Here are some back-to-basics reminders for designing an effective incentive program

Objectives

• Objectives need to be measurable, realistic and attainable
• It is recommended that you keep the number of objectives to three or fewer

Participants

• Direct your incentive program to the individuals who have direct impact on the sales or purchases of your product/services

Timing

• Length of time depends on goals, product selling cycle, market conditions and budget
• You must consider when is the best time to run an incentive program as well as how long

Awards Vehicle

• Awards are the motivational drivers, they should be attainable and desirable
• Choose an award vehicle that fits an average participant's earning potential
• A broader award selection generally will have a greater impact

Program Structure

• Rules are determined by the budget/budget is driven by the rules
  
  • Closed end award structure (defined by the budget limits, i.e. Contest & sweepstakes)
    
• The simpler the better (K.I.S.S.)
• Award payout structure should protect you from payout for non-performance while rewarding goal achievement/incremental activity

Administration

• Enrollment-establishing direct link to participants is key to success
• Sales/purchase validation- strike a balance between simplicity and cost
• Point Issuance (bank account statement)- the most effective way to distribute award winnings
• Sales Reporting- Keep it simple
• Point Redemption- a measure of the success

Communication

• Clear and concise messages are critical
• Frequent and repetitive communications yield greater results. The longer the program, the more the communications
• Core elements include:
  • Announcement/Kick-off
  • Awards catalog or brochure
  • Follow-up mailings (Mailers, stuffers, newsletter etc.)
  • Administrative reporting and award issuance (this is a very important communication element)

Budget

• Program objectives, profitability and length must be taken into consideration when determining the program budget
• Awards budget is driven by rules plus fixed costs (administration and communications)
  • Sponsoring company payout should be 1%-1.5% of total sales or 10%-20% of incremental sales.
• Annualized program earnings should be 5%-10% of annual income
• Administrative Services: Factors influencing the extent of administrative services required, the complexity and overall costs include:
  • How performance is tracked and measured
  • Number of participants and levels of participation
  • Type and number of program elements (ie.fast start, sweepstakes bonuses, overrides, bonus levels)
  • Reporting frequency
  • Management reporting requirements
• Total administration cost should be between 5%-10% of awards budget
• Communications: size of audience, length of the program and frequency will drive communication costs. You should plan to spend between 5%-10% of the awards budget.