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Tuesday, February 2, 2010

Agent incentives: cash or merchandise?

This is undoubtedly one of the most frequently asked questions by contact center management. I’d be rich if I had a dime for every time I’ve heard it. This article will not provide the definitive answer but will relate some of my observations and suggestions so you may answer the question yourself.

Incentives should be used to drive and maintain behaviors that maximize profitability. Whether buying a birthday gift for a friend or incentives for your employees, deciding what will please someone else is almost always a challenge. Mind reading is not an exact science.

One of the biggest perceived negatives of offering cash or equivalent (such as debit or gift cards) is that it’s “impersonal” and the giver is lazy and uncaring. However, there is no question about the true monetary value of the reward as can be the case with merchandise. Gift cards tie the recipient to a specific store but cash or debit cards allow complete freedom of choice.

Many incentive companies claim that merchandise has a greater impact on behaviors and their catalogs and gift cards solve the challenge of “what to give” by allowing the recipient to select what they want. Some providers offer their services at no charge provided the customer uses their catalog.

Catalog merchandise is usually marked-up; I’ve seen some as high as 50% above “street” prices. The lowest debit card I’ve seen has 3 ½% to 4% mark-up. The lower the mark-up, the better the return for your incentive dollar.

For many years I’ve used a charge card that earns “points” that can be used to “buy” catalog merchandise and gift cards. As a general rule, each dollar spend with the card earns a point and a point is worth one cent. The catalog offers a wide selection: airlines, hotels, car rentals, resorts, retail, restaurant, electronics, entertainment, fashion, sports and more. Every year I receive a beautiful new catalog and I can browse and redeem points on-line as well. Until very recently, I had not tried to redeem points (saving for retirement). After receiving a new catalog, I compare the catalog prices with prices that I find on-line. These annual comparisons have caused an uneasy feeling in my stomach as I’ve easily found much lower prices. I have accumulated more than 350,000 points and recently tried to redeem some. In addition to high catalog prices, I encountered many restrictions that further decreased their value. I solved this problem by buying gift cards with my points, selling them on eBay, transferring the PayPal monies to my bank account and closing my account with the charge card company. Now I am able to buy what I want and not feel ripped-off.

An agent incentive program is most effective if employee focus is on achieving your goals, not how fair or unfair the program is.