Incentives: 3 Trends to Watch

An insightful Q&A with the IRF's Melissa Van Dyke

IRFs Melissa Van Dyke

A new generation of winners, increased spending and the growing threat of travel disruptors are among key factors in the incentive travel marketplace, according to the Incentive Research Foundation. These trends, gleaned from the IRF's own research, as well as from a 2016 incentive marketplace study conducted by the Incentive Federation, were highlighted in a TED-style session during the IRF's annual invitational and education event, which took place this past  June at the Red Rock Casino Resort & Spa in Las Vegas.

Melissa Van Dyke, president of the IRF, weighed in on these findings in an exclusive Q&A with M&C.

The incentive market keeps growing and expanding -- $90 billion was spent on incentives in 2015, up 17 percent over 2013. What are the reasons for this increase?
I attribute it to economic growth, greater awareness and shifts in the market. As the economy expands, so do the opportunities for investment in human capital.

Likewise, all of the major human resources organizations -- the Society for Human Resource Management, World at Work, the HR Certification Institute -- have some level of education regarding the importance and role of non-cash incentives and recognition.

Finally, about two-thirds of the jobs in our economy currently are either service or experience-related, and 90 percent of the jobs being added in the next decade will be related to service. Where service/experience is the core offering, engagement is key. Most employers know that it takes investment beyond standard compensation to truly have an engaged, committed workforce.

Twenty years ago, just 26 percent of U.S. companies used non-cash incentives. How does that compare to the latest findings?

Today, 84 percent of all U.S. businesses use some form of non-cash reward to motivate their employees, channel partners, salespeople and customers.

How does spending on reward merchandise compare to spending on incentive travel?
The market survey was redesigned this year to help us understand the different tracks for spend. Award-point spending was $28.5 billion, plus $24.1 billion spent on gift cards, $14.4 billion on travel, $12.3 billion on merchandise and another $12.3 billion on customer gifts.

Overall, about 45 percent of all U.S. businesses use incentive travel in some manner. Between 43 and 53 percent of firms that give non-cash awards also use incentive travel, depending on business size. The highest incidence and spend we see on travel is in the middle market -- firms with $10 million to $100 million in annual revenue.

Spending on incentive programs for salespeople traditionally has been higher then spending for other employees. Why are companies now willing to spend more on employees who may not have a direct impact on the bottom line?
I believe this is because creating a truly rewarding experience takes a certain amount of money, and companies have to be willing to invest this amount if they are going to get any return from the program, regardless of whether it is a sales or employee program.

Incentive travel spend on participants this year is up by 32 percent from 2014, with an average spend this year of $3,659 per participant, according to the IRF. To what do you attribute this?
The economy. Our trends study has shown that incentive travel is incredibly elastic and responsive to economic growth. As the economy expands, so will spend and programs.

Another trend is the influence Millennials are having on incentive travel. Can you share more insights?
In 2015, Millennials surpassed Generation Xers in the workforce. Today, one in three workers is a Millennial. They want to be continuously connected to their devices and social media during their incentive experiences. We also know that having unique, authentic experiences are paramount to them, and they tend to choose properties that are more in tune with their personal preferences and not necessarily the more traditional desire for luxury brands.

The Big Picture
The Incentive Federation's Incentive Marketplace Estimate Research Study is one of the most comprehensive surveys of the incentive industry. The 2016 survey queried 1,392 U.S. business executives -- including 400 who have a role in managing incentive or non-cash rewards programs -- on their 2015 usage. The Incentive Research Foundation, Incentive Marketing Association, Promotional Products Association International and SITE funded the study.

Following are key takeaways from the survey; the full report can be found here

 U.S. businesses spent some $90 billion on non-cash incentives in 2015.

 Of that total, $14.4 billion was spent on incentive travel.

 84 percent of U.S. businesses use some form of non-cash incentive award, which might include incentive travel, merchandise, gift cards and award points.

 About 45 percent of companies use incentive travel in some manner; the highest incidence and spend for incentive travel are from firms with $10 million to $100 million in annual revenue.

 The most commonly used award program types were employee rewards (72 percent), corporate gifts (72 percent), sales rewards (60 percent), customer rewards (45 percent) and channel partner (dealer) rewards (41 percent).

How can incentive planners better design programs that appeal to these young participants?
Make sure the experiences are unique, but also that they are an authentic reflection of the community and country in which the trip takes place. And including opportunities to give back to the community is always a good idea. 

The IRF trend session noted that individual incentive travel was experiencing an uptick. Why is that? 
I believe the move to a strong individual travel market has been driven by a few factors: the travel-related price pressures of the downturn, the surge of small and middle-market companies using incentive travel, the desire for individualized experiences, particularly on the part of Millennials, and the greater availability of providers who can assist with the delivery of packaged individual travel experiences.

Travel "disruptors" also were noted as a trend. What are the major disruptors affecting programs?
Social, political and weather-related disruptions are happening at a faster rate than before. Likewise, Airbnb, Uber and other nontraditional players, such as crowd-sourcing apps, continue to challenge the traditional ways programs are managed and executed.

Incentive travel is at the crux of so many social and technology changes, so I would say that "embrace the change" has been the mantra and status quo for most planners for decades. What has changed now is the pace of these changes and the technologies available to mediate them. Planners must be as much technologists and marketers as they are logistics, design and contract gurus.