With economic news still getting worse by the day, incentive program managers are feeling the pain. In our last issue, we spoke with the heads of incentive firms about their clients' reactions to the down economy. This, our 2009 Incentive Trends Survey report, comes right from the source — the end-users: senior executives, directors of sales and marketing, and meeting managers at Fortune 1000 companies. And we found that more than half of respondents — 56 percent — are postponing or eliminating at least a portion of their incentive programs in 2009.
“This is the mother of all economic downturns — it's worse than anything I've seen,” says Bob Vitagliano, CITE, executive director of the International Site Foundation and an incentive industry leader for more than 30 years.
Incentive planners are running scared, Vitagliano believes, partly because of the global nature of this downturn, partly because their industries are already hurting, and partly because of public perception — which took a hit after AIG's incentive trip to a luxury resort on the heels of its government bailout.
“We're in bad trouble, no doubt about it, but the whole AIG thing has freaked out every company when it comes to perceptions [about incentives],” he says. “Yes, there are some changes that need to be made to contain costs, but I think that those who are not making major changes probably are still finding ways to do their programs more moderately.”
ING Life Distribution, Minneapolis, recently canceled this year's incentive trips for sales agents. President Daniel Mulheran cited the onset of the recession, as well as increasing numbers of home foreclosures and job losses, as reasons behind the decision. However, according to published reports, Mulheran also said recent negative press coverage of industry gatherings could harm ING's public image if the company went ahead with its 2009 incentive programs.
It Depends on the Industry
Fay Beauchine, president, engagement & events-U.S. for Carlson Marketing, also in Minneapolis, reports that she has seen some changes and cancellations, but they vary from industry to industry. Automotive, for example, is particularly hard hit, and she is seeing programs pulling back in that sector.
Some companies, including ING, have decided to offer winners cash instead of a group trip or merchandise, according to a report published by our sister magazine Financial & Insurance Meetings. In fact, 65 percent of respondents to our survey said cash is the best motivator for sales incentives. And indeed, with consumers tightening their purse strings, the temptation might be to reward your employees with cash and gift cards.
But Beauchine warns that, ultimately, this might not be best for the company. “You can argue that in today's economy, cash is important, but a trip is far more internalized [by the winners] than cash, which they use to pay their bills.”
Across the board, companies that are continuing with their travel programs are considering changes, according to our survey. Of the 44 percent of survey respondents moving forward with their programs, nearly three-quarters are making some kind of adjustment: 44 percent of this group will send fewer in-house staff, 40 percent expect to send fewer qualifiers, 30 percent will cut the number of nights, and 30 percent expect to have fewer pillow gifts in the rooms.
Michele Samoulides, senior manager, worldwide reward & recognition programs, Microsoft Inc., Redmond, Wash., says her company will not be making major changes to programs for 2009, but she is conscious of managing expenses.
“We are always extremely aware of costs and work with pretty limited budgets already, but we won't be cutting back on the number of winners or the number of days in the program — at least at this point,” she says, adding that most of her final planning takes place in the late spring for program operations in the fall, so this could change.
Jodi Visco, event planner at Amylin Pharmaceuticals in San Diego, says she is also going forward with her annual 80-person sales incentive, booked into Puerto Vallarta for four nights in 2009. She is considering reducing the number of company employees attending but otherwise will be sticking with her plans, which include several choices of activities and plenty of free time. Her 2010 program, scheduled for Costa Rica, is also going forward as planned.
However, Visco is in the minority among survey respondents: Looking beyond 2009, 71 percent said they are rethinking destinations due to airfare costs, and almost half (47 percent) will be using less-expensive properties. That's no surprise: While half of respondents said their budgets stayed the same from 2007 to 2008, for a median of $3,846 per qualifier, 56 percent expect their 2009 dollars to shrink. Planners were far more optimistic when surveyed in late 2007 about their 2008 incentives: Only 20 percent expected their annual budgets to.
Carlson's Beauchine has even seen clients scrutinize property names. “In some cases, having the word ‘resort’ in a name isn't the best,” she says. “People may want some of the amenities of a resort, but they don't want to have [their meeting] at a ‘resort.’” That concern is reflected by survey respondents, 46 percent of whom said the economy had impacted their property and/or destination choices.
In another sign that companies are scaling back this year, only 37 percent of respondents reported using a non-U.S. destination every year — down from almost half of respondents when surveyed in late 2007 about their 2008 incentives. An even greater drop is in the number of respondents who reported they travel outside the U.S. every couple of years, from 80 percent in last year's survey to just a third of respondents in this survey.
Scaling back is appropriate, says Site's Vitagliano. “Backing off on the elaborateness makes people more comfortable” as they see others experiencing tough times around them, he says. “You should make things more modest. But I think cutting entirely is a mistake. Canceling makes people feel insecure. When the opportunity arises, those top performers will go somewhere else.”
Chuck Lane, director of incentive travel and public relations for health benefits company Humana Inc. in Green Bay, Wis., says his incentive programs are constantly scrutinized to ensure maximum return. “We keep asking ourselves, ‘Is this or that element necessary?’ and ‘Are we doing this just because we have always done it this way?’”
For his four 2009 incentive programs, Lane is trying to maintain the same per- capita spending while delivering the same experience. To that end, he has cut back on speakers and will be considering other cuts — including possibly shortening some programs by a day — to keep within budget. “We will be considering other deletions where possible, but part of our ‘magic’ is to create unique rewards, which can be ticklish if [deletions] are glaring.”
While the purse strings may be especially tight now, doing more with less is nothing new, Vitagliano notes. “The beauty of our industry is that you always find ways to run a fabulous program on a limited budget.” And with times as tough as they are, winners are likely to understand — or even welcome — a more subdued program.
Sometimes — as in Shannon McCorison's case — the winners even understand a company's decision to cancel. McCorison, who is manager,and promotional programming for ProLogis, a Denver-based commercial real estate firm, found that when talking with the brokers who are potential qualifiers for her company's annual incentive programs, “they were supportive of our plans to forego incentive trips in 2009,” she says. “Several even encouraged the move because they feel it's important that they focus on the business at hand in 2009 and that attending incentives might seem frivolous in light of the economy.”
She thinks part of the reason for this acceptance is that the company was proactive in contacting these top performers well in advance. “Had we waited until attendees started asking where their invitations were, the change could have been met with more negative feelings,” she says.
The idea of canceling may seem frightening, but McCorison advises staying calm. “Meeting managers shouldn't be panicked by the idea of eliminating programs in 2009,” she says. “We should all look to this as a time to reevaluate, get back to basics, and establish processes that will allow us to be even better when the programs come back.”
Percentage of respondents who have canceled some or all of their 2009 group incentives:
Percentage of respondents who have canceled some or all of their 2010 group incentives:
What They Spend
Per-person incentive budget for companies with fewer than 1,000 employees:
For companies with more than 1,000 employees:
Goodbye, Five Star?
Percentage of respondents considering less-expensive properties for 2010:
Where to Go
Percentage of respondents re-thinking destinations for 2010 because of airfare costs:
Who's the Boss?
Who makes the final destination decisions for your programs?
In November 2008, Penton Media e-mailed invitations to participate in an online survey to domestic subscribers of Corporate Meetings & Incentives who hold management, sales/marketing, and meeting management titles and who have responsibility for planning incentive travel programs. This survey is based on 108 responses.
An Analysis of the Economy’s Impact on Incentives by Market Sector