Best Markets for Incentive Programs: Find the Right Buyers Michelle M. Smith, O C Tanner Monday, January 4 12:15 p.m.-1:15 p.m. Room 202B

Sponsored by Fields Manufacturing asi/54100

All education handouts are available to download at www.asishow.com/education

The Best Markets for Incentive Programs:

Finding the Right Buyers Michelle M. Smith, CPIM, CRP Vice President, Business Development O.C. Tanner Company

Today’s Discussion

The Business Case

High Gain Programs

Relevant Research

Your Opportunity

Target Buyers

Align Your Message

Programs End-Buyers are Investing In Business Gifts

(thank you gifts, PR items, holiday gifts)

Customer Retention (loyalty programs)

Customer Acquisition

2009 Total 69.2% 52.7%

(new business)

47.7%

Trade Shows

43.7%

Employee Incentive Programs

(productivity, safety, attendance, sales goals)

Recognition Programs

(employee service, team or individual performance)

Trade Promotions

(dealers, distributors, etc.)

35.6% 34.6% 17.9%

2007 Industry Size = $ 46.1 B Program Breakdown • Incentives represent 56% of market ($25.9 B) • Travel programs account for 29% of total spend • Gift, emblematic, and merchandise programs are 71% of total spend

Corporate Gifts Sales – $5.6 B Direct Employees 12% $11.7 B 25% Milestone & Perf. Recog. $14.7 B 32%

Merch = $5.1 B 11% Travel = $6.6 B 14%

Sales Dealer/Channel $1.6 B 4%

Merch = $11.4 B 25% Travel = $ 3.3 B 7%

Sales Consumer $12.6 B 27%

Merch = $750 MM 2% Travel = $800 MM 2%

The Business Case for Incentives • Return On Investment (ROI) – Make money – Save money – Cost-benefit analysis

• Connecting the Dots – How to use incentives & recognition – Back-up your words with hard data

• Internal Branding • Higher Purpose

Align Your Message to Your Audience

CEO Future focus & on emerging value

Senior Mgmt. Present focus & on true cost of ownership

Line Mgmt. Time & price orientation; Product focused

Operations Focus on pricing, economies of scale & efficiency

• • • • • • •

Focus on significance/legacy ID & size business problems ID & size biz opportunities Set corporate agenda/policy Formulates strategy; M,V & V Think: potential / create value Talk about them; prove biz fit

• • • • • • • • • • • •

Can shuffle program monies ID new corporate strategies Size & distribute budgets Resource management ID cost-cutting measures Implements strategies Implements budgets Will discuss product” B2C Area Vendor on demand focus Control costs / fix problems Consolidation

Audience

Human Resources

Business Issues • Employee attraction, retention & productivity • Achieving Employer of Choice status • Employee health and wellness • Corporate and individual milestone events • Improve efficiency of benefits administration • Career training & certification requirements • Leadership development and training • Succession planning; legislative compliance • Corporate culture; integrating culture in M&A • Workforce diversity; Human Sigma • Generational and cultural workforce challenges • Outsourcing; consolidating administration • Work/life balance issues; remote employees • Union negotiations and conflict resolution • Union/non-union employee cooperation • Blood drive, charitable donation participation • Company credit union participation • Corporate and event gifts

Solutions • Service and retirement awards • On-Boarding programs • Employee recruitment programs • Employee referral programs • Employee recognition • Milestone achievement • Training completion • Peer-to-peer recognition • Teamwork and cooperation • Idea/suggestion programs • Wellness programs • Time and attendance programs • Employee incentives • Recognition or incentives for participation in events • Gifting

Engagement » Quality » Productivity • • • • • • • • • •

12% more profitable 51% unlikely to steal 18% more productive 2.6 times higher growth rate 18% higher earnings per share 27% less prone to absenteeism 12% better in engaging customers 62% unlikely to be involved in a job accident 51% less likely to leave (low-turnover companies) 31% less likely to leave (high-turnover companies)

Effectiveness of HR Initiatives Total Rewards & Accountability and Value Creation Collegial, Flexible Workplace and Value Creation Recruiting & Retention Excellence & Value Creation

16.5% 9.0%

7.9%

Communications Integrity & Value Creation 7.1%

Focused HR Service Technologies & Value Creation 6.5%

- 33.9%

Prudent Use of Resources

Superior Human Capital practices are a leading indicator of financial performance

