The data released in September from the Pew Internet & American Life Project show that 72 percent of adults are now online, with percentages higher among younger segments of the population (84 percent among those age 18-29, 83 percent among those age 30-49). As Internet use grows and broadband penetration spreads, more and more companies are drawn to the efficiencies and creative potential of online incentives, from online point tracking and reward fulfillment to e-communications and overall program administration.
The Incentive Federation, an alliance of organizations in the incentive industry, has evidence of the trend. In its 2005 incentive survey, the federation asked respondents if they had ever run an incentive program online. About a quarter of the respondents (24 percent) said yes. That finding represented more than a 30 percent increase in the percentage of respondents who answered that way in a federation study conducted just two years earlier. And at companies with more than 500 employees, the 2005 survey found far more converts: 44 percent of those large companies were already running online programs.
“The comfort level that companies are feeling with online incentive programs has increased,” says Phil Duyff, president of Duyff International, a Manchester, Mo. — based company that specializes in the back-end fulfillment of online incentives via its Web site, www.travelawardsonline.com. “In the past, companies were hesitant about embracing online incentive programs because of concerns about whether they would really save time or money.” Today, he says, the concerns are fading, and usage is growing.
Improvements in program administration software are one of the major factors convincing companies to try online incentive solutions. In the past, a program administrator's ability to independently change measurements or goals for a spot award from one month to the next was limited. “Online tools have improved to the point where administrators can go in themselves, make the change, and publish it live. If they subsequently decide the change was not such a good idea, they can tweak the offering again on the fly,” says Duyff. “When they see that the programs are much more customizable and easier to use, that makes a big difference in their acceptance of online incentives.”
Duyff's view is backed by a survey conducted by the Online Incentive Council, an arm of the Incentive Marketing Association. In the 2005 study, respondents cited “administration” as the incentive program function for which they most often used an Internet-based solution. (The next most frequently used capabilities are results tracking and communications. See chart, page 36.) In another question, respondents were asked to compare Internet-based solutions to paper-based programs. Five capabilities in which e-solutions dominated were all centered on administrative issues: immediate access to information, reporting capabilities, data collection/management, ease of administration, and award calculations.
CEO Arnold Light has seen the power of online incentive administration. His company, The Light Group, White Plains, N.Y., has been in the incentive business for 25 years, but in recent years, it has increasingly positioned itself as a player in the online incentive space. Light describes one client, a bank, that gave branch managers buckets of reward points on a quarterly basis. The branch managers could distribute the points as they saw fit, but they used to have to fill out forms or Excel spreadsheets and submit those pieces of paper recommending that a particular employee receive an allotment of points. Now the branch managers can handle the whole process electronically, from receiving the points to accessing a pull-down menu of employees to sending a personalized congratulatory e-mail to point recipients. The points are credited to the recipients' accounts in real time.
Although branch managers always had the ability to distribute points, the new system has reduced the hassle of program management and made the process more personal and immediate between manager and employee.
It's All About Me
While transitioning from paper-based to online administration offers many efficiencies, customization is the X-factor that takes online programs to a higher level of engagement with participants.
“One thing we stress over and over is that it doesn't matter how good your program is or what your awards are if you don't communicate well with your target audience,” says Duyff. “In the past, the various tools for communication with online programs were not as robust as they could have been. These days, you can have on-the-spot quizzes, surveys, and individual personalized encouragement.”
Communications have moved away from massive e-mail broadcasts to targeted, personalized messages that can, for example, recognize a participant for hitting a certain target level.
And it's not only the e-communications that can be customized. Managers can work with employees to create custom point levels and rewards. “We are no longer in a world where corporate administration tries to decide if everyone should get a chance to go to Disney World or on a cruise,” says Duyff. “We've taken rewards a couple of steps further and are letting participants decide what will be their own hot buttons.”
Light also points to the real-time customization of a program's online rewards catalog. “As an item drops in price, which happens often, particularly for electronics, the program participant will benefit from our ability to frequently go into a rewards catalog and change the prices,” he says. “If a new item comes onto the market, it will go into the catalog. As older items become unavailable, they are removed from the program Web site before anyone can even order them. Because of our ability to publish a real-time catalog, we have cut our time spent in customer service tracking items by 80 percent within the past five years.”
Improvements Are Inevitable
Over the next few years, observers expect to see even more creativity and efficiencies built around online incentives. Jeff Broudy, executive vice president of Philadelphia-based United Incentives, sees the online incentive space becoming more personalized and more entertaining to compete for attention. “People have built surfing habits around specific portals,” says Broudy, adding that incentive houses will have to develop attractions that make their sites stickier.
To do that, participant demographics will have to be closely watched. For example, Broudy says research has shown that women are more interested than men in sharing their experiences through blogs and discussion groups. He believes incentive houses may use components like these to attract and retain more female site visitors.
Broudy also sees incentive sites that encourage visitor registration to be able to segment their audiences into more and more detailed groups based on the way they use the incentive site and which pages they visit. “Instead of shouting a message through a bullhorn, we are moving toward one-to-one communications,” he says.
These days, Arnold Light is especially excited about a ground-breaking project his company is working on that will involve hundreds of thousands — if not millions — of participants. “The [large, retail] client is integrating point-of-sale into the rewards program so that when the sale is completed, the information is communicated to the rewards Web site, turned into points, and uploaded to the individual's account,” he says.
Light believes that this program will herald a new level of sophistication in customer retention. A reward program with 5,000 items available for online purchase through a rewards site, he says, has the potential to reduce churn and keep customers loyal. “Anybody who wants to market a product today has to think about customer loyalty,” he says.