There’s Big Money in Motivation

By John Hollon

Sep. 27, 2007

I get lots of press releases. Few stop me in my tracks, but this one did because the numbers were so amazing. To wit:

Travel and merchandise incentives for employees is now a $46 billion industry, according to the Incentive Federation’s 2007 United States Incentive Merchandise and Travel Marketplace Study. According to study, $32.7 billion was spent on merchandise incentives and $13.4 billion on incentive travel, in 2006.

The size of that number took my breath away — $46 billion per year on employee incentives?????? Can that be possible? Do all those gift cards, holiday turkeys, and roundtrips on Southwest really add up to that much?

 “The incentive industry is booming,” Frank Katusak, Incentive Federation Board chairman, says in the press release, and some of the numbers broken out of the study seems to back him up:

• Thirty-four percent of U. S. companies used either incentive travel or merchandise incentives in 2006. Almost one third (31 percent) of companies used merchandise incentives, while 10 percent used incentive travel.
•  Incentive travel is seen as an investment by 85 percent of companies with revenues over $100 million in the study. Merchandise incentives are seen as an investment by more than three-fourths of respondents.
• Companies with revenues over $100 million are more likely to use both travel and merchandise incentives than smaller companies.
• The most common incentive travel application is for sales incentives. Other widely-used applications are non-sales employee recognition and consumer/user promotions.
• Merchandise incentives are most often used for non-sales employee recognition and business gifts.
• The average budget for travel incentives was $164,271. More than three fourths of incentive travel end users spent between $100,000 and $500,000.
• The typical budget for merchandise incentives last year was $119,008. Almost half of the merchandise incentive users spent between $100,000 and $500,000.

I’ve always questioned whether a lot of these incentive programs work, but these recent numbers would seem to indicate that they have a much bigger impact than I ever thought. And, as Roger Rickard, senior vice president for incentive travel company Don Anderson Inc. in Rocklin, California, told Workforce Management last September, “An organization, and particularly a public company, has an obligation quarterly to show that they are continuing to drive profits. And if the incentive travel is created to drive profit and is successful in doing that, that’s really not an area that anybody is going to risk changing.”

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