Managing New Hires

• 4% of employees leave the first day • 65% of employees make their decisions to leave within the first month

Impact of On-boarding Programs 100 90 80 70 60 50 40 30 20 10 0

100

60

57

23

19 7

0

Improved Retention

2

4

Time to Completion Productivity Rates: Tasks

Best-in-class Average Laggard

Absenteeism • Annual direct & indirect costs = 36% of payroll • Incidental unplanned absences = 6% of payroll – 3x direct costs

• Extended absences = 3.2% of payroll – More than 5x direct costs

• Low morale companies spend 23% more on absenteeism • 2.8 million workdays lost annually

Wellness Programs • 20% of employees create 85% of the cost of health care benefits

• Roughly 50-87% of health care costs are believed to be lifestyle-related • Each $1 invested in wellness programs saved $3.48 - $5.82 in health care costs • Wellness programs have reduced absenteeism 28%; worker’s comp 30%; and health care costs by 26%

Wellness Programs • Health care costs per employee have risen over 40% in the last 5 years • If food prices rose at the same levels… – Dozen eggs = $80 – Butter (1 lb.) = $102

• Great vehicle for Pharma product

Audience

Sales

Customer Service

Business Issues

Solutions

• Revenue growth – direct sales • Revenue growth – channel sales • Increase sales productivity • Customer acquisition • Customer retention and recovery • Customer satisfaction; Human Sigma • Sales training and innovation • Competitive differentiation • Reduce operating costs • Optimizing remote sales offices / staff • Sales meetings and conferences • Corporate, customer, and event gifts

• Employee sales incentives • Employee recognition • Team incentives & recognition • Dealer/channel sales incentives • Dealer loyalty • Customer referral • Customer appreciation & loyalty • New/close-out product incentives • Dealer loader programs • Training completion incentives • Gifting

• Improve employee retention • Customer retention and recovery • Improve productivity; Human Sigma • Improvement in customer service levels • Remote sales offices / staff • Reduce operating costs • Corporate gifts

• Customer appreciation • Customer recovery • Employee and team recognition • Employee incentives • Time and attendance • Call volume/quality metrics • Gifting

Sales Incentives • The ‘standard’ of incentives… just about everyone has one • Incremental sales growth usually pays for the program cost • Easiest to sell because ROI is easy to assess

Audience

Marketing, Corporate Commun. & PR

Business Issues • Customer attraction, retention and loyalty • Brand integrity and strength • Corporate messaging and communications • Generating Sales opportunities; differentiation • Align external & internal brand messages • Improving Net Promoter scores • Product and services pricing • Market research; Human Sigma • Trade shows and conferences; site visits • Strategic alliances and partnerships • Corporate Social Responsibility initiatives • Community involvement & fundraising • ID and manage corporate sponsorships • Goodwill outreach to schools etc. • Extending and improving media relations • Founder’s Day/Anniversary events • Corporate, VIP, Board, and event gifts

Solutions • Customer appreciation programs • Consumer loyalty programs • Customer referral programs • Employee incentives • Employee recognition --- Re-direct advertising monies • Direct Mail response promotions • Market research participation • Trade show traffic builders • POP and PWP incentives • Continuity programs (multi-sales) • Partner incentives & recognition • Sponsor incentives & recognition • Vendor incentives & recognition • Fundraising incentives & recog. • Gifting

Engaged Customers • Generates 23% premium • Emotional satisfaction is far more powerful – Creates action & passion – Achieving either = 70% boost (1.7 - 2.5x financially) – Optimizing both = 240% boost (3.4 - 5.2x financially)

• Many customer-facing employees have no idea what makes their company different

Align Internal/External Branding

• Employee

Customer

Results

• Employee is right – the customer is why • Promise makers & promise keepers • Recognition = cost-effective marketing

Employees Become the Brand

…. and Build Loyalty

Corporate Social Responsibility • 27% of consumers defined CSR as commitment to employees • 76% use companies’ employee treatment in their purchasing decisions

Audience IT/IS & Research and Devel.

Production & Engineering

Business Issues

Solutions

• New product development and innovation • System efficiency & effectiveness • Systems integration • Project completion • Training; Human Sigma • Creating proprietary info; obtaining patents • Career certifications, degrees, etc.

