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News Analysis: Time to Hit the Reset Button on Incentive, Recognition, Loyalty Business Models

The current practice of charging for program design, implementation, and technology in the reward markup does everyone a disservice.

By Bruce Bolger

Most companies would say they use the services of incentive, recognition and loyalty companies for the purposes of engaging employees and distribution partners, but one would never know that from the typical business model in the marketplace. While solution-providers typically provide a wide variety of services and technologies to support engagement efforts, their fees are more commonly covered in markups on rewards and recognition than for professional services. Based on the elevation of standards that surely will come from the influence of ISO 9001 and ISO 10018 best practices and the extensive research now available on effective design, it’s time for this outmoded pricing model to go.

If organizations hire incentive, recognition and loyalty solution-providers to help them achieve sales, marketing and human resources goals, it makes little sense to anyone to bury those costs in the rewards markup. The end-users of these programs suffer because:
  • The purchasing team has little way to evaluate the true cost of those professional services when comparing one vendor to another, so that a vendor with a lower merchandise cost can win the bid, even though it might be incapable of designing an effective program.
  • With this model, resellers have no choice but to push for rewards that provide them a better margin to cover some of those hidden costs, rather than select what makes the most sense for the audience and context.
  • The perceived value of the program suffers because recipients often wonder why the points they receive have so little value versus the cash equivalent.
  • There is little accountability for performance by the solution-provider other than the points generated and redeemed, instead of actual goals achieved and return on investment.
Ironically, organizations can obtain a better result with a more transparent business model that allocates fees based on program design services, content development, communications, technology, rewards and reporting, and a separate fee for achieving performance goals and managing the rewards selection, personalization and redemption process.

The antiquated system most firms currently use persists because the rewards and recognition field remains unknown to most people in management, and because management often discounts the value of professional program design and implementation experience, technology and the creation of a high-impact rewards experience.

As Dave Dittman, President of Next Level Performance, asserted in a recent feature article (See RRN Q&A With Jim and Dave Dittman on the Future of Next Level Performance) it’s the job of solution-providers to educate the marketplace using all of the available research to elevate the professional expertise involved with all aspects of design, implementation and measurement.

Up Your Team’s Game at Engagement World’s Professional Development Days, May 7-9 in Galveston

To educate yourself and/or your team on the latest best practices on multiple aspects of engagement, sign up for Professional Development Days at Engagement World, May 7-9, in Galveston. Click here for information on the first opportunity to have your team trained under one roof in the new ISO 9001 and ISO 10018 Quality People Management Standards, The Culture Works Leadership program, Raising Employee Engagement by Recognition Professionals International and Incentive Practitioner Certification from the Incentive Marketing Association, among others.
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