Companies moving away from incentive travel and merchandise to prepaid incentive cards to avoid perception of extravagance
TORONTO, June 9, 2009 — In a joint analysis of millions of dollars of spend on VISA* prepaid incentive cards across North America (from the first quarter of 2008 to the first quarter of 2009), Scotiabank® and Berkeley Payment Solutions uncovered a number of trends particular to difficult economic times.
Fast food restaurants are proving their value as people more than doubled their spending (+107%) during the period. Conversely, spending at home furnishing and equipment stores is down by almost half (-44%), as consumers chose to purchase household essentials at discount stores (+37%), drug stores and pharmacies (+26%) and grocery stores (+20%). Although department store spending has also declined (-35%), spending at family clothing stores (+79%), men and women’s clothing stores (+37%), and women’s ready to wear stores (+33%) are up significantly as individuals focus on stretching their dollars as far as possible.
“Our analysis shows that it is now more difficult than ever to anticipate the type of incentives that will successfully motivate individuals,” explains David Eason, President of Berkeley Payment Solutions. “Further, as economic conditions worsen, spending migrates towards day-to-day necessities such as groceries or clothes instead of non-essential items such as luxury vacations or big screen televisions. What’s more, of the millions of dollars analyzed, no single merchant category accounted for more than 8% of the total incentive spend — underscoring the fact that it is impossible to anticipate each individual’s choice of rewards.”
Companies moving from incentive travel and merchandise to prepaid incentive cards to avoid perception of extravagance
Another significant industry shift resulting from the economic downturn is that companies across North America are turning away from luxury travel and high-end merchandise and towards prepaid cards as they try to find less conspicuous ways to reward employees, customers, and partners. In its October 2008 outlook study of incentive industry trends for 2009, the U.S.-based Incentive Research Foundation found that more than three-quarters of survey respondents (78%) believe the economy will have a negative impact on incentive travel programs in 2009, while over half of the respondents (58%) expect incentive travel budgets to decrease. In addition, nearly half (49%) of respondents believe the economy will have a negative impact on their ability to plan and implement merchandise non-cash incentive programs in 2009.
What’s more, by October 2008, a significantly greater percentage of respondents (75%) said that their company was sensitive enough to perceptions of program extravagance to change the types of awards they use — while just a month earlier, only 45% were considering altering their incentive programs. Prepaid cards are being seriously considered as alternatives, with 24% of respondents reporting that they expected to use them more in the future.
“At a time when so many people are being asked to do with less, companies need to be sensitive to how they reward their employees,” explains Eason. “As a result, many companies are moving away from rewarding individuals with highly visible luxury items that are typically part of travel and merchandise incentive programs. They are doing so to both avoid the perception of extravagance and to allow individuals to choose the rewards that are most appropriate to their current needs.”
Prepaid incentive opportunity continues to grow
”Prepaid incentive cards have rapidly emerged as a preferable means of rewarding employees versus traditional, paper-based methods,” explains Brian Triplett, Head of Global Prepaid, VISA Inc. “As companies search for cost-effective alternatives to manage and deliver reward and incentive programs, they are realizing one of the best ways to motivate employees is to give them the flexibility and choice offered by a VISA prepaid incentive card. And with more and more businesses embracing prepaid cards as an efficient means of delivering incentives, the prepaid incentive card segment is poised for strong industry growth.”
Flexibility and choice critical to motivating during a downturn
Ultimately, providing cardholders with the flexibility and choice to redeem their rewards anyway and anywhere they want is the ultimate win-win situation during a recession. People are motivated by choice and the current economic downturn has affected that choice. People are buying more household necessities instead of discretionary or luxury items, which makes VISA prepaid incentive cards an ideal way for companies across North America to reward employees, customers and partners.
For years, Canada’s largest telephone directory publisher Yellow Pages Group (YPG) implemented regional gift card and merchandise campaigns. However, aggregate spend was not easy to track and campaign success was difficult to measure. Always an innovator, and attracted by program benefits, YPG launched a new sales incentive campaign in early 2008 where its national advertising sales representatives received a portion of their commissions via VISA prepaid incentive cards. Sales representatives benefited from the ease and flexibility of the program. They were also motivated to meet sales targets because they could select their own reward. Management benefited from being able to track the success of the campaign. They could also quantify increases in sales, determine each incentive campaign’s success and increase brand awareness by distributing YPG-branded VISA prepaid incentive cards to each sales representative.
“The Yellow Pages Group program showcases the success that companies of all size have achieved by motivating people to meet business goals with VISA prepaid incentive cards,” explains Rubina Havlin, Managing Director, Credit Cards, Scotiabank. “The many benefits associated with giving people the flexibility and choice to redeem rewards however and whenever they want have quickly transformed these cards into the incentive and reward solution of choice across the country.”
About Berkeley Payment Solutions
Berkeley Payment Solutions delivers innovative VISA prepaid card programs and services to companies across North America seeking proven cost-effective payment solutions that extend their company's brand and resonate with employees, customers, and partners. While reducing the complexity and cost of implementing incentive, reward, and rebate programs, Berkeley harnesses the universal acceptance, security and functionality of a VISA prepaid card. For further information, visit www.berkeleypayment.com.
About Scotiabank
Scotiabank is one of North America's premier financial institutions and Canada's most international bank. With more than 69,000 employees, Scotiabank Group and its affiliates serve approximately 12.8 million customers in some 50 countries around the world. Scotiabank offers a diverse range of products and services including personal, commercial, corporate and investment banking. With more than $509 billion in assets (as at January 31, 2009), Scotiabank trades on the Toronto (BNS) and New York Exchanges (BNS). For more information please visit www.scotiabank.com or www.scotiacapital.com.
About VISA Inc.
VISA Inc. operates the world's largest retail electronic payments network providing processing services and payment product platforms. This includes consumer credit, debit, prepaid and commercial payments, which are offered under the VISA, VISA Electron, Interlink and PLUS brands. VISA enjoys unsurpassed acceptance around the world, and VISA/PLUS is one of the world's largest global ATM networks, offering cash access in local currency in more than 170 countries. For more information, visit www.corporate.visa.com.
For further information, contact:
Andrea Lekushoff
Broad Reach Communications
416-435-2569
alekushoff@berkeleypayment.com
TM Trademarks of the Bank of Nova Scotia. ® Registered trademarks of the Bank of Nova Scotia. * VISA Int./Lic. User The Bank of Nova Scotia.