• Employee recognition • Employee incentives • Milestone completion recognition • Team recognition • Training completion incentives • Supplier incentives & recognition

• New product development and innovation • Safety • Minimize/off-set corporate carbon footprint • Productivity improvement • Supply chain management • TQM / Six Sigma / Human Sigma • Sustainability • Preventative maintenance • Training • Waste/scrap minimization

• Employee recognition • Employee incentives • Suggestion/idea programs • Training completion incentives • Supplier incentives & recognition

Suggestion / Idea Programs • Good cost-benefit business case • Effective at engaging employees

• Especially useful as companies attempt to ‘reset’ to new marketplace realities • Don’t implement unless there’s full commitment to follow-up and take action

Audience

Operations

Finance

Business Issues

Solutions

• ROI, ROE, ROA, Triple Bottom Line etc. • Product pricing • Reduce costs; increase productivity • Improve safety • Optimizing remote work locations • Training and innovation • Manage supply chain • Outsourcing; adapting work environments • TQM / Six Sigma / Human Sigma • Regulatory & legislative compliance • Minimize/off-set corporate carbon footprint • Environmental and ‘green’ initiatives

• Employee recognition • Employee incentives • Safety incentives • Wellness programs • Inventory control incentives • Error reduction programs • Training completion incentives • Supplier incentives & recognition

• Reduce costs • Improve efficiency and productivity • Value creation • ROI, ROE, ROA, Triple Bottom Line etc. • SOX and legislative / tax compliance • Sustainability • Human Sigma

• Suggestion/idea programs • A/R collection programs • Error reduction programs • Supplier incentives & recognition • Employee recognition • Employee incentives

Safety Programs • Workplace injury costs ($164.7 B) exceeded the combined profits of the ‘Fortune 11’ in 2007 • 2008 costs = $225.8 B or $1,685/employee • OSHA announced they will target construction and chemical industries in 2010

Employees = Market Value

85% of a company’s market value is now intangible assets…. knowledge, reputation and human talent (Up from 38% in 1982)

Audience

C-Suite

Business Issues • Grow top line revenues • Reduce costs • Create value • Increase profit / return to shareholders • ROI, ROE, ROA, Triple Bottom Line etc. • Sustainability • Innovation • Market differentiation • SOX and legislative / tax compliance • Globalization • Generational and cultural workforce challenges • Human Sigma • Brand integrity and strength • Aligning internal / external brand messaging • Corporate Social Responsibility • Flexible, dissipating organizational structure • Minimize/off-set corporate carbon footprint • Corporate, event, and business gifts

Solutions • Employee recognition / incentives • Service and retirement awards • Dealer/channel sales incentives • Customer appreciation & loyalty • Customer recovery & referral • Milestone completion recognition • Team recognition • Training completion incentives • Supplier incentives & recognition • Idea/suggestion programs • Safety incentives • Wellness programs • Inventory control incentives • Fundraising incentives & recognition rewards • A/R collection programs • Error reduction programs • Gifting

CEOs Looking For New Solutions

• Want theory and execution expertise • Need cross-silo integrators of strategy

• Business issues = people issues – Sell the program result

Thank You! Further Questions Can Be Addressed To:

[email protected]

Michelle M. Smith, CPIM, CRP Named as one of the Ten Best and Brightest Women in the Incentive Industry, Michelle has worked in every facet of recognition and incentives, both domestically and internationally. A highly rated international speaker, writer, and consultant on performance improvement; Michelle is a respected authority on human capital management, internal branding, and engagement. She’s published and delivered more than 350 articles and lectures and has advised many of the world’s most successful organizations on how to optimize their performance improvement initiatives and gain maximum ROI. Michelle is the Past President of the Board of Trustees of the Forum for People Performance Management and Measurement at Northwestern University and active in the Global Incentive Council, the Society of Incentive & Travel Executives, and serves on the Board of Directors for Recognition Professionals International. Michelle is also President Emeritus of the Incentive Marketing Association, on the Board of Directors of the Incentive Federation, the National Advisory Board for the Motivation Show, and the Recognition Council. She is also a member of the Editorial Board for Return on Performance Magazine, the Performance Improvement Council, WorldAtWork, and the Corporate Executive Board. Michelle is O.C. Tanner’s Vice President, Business Development.