The following is a blog that was originally written for Best Payment Solutions.
https://bestpayment.solutions/knowledge-center
Incentive programs are nothing new. For years, B2B and B2C companies have used them to motivate sales, increase brand awareness, and more. But as with any business strategy, people want to know if the results are worth the effort.
Let’s take a look at the data. We will review what incentive programs are, how incentives work, their effectiveness statistics, and real-world examples.
An incentive program can be defined as any formalized program in which rewards are provided for engaging in specific actions or behaviors. Generally, something as simple as telling your child they will receive a cookie for every A+ grade they get during the school year can be an incentive program. Companies use various incentive programs for everything from encouraging purchases to incentivizing healthy lifestyles among employees. Here are a few simple examples:
Sales Incentives: Participants are rewarded for selling products or services. These can include long-term incentive programs or short-term sales contests.
Referral incentives: Participants are rewarded for referring other potential customers to a company.
Rebate incentives: Participants receive a rebate as an incentive to purchase products.
Health Incentives: Participants receive incentives for completing health-related activities such as exercising.
There are many others and variations on the above. Still, these should give you a basic idea of what incentive programs can look like. In the next section, we will look at how incentives work.
Several psychological and behavioral economic principles help to make incentive programs successful. Here are a few of them:
Incentive Theory of Motivation – This psychological theory of motivation suggests that humans are externally motivated to take actions based on the rewards they can obtain. An incentive program allows companies to take advantage of this and encourage behaviors aligned with company goals.
Reward Substitution – Reward Substitution is a behavioral economics concept that shows how an immediate reward can help increase motivation for achieving long-term goals. For example, suppose a company offers performance-based bonuses at the end of the year. In that case, some employees might lose motivation because the reward feels far in the future. However, the company offers smaller monthly bonuses as well. In that case, the employee will see immediate benefits for their actions and additional motivation in working towards their long-term goal.
Social Proof Principle – The principle of Social Proof is as follows: We determine what is correct by finding out what other people think is right. With incentive programs, when someone sees that other participants view a reward as valuable, they will also value it. This can be achieved through posting winner lists for monthly sales contests, having participant dashboards showing rankings, etc.
These are just a few examples of how psychological and behavioral economic principles are tied to an incentive program’s effectiveness.
Several studies and polls support the idea that incentive programs are effective. Here are a few key examples to consider:
As you can see from these statistics, many benefits derive from having an incentive program. This includes B2B loyalty incentive programs, channel sales programs, and referral incentives.
Beyond the statistics, there are many real-world examples of successful incentive programs.
Started in 2015, the Lenovo Expert Achievers Program (LEAP) is a dealer/distributor sales incentive program. It was initially created to help sell servers but was adapted to include PC sales as well as services. The program has been very successful. Here are some of the data for the program from 2022:
Cisco has thousands of partners, with over 90% of the company’s business going through those partners. Cisco has incentivized its partners for years. As of 2023, their partner incentive program includes:
Dropbox, a file hosting and sharing service, offers clients an extra 500 MB of storage for every person referred to their services (up to 36GB). This was done via invites, with an additional 500 MB of storage given to every person who accepted the invitation to use Dropbox.
After first implementing its referral program, Dropbox saw massive growth. Over a 15-month period between 2008-2010, Dropbox grew its number of registered users by 3900%.
Only some incentive programs are guaranteed to be a success. It takes careful planning and a clear understanding of how the incentives will help you achieve your goals. This is why many companies choose to hire incentive program management experts to run their programs. Once you are set up with the right team and technology to support your incentive program, you are well on your way to success.
Sources:
Influencing Behavior through the Principle of Social Proof
https://cuttingedgepr.com/articles/influencing-behavior-principle-of-social-proof/
What is Reward Substitution In Behavioral Economics?
The Incentive Theory of Motivation
https://www.verywellmind.com/the-incentive-theory-of-motivation-2795382
Essential B2B Loyalty Program Statistics In 2023
https://zipdo.co/statistics/b2b-loyalty-program/
Sales activity incentives
https://tips.ariyh.com/p/sales-activity-incentives?s=r
How B2B Sales Can Benefit from Social Selling
https://hbr.org/2016/11/84-of-b2b-sales-start-with-a-referral-not-a-salesperson
IMA Announces 2023 Excellence Award Winners
Dropbox grew 3900% with a simple referral program. Here’s how!
https://viral-loops.com/blog/dropbox-grew-3900-simple-referral-program/
At Summit, Cisco Revs Up Its Partner Engine