Incentives in Corporate America: “a Whopping, Major-League Industry”

The benchmarks are in, and the numbers are huge: U.S. companies spent $46 billion on travel and merchandise incentives in 2006, according to a study sponsored by the Incentive Federation, an umbrella organization that conducts lobbying and research efforts on behalf of the incentive industry. Of that total, $32.7 billion was spent on merchandise and $13.4 billion on incentive travel.

“The use of incentive programs is bigger than ever, and it is growing,” said Bruce Bolger, managing director, the Incentive Performance Center (part of the Incentive Federation that focuses on corporate outreach), at a press conference held during The Motivation Show in Chicago last week. “This is a whopping, major-league industry.”

Perhaps even more important than the big bucks posted for 2006 was the trend revealed by the study: “This boom is not going to be ending,” said Frank Katusak, president of The Incentive Research Foundation, one of the member associations of The Incentive Federation, for which Katusak also serves as chairman. “More than half of large companies that use incentive travel said their budgets had increased over the past two years and will continue to increase over the next two years.” On the merchandise side, 59 percent of respondents expect their budgets to increase over the next two years.

Other key findings:

• Thirty-four percent of companies used incentive travel or merchandise incentives in 2006.
• Among companies that use incentive travel, 81 percent use it for sales incentives; 58 percent use it for nonsalesemployee recognition.
• Among large companies (revenues in excess of $100 million) that use incentive travel, the average number of incentive trips held annually was 3.6, with average attendance of 157.
• The average budget for incentive travel in 2006 was $164,000.
• The average budget for merchandise incentives in 2006 was $119,000.

“This was a landmark effort to document the size of the marketplace for incentive merchandise and travel,” said Katusak, adding that the full report will be released later this month at www.incentivecentral.org. The study will be repeated in 2010.

Beyond the Carrot
Bolger called on the incentive industry to recognize the need for increasingly sophisticated employees and programs to meet the coming demand for incentive strategies with measurable results. “This is an opportunity for us, but we need to sharpen our skills,” he said. “We need people who understand the difference between trips and prizes—trinkets and trash—and performance improvement. It isn’t about carrots. It’s about lighting the fire within.”

Defining Meetings
Concurrent with the The Incentive Federation’s U.S. Incentive Merchandise and Travel Marketplace Study, The Incentive Research Foundation is releasing its 2007 Industry Profile Study, which looked at spending on three categories of meetings: incentive travel, motivational meetings, and special events. Spending for all three segments was more than $77 billion in 2006.

Incentive travel, used by 10 percent of companies, is defined as “a management tool that uses an exceptional travel experience to motivate and recognize participants for superior performance. The purpose of the trip is for participants’ enjoyment, not for business.” Motivational meetings, used by 50 percent of companies, were defined as meetings that include any motivational element but for which attendees don’t have to earn their invitation. Special events were defined as “standalone events” that could include business meetings, product launches, road shows, and social customer gatherings.

Other highlights from this study:

• The average budget for motivational meetings in 2006 was $68,000.
• The average budget for special events in 2006 was $78,000.
• On average in 2006, large companies sponsored 4.7 motivational meeings, each involving 197 participants.
• On average in 2006, large companies held 91.3 special events.

The full report will be available later this month at www.TheIRF.org.