Proof2

The results of the program were startling even to someone as predisposed to non-cash awards as Gravalos. I fully expected the non-cash group to perform better in the program that the cash group, but I was startled by how great the margin of difference turned out to be he says. While the performance of both groups improved over the program period, the group motivated by the Awardperqs out performed the group motivated by cash by a margin of 46 percent. The Awardperqs group also produced a 37-percent greater increase in product mix sold, as compared with the previous six-month period, than did the cash group, which also experienced a modest increase in this area. And, most important of all, the cash group generated a negative return on investment (ROI) with a minus 20 percent ROI while the Awardperqs group generated a plus 31 percent ROI. In other words, for every dollar invested, the company got back 80 cents from the cash group and $1.31 from the Awardperqs group.

The bottom line was that the non-cash program was able to show a significant profit with a program that distributed rewards for every increment of 12 tires sold while the cash program could not. The cash program would have needed higher, -- hence tougher goals, which could have been demotivating. Add to that the fact that the cash awards were competing with the retail value of non-cash items bought at cheaper, bulk prices, which created a perception of higher value among the participants receiving them, although Gravalos is quick to point out that this is speculation and can’t be proven.

Since this test, Goodyear has become firmly committed to incentive programs that offer non-cash rewards. This test has given us the hard facts to comfortably make decisions on incentive marketing strategies in the future, says Gravalos. As a result of this experiment Gravalos feels even stronger about non-cash incentives than he did before. I would have been prepared to accept it if cash had won out after all, cash is easier to deliver, he says. Anyone considering the use of non-cash incentives has to realize there’s a greater commitment required than just delivering cash, it’s more complicated. But you get better performance. If you had asked me three years ago what works better, cash or non-cash incentives, would have given you my opinion, but no facts to support it. Now I’ve got some hard facts.

Why Non-Cash Works

Incentive participants say they prefer cash, but why did chaos ensue when Lantech uses only cash? Why did Goodyear salespeople perform better when motivated by non-cash rewards? Why do cleaning establishments and food service companies increase customer loyalty with ad specialties? And why does Herbert Lucke still get choked up over a tractor he won in a Magnavox program over 30 years ago?

According to Alice Kendrick, associate professor of advertising at Dallas-based Southern Methodist University, there’s a perceived value of non-cash items that makes them more motivation. I did a study in 1986 that asked focus groups to assign a cash value to a number of promotional items and most assigned a higher value to the items than they actually had, says Kendrick.

But why do non-cash rewards motivate better than cash? In considering the probable cause it’s important to understand how the participants in an incentive program perceive the offers of rewards. About three years ago, we began to look into the reason why non-cash incentives motivate better than cash incentives. We discovered a host of studies from academic, government and medical sources and pieced together a model for the effective use of contingency based rewards. (An incentive is a contingency-based reward just the same as a sales commission is.)

The research showed that the way the brain processes information is responsible for non-cash rewards having a greater impact on people than cash awards. Offers of non-cash rewards, such as those offered in the Goodyear program, are visualized or imaged by the right hemisphere of the brain. Such images or mental pictures trigger emotional responses, which can be quite powerful.

Conversely, offers of strictly monetary rewards are processed by the left hemisphere, which lacks the ability to create images. When a monetary offer is received, the brain’s left hemisphere assesses the information and determines whether the offer is sufficient, relative to the time or effort required to earn it. The emotional response is what drives behavior, not rational thought. With cash, it’s reduced to one issue: how much.

Of course if you offer enough money you can move the needle in most situations, but there’s rarely enough money in a client’s budget to buy performance. That's why you need the emotional response that only a non-cash reward can provide.

*Tom Gravelos’ 44-page Masters Degree Thesis: “The Trouble With Money” is available on request by calling Neil Zielinski, Account Executive at Heritage Marketing & Incentives 800 343-4034 ext. 454