How has the pandemic affected the incentive and rewards industry?

Jonathan Grey, Past -President of IMA Europe muses on some of the permanent changes facing the incentive and rewards industry following the pandemic.

They say that every cloud has a silver lining, although, at the same time, with clouds comes rain.   I've always taken a very optimistic viewpoint on most things, however the economic rain from the clouds of this pandemic have certainly tested my glass half full resolve!

In that regard, I thought I'd take a look at the impact that this pandemic has had on some aspects of our incentive, reward and motivation industry to see whether there has indeed been silver linings, but also keep an eye on the changes of behaviours or habits that could potentially bring a few more dark clouds on the horizon for parts of our industry.

Employee recognition programmes

Firstly, let's take a look at the area of employee recognition programmes. Employee recognition programmes are based around the premise of influencing workforce behaviours to align with the strategic values and goals of the business, then rewarding that good behaviour when identified. In most instances programmes are designed to allow the people in a company to observe behaviours, to see things that are happening and then report the good things that they see. With the expected dominance of a hybrid work-from-home model coming our way post pandemic, this process obviously becomes a little more challenging. The most visible on-brand success stories will still rise to the top, be appreciated and recognised. However, a lot of the unsung hero type of actions which gets picked up when everyone is in the office becomes a little more tricky to identify.

One may find this hard to believe, yet only two years ago statistics from the Incentive Research Foundation and Gartner Research showed that still over 30% of employee recognition programmes in operation in the US still were managed using traditional methods, such as actual physical suggestion and comment boxes, recognition cards and the once dominant physical certificate that hangs proudly on the side of the cubicle.    

While digital recognition platforms have been booming in the past few years, it is almost certain now that those last holdout organisations will finally reinvent their internal recognition programmes, ditch the paper-based approach, and rush headlong into the digital recognition age.  The boom in digital employee recognition platforms is certainly set to accelerate at a much faster pace in the coming few years.  I predict there will be areal sense of urgency in corporate HR to get the Requests for Information (RFIs) out for online recognition platforms as fast as possible in the coming months.  

Of course, the other anomaly in dealing with recognition platforms that has come to pass from this pandemic is the fact that workers who are able to work from home, have decided that home does not now need to be inthe same city, county, province or even country as the once much-loved company office. For companies using very localised rewards, based around the location of an office, perhaps enlisting local gyms, restaurants, beauty salons etc., they now face a new challenge of how to keep the rewards relevant for the dispersed workforce.  The reward selection available will need are view, and in many instances, it will have to internationalise.

 

Sales incentives

The next area that's had a major upheaval throughout this pandemic has been the world of sales incentives, both B2B and B2C. Incentive marketing and sales promotion companies who manage these campaigns for their clients would have had a turbulent time the past 18 months. Depending on the business sector, or vertical market, in which they specialise, agencies could have had avery good…or a very bad time.  Who wants to be running a sales incentive campaign for office printers when there's noone in the office, or a booking referral for a cruise line when all the ships are docked.  On the other hand, running a customer acquisition campaign for an online electrical retailer or fashion brand would have seen unprecedented activity.

And this is where I think a problem lies in our industry when it comes to sales incentives, our agencies tend to specialise in vertical markets.  This has always been for very good reasons. For example, you understand that market intrinsically, you know the distribution channels, you know what motivates the salespeople as they move from one company to the next, and you know when pitching that your programmes will have an impact because you understand your clients’ business backwards.  However, what appeared to be a strength pre-pandemic has proven to be a serious weakness in our new world order.  

Incentive houses with an over reliance on a certain industry will now be looking as fast as they can to find ways to broaden their scope of competency. Agencies will find ways to buy the talent, experience and systems they need so they don’t find themselves exposed to such systemic risk again.  I think we're going to find that incentive agencies will need to be bigger rather than smaller in scale, both for their own managerial necessity, as outlined above, but also to combat procurement risk assessments from potential clients. In procurement, clients will want to know that should another sector not associated with what they do falls victim to an unforeseen event, such as we've seen the past 18 months, that the agency they have chosen won't go under as a result and take their programme with them. There will be a lot of consolidation in the marketing agency landscape in the coming year.

Rewards

And finally the world of rewards. There can be no doubt that in the past 18 months one of the big winners in our incentive ecosystem has been digital rewards.  And by this I don't just mean digital gift cards but anything that you can send and receive without having to go to the post box or wait for the courier.  Consumer habits, when it comes to payments and digital value, entered this pandemic in the year 2020 and is leaving it in the year 2030.  To give a simple example, a UK Finance study released this month shows that in the UK, five in six payments now involve no notes or coins at all. This compares to half of all transactions a decade ago.  

The era of the cashless society is truly among us with many businesses throughout Europe no longer even accepting physical legal tender at the point of sale.  The massive increase of digital rewards in incentive and motivation programmes throughout the pandemic is a true reflection of this wider adoption of a cashless society.  

Consumers want to get their rewards instantly, in digital format and they want to spend them instantly, in a digital format. There is no longer a desire amongst consumers to feel a gift card in their hand, to walk into a high street store, to pick up their product and have that retail experience.  This is especially true of the Gen-Z digital generation for whom convenience and speed matters more than touch and feel. How the impact of this fundamental and rapid change is going to trickle down through the retail landscape and into the incentive ecosystem has yet to fully unfold, but you don’t have to look far to see the dark clouds of uncertainty hanging over many legacy incentive structures.  

In my own business, we have seen the very fast adoption of digital rewards for global incentive programmes over the past decade. However, since the pandemic started the transformation has been complete. As a business we took the opportunity that the pandemic afforded us, out of desire and necessity, to drop all physical gift cards and gift vouchers from all programmes in all countries, for all clients – and we won’t be returning. This is something that many clients would never have agreed to prior to the pandemic, but now one that they insist must remain. It’s cheaper for them and easier for us. In this at least, my own business has found that silver lining.

 

Notes:

Jonathan Grey is the founder and CEO of Ovation Incentives and is the current Past- President of IMA Europe. He has been an advocate and promoter of the incentive and rewards industry for over 20 years. Respond to him on jonathan@ovationincentives.com