Meetings & Conventions: Incentive News
SHOULD PRICES BE BASED ON PROGRAM RESULTS?
Planner Ties Fees to ROI
Bob Dawson
A leading incentive expert is calling for a
radical restructuring in the way performance improvement firms
charge for their services.
Bob Dawson, managing director of The Business Group, a Rocklin,
Calif., performance improvement firm, believes incentive companies
should rethink the standard per-person or per-program fee and
instead charge 25 percent of the ROI the incentive firm creates for
its clients’ overall business. Dawson has been using this fee
structure successfully since 1991.
Not only is the strategy beneficial to the client, according to
Dawson, but it can earn planners twice as much as they typically
are paid. The prevailing pricing methods encourage incentive firms
to design programs in which large numbers of participants qualify
for rewards, which might not be what is best for a client, said
Dawson.
“It creates a sugar high,” he said. “All you look at is the
sales increase, but you don’t look at the other costs incurred by
other areas of the firm due to the sales push.”
“I think his idea is good,” commented Bob Vitagliano, president
of V Associates, an incentive consulting firm in Wilmington, N.C.
“It keeps incentive companies honest and can create long-term
client relationships, but it works only for full-service firms.
Many incentive companies only handle the promotion and reward
portion of the program.”
Another obstacle, said Bill Vastine, executive vice president of
Arlington, Texas-based incentive firm Galactic Inc., is that
clients often don’t want to share too much information. “They might
just tell us their sales target, period,” said Vastine, who also is
president of the Society of Incentive & Travel Executives.
Vastine added that incentive firms should be paid regardless of the
outcome, since factors well beyond their control can upset program
results.
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