Proof

Recent studies by Goodyear have uncovered astonishing results when comparing cash incentives to merchandise and travel awards. They show that cash incentives are only HALF as motivating as merchandise or individualized travel. This information is reprinted from Incentive Magazine.

Tom Gravalos, manager of special accounts marketing for the Akron-based Goodyear Tire & Rubber Co., Was constantly butting heads with upper management whenever he presented a proposal for an incentive program budget offering travel or merchandise. The bosses wanted cash and were pretty vocal about the reasons why: Everybody has to have money. Whenever you ask people what they want they always say cash. What could be more motivating than something that everyone already wants and needs?

In response, all Gravalos could offer were the usual arguments: Cash is considered income; cash has no trophy value or lasting effect, and cash has poor perceived value.

Unfortunately, Gravalos had no facts to support these statements. All he had was anecdotal evidence derived from feedback from his program participants and assurances that this was correct from incentive houses, industry organizations and trade magazines. I was amazed about how little real data there was out there, says Gravalos.

In fact, most available research supported the position that cash was a better motivator. In 1993, for instance, the New York-based Society of Incentive Travel Executives sponsored a survey of incentive preference on 534 employees of a nationally known insurance company and cash came in No. 1. And managers feel the same way. When polled, many incentive decision-makers also believe money is the reward of choice for incentive programs. In 1995, bonuses and other incentive pay rose by 33 percent according to a survey by Hewitt Associates, a New York-based compensation consultancy.

By 1994, after years if dancing around the issue in budget meetings, Gravalos had had enough. I got tired of having to defend the decision to use incentives with anecdotal evidence, he says. We run our company based on facts. Were quality-oriented and we test and analyze our products rigorously, yet in this particular part of the business we were relying on very sketchy facts to support a very expensive marketing strategy.

Gravalos was certain that non-cash rewards were more motivating than cash. So he decided to put it to the ultimate test. Gravalos ran a sales incentive program that rewarded half the participants with cash and the other with non-cash. And guess what? Those rewarded with non-cash produced results that were almost 50 percent greater than those motivated by just cash.

Gravalos documented the results in a research paper. Its part of a growing pool of hard evidence that suggests that non-cash rewards actually motivate both employees and consumers better than cash rewards.

Gravalos put those non-cash incentives to the test in a program to increase sales of the company’s Aquatred® tires. The program was aimed at sales associates and managers at 900 company-owned stores and service centers across the country. The outlets were ranked in numerical order from best to worst in terms of sales, and then divided into two groups. The top selling outlet was placed in group A, the number two outlet was put in group B, number three in group A, number four in group B, and so on until the entire pool was divided. This assured that the test results would be free of impinging factors such as regionality and created two group of nearly identical in performance. The groups were communicated to equally through promotional pieces and periodic newsletters. One group was arbitrarily chosen to receive monetary rewards for every increment of 12 tires sold. The second group received and equally priced selection of merchandise and travel rewards. The latter offer, called Awardperqs, was structured to plateaus, which made it impossible to assign a monetary value to them.

One of the problems with using a point system is that the participants often try to assign a monetary value to the points. A participant will see a radio in the award catalog that can be redeemed for three points, then they will shop around, find out the retail price of the product is $30 and conclude that the points are worth $10. Once that happens, that person has translated the points into cash and it’s no longer a non-cash award.

To combat this, the entire 200-page catalog used in the Goodyear program was divided into levels. None of the awards received point values and the cost spread between items in a given level was $25 on the retail level. If a participant went to a department store and looked up the price of an item, it could be $40, while another item in the same level could have a retail price of $65. If any of the participants tried to figure out the precise value of the Awardperqs they would end up with inconclusive information. The objective was to focus the attention and energy of the second group on the available merchandise and travel opportunities without regard to the monetary value.

The results achieved in the program, which was designed to operate for six months, were compared with sales in the six-month period immediately preceding the program launch. In addition, results achieved by each group were compared with those of the other group. Measurement was on the basis of units sold, as well as in terms of the ration, or mix of sales of Aquatred tires versus other lines.