Earlier this year, Berkeley Payments Solutions released the results of our third annual Canadian Incentive Trends Survey. The results tell the story of an evolving corporate incentives industry that continues to grow despite ongoing global economic uncertainty.
Perhaps the biggest news is that an increasing number of Canadian companies are choosing to use employee incentive programs, and these companies have no plans to reduce their incentive program budgets. The survey also tells us that employers need incentive programs that are cost-effective, provide a high ROI, and create competitive advantage by motivating and retaining a multigenerational workforce.
A total of 767 Canadian professionals participated in the survey. A majority (72 percent) were incentive program managers, directors or administrators who helped identify four major trends that currently impact the prepaid industry:
- First, the use of employee incentive programs has risen for two consecutive years.
- Second, employers' views on different types of prepaid incentive programs vary.
- Third, a stark disconnect exists between what employers say they want and what programs they actually choose.
- Fourth, motivating a multigenerational workforce has become a significant challenge for many employers.
Let's delve into these four trends and look at how prepaid industry decision makers on both sides of the border can benefit:
1. Use of Employee Incentive Programs Continue to Rise
During the past two years, Canadian companies have considerably increased their use of corporate employee incentive programs. The Canadian Incentive Trends Survey shows that the number of companies using incentives for employee programs increased by about one-fifth (21 percent) over 2011 and by almost half (46 percent) over 2010. What's more, when asked how their 2012 incentive program budgets compare to their 2011 budgets, over three-quarters (76 percent) of survey respondents said there had either been an increase or their budgets remained the same.
Given the uncertainty prevalent in today's economic environment, this trend is somewhat surprising. If we take a look at what happened during the economic downturn in 2008/09, companies appeared to focus on sales, while employee incentives fell by the wayside. This trend reversed during the economic recovery, which is exactly what one would expect. Yet, despite today's global economic uncertainty, the use of incentive programs has continued its upward trajectory.
Although there's no concrete explanation as to what's driving this trend, it may be a result of the increasing number of articles and research papers touting the strategic benefits of employee retention in times of economic uncertainty. The survey shows that the primary reason indicated by survey respondents for implementing an incentive program was to motivate or retain employees (27 percent), and this continues to be a high priority in uncertain economic times.
Regardless of the reason behind this trend, the numbers are good news for the prepaid industry overall. Still, as the next trend shows, certain areas of the prepaid incentive market have benefited more than others.
2. View on Prepaid Incentives Varies
In general, the news for suppliers of retail gift cards is positive as retail gift cards remain a top choice for employee incentive programs, while prepaid network branded cards continue to lag behind other options.
The majority of survey respondents who have run employee incentive programs used retail gift cards and gift certificates (43 percent), followed by merchandise (39 percent), special events (23 percent) and prepaid Visa, MasterCard or American Express cards (22 percent). And when asked what type of prepaid incentive cards they've used, respondents said retail gifts cards (71 percent); store-bought prepaid Visa, MasterCard or American Express incentive cards (59 percent); and company-branded prepaid Visa, MasterCard or American Express incentive cards (36 percent).
On the other hand, the survey shows that network branded prepaid cards are gaining some ground against other incentive/rewards options. The use of these cards rose to just over one-third (37 percent) in 2012 from 33 percent in 2011.
This presents a tremendous opportunity for industry decision makers to expand the reach of prepaid cards by rethinking their marketing and positioning efforts. One way to do this is to address the disconnect identified in the following trend.
3. What Employers Say They Want vs. the Incentives They Choose
Our survey identified a stark disconnect between what employers say they want in an employee incentive program and what employers are actually offering.
The survey showed that when designing an incentive program, almost one-quarter (23 percent) of respondents identified program costs as a key factor in ensuring the program's success. So it may not be surprising that retail gift cards are the leading choice, as 32 percent of employers view them as the most cost-effective incentive option. However, network branded prepaid cards didn't lag far behind, with just over one-quarter (26 percent) of employers believing them to be the most cost-effective option.
Yet, the real disconnect lies in the following results: Survey respondents identified participant satisfaction/positive experience (20 percent) and the ability to measure results or ROI (15 percent) as additional key factors. According to 38 percent of respondents, network branded prepaid cards are believed to be most valued by recipients. They're also believed to provide the highest level of motivation for recipients (51 percent) and the best ROI (40 percent).
Again, an opportunity exists to change the way employers think about network branded prepaid cards by promoting significant benefits, such as cost-effectiveness, a high ROI and value to recipients.
4. Employers Challenged by Motivating a Multigenerational Workforce
The survey revealed another benefit of network branded prepaid cards: The ability to motivate employees across generations, which has become an important consideration for employers.
From the survey results, it's clear that employers believe incentive programs give them a competitive advantage by providing a way to motivate and retain employees, create a more engaged workforce and boost productivity. More than half of respondents (59 percent) said they felt they had gained a competitive edge over their competition as a result of their incentive programs. Yet, today's increasingly multigenerational workforce adds a new level of complexity to designing effective incentive programs.
How can companies create universal incentive programs that appeal to both Millennials and Boomers, who are at drastically different life stages, and also appeal to Gen X employees who make up the bulk of the workforce? The answer lies in creating an incentive program that is valued by multigenerational recipients. Almost three-quarters (74 percent) of respondents believe it is either somewhat or very difficult to develop an incentive program that will motivate employees of all ages.
In today's changing business landscape, industry decision makers can take advantage of this finding by positioning network branded prepaid cards as the incentive most universally valued by recipients across all workforce age groups. This may be accomplished by communicating that these cards can be used anytime and anywhere to purchase virtually any reward the employee desires.
Final Thoughts: Capitalizing on Incentive Trends on Both Sides of the Border
Employers in Canada and the United States face the same challenges, the same demographics and the same choices in terms of incentive programs. With that in mind, prepaid industry decision makers on both sides of the border can capitalize on the incentive trends discussed throughout this article. By recognizing the key advantages of network branded prepaid cards, and how these benefits resonate with employers and employees, decision makers can capture a larger market share by designing and marketing incentive programs that appeal to a broader range of potential customers.
CEO, Berkeley Payment Solutions
Article appeared in Paybefore magazine on November 1st 2012.