Incentive industry making comeback
By Kathy Bergen
Chicago Tribune
CHICAGO — After the Sept. 11 attacks, Farm Bureau Insurance of Michigan, like many U.S. companies, reined in trips awarded to its top sales representatives.
"We decided to stay domestic," said Marcia Merando, director of marketing administration for the Lansing-based firm. "We were not sure if an overseas trip would be a disincentive, or, if people earned them, they'd decide to decline them."
But now the company is thinking expansively again.
"We are negotiating a contract now to go to Switzerland in 2006," she said.
Such statements are like cool sips of water to the badly parched $29 billion incentive industry. Typically, companies use incentive programs to reward salespeople, dealers and consumers with trips, merchandise, gift certificates or cash.
But the industry, battered by the post-9/11 resistance to air travel and the concurrent souring of the economy, has been excruciatingly slow to come back, in part because some companies view such programs as optional expenditures in tough times.
"Gone are the rah-rah days, the endless sources of cash," said Bennett Ockrim, a vice president with Hitachi Consulting who has spent the past 20 years in management posts with a number of high-tech firms.
What's emerging in this modest, tentative revival is an industry much changed, and chastened, since the red-hot days of the late '90s.
"It's only been the last few months where we've seen growth to the point where we are back to our old ways, where people are willing to travel overseas," said Bob Vitagliano, a consultant to the incentive industry and to its Motivation Show, held recently at Chicago's McCormick Place.
For one thing, incentive-program budgets remain tight.
Carlson Marketing Group, a major player in the incentive business, cites one pharmaceutical client that wants a 2006 program for the same per-person cost as was in place two to three years ago.
"So a lot of our response needs to be on value," said Jonell Cella, senior director for business development. "Giving less, but not seeming to give less."
And in an era of increasing attention to corporate accountability, many companies want to make sure trips generate beneficial results for the company. Toward this end, many companies are blending meetings and educational sessions into trips, Cella said.
Some companies also are moving away from the one-size-fits-all offerings.
"Years ago, you'd plan golf and please most everyone," said Brenda Anderson, chief executive of the Chicago-based Society for Incentive & Travel Executives.
No longer. Many younger workers want adventure. Many employees with children want family time.
"There's a shift toward individual incentives and away from groups," said George Deeb, chief executive officer of iExplore Inc., a Chicago-based adventure-travel agency that does some incentive work.
"Instead of taking your top 100 salespeople in a group to Hawai'i, you give them each a $5,000 gift certificate and let them travel with their families whenever they want," he said. "It's not really motivating to be away from your family for a week."
The incentive industry has several distinct segments, and some have fared better than others, said Bruce Bolger, a director of the Incentive Performance Center, a nonprofit group.
"Two were hurt badly," he said, citing the incentive travel business and the promotional products business.
Promotional products — gifts stamped with a company's name and logo and given out at trade shows and meetings — are viewed by companies as a "natural line item to eliminate" in difficult financial times, said Bolger. He disagrees with that line of thinking, however, asserting such campaigns can be a powerful form of branding.
And travel took a hit, for obvious reasons. The average cost per person for a sales-incentive trip was $1,473 last year, down from $1,981 in 1999, according to a study by the Incentive Federation Inc. And trips generally ran four nights instead of five.
Meanwhile, companies put more emphasis on merchandise rewards. The value of the average sales reward went to $566 in 2003, up from $552 in 1999, and the number of people per program rose to 3,770 from 3,509, according to the study.
The use of branded goods from big-name companies like Coach Inc. and Sony Corp. stayed strong and is poised for growth, said Bolger, who also is president of Selling Communications Inc., a target marketing company.
