Dare to Dream: Incentives Gone Wild
August 29, 2008
By Maya Dollarhide
Owning racehorses, a new motorcycle, or even a Swiss watch valued at five or six figures—incentive rewards or dreams coming true?
The answer is both. Incentive experts say that despite our country's weak economy, high-end merchandise or rewards like the ones mentioned above continue to be popular motivators.
"We haven't seen a drop-off in the frequency of [reward] events or the number of rewards within the luxury marketplace. Not yet, anyway," says Tom Taraci, president of TJT Motivation in New York. According to Taraci's colleague, David Groveman, high-end luxury items are affordable for companies, because they are not given out frequently or in great numbers and they always provide a return on the investment.
"Luxury items definitely provide a good ROI," says Taraci. "People appreciate the level of quality, and the prestige of the brand they are given really means something to employees when they receive them."
In a recent Incentive survey, 66 percent of respondents reported that their use of luxury brands had remained steady over the past few years. Nearly a third of the respondents added that they planned to increase their high-end rewards spending this year. Some companies offer specific items like Cartier watches, Gucci handbags or cruise gift certificates worth thousands. Other companies use credits or point-based systems that allow their employees to select a personalized incentive reward.
The most over-the-top items often come from accruing and banking a certain number of these incentive recognition credits and points. According to Taraci's company, the average price range for luxury items is $250 to $1,500. But accrued credits and points over time can translate into tens of thousands of dollars worth of merchandise. The results of saving up credits may mean a big difference, the difference between receiving a high-end and super-deluxe item as an incentive reward.
For example, Carlson Marketing Inc., in Minneapolis, helped facilitate the sale of several racehorses for an automotive client. "This company had a sales employee who did very well and accrued a large number of incentive reward credits. The guy spent time at a local racetrack and admired a horse there. He asked his company if he could cash in his credits to buy the horse from the track," says Barry Wegener, senior director of marketing and communications for Carlson. "The company came to us to facilitate the sale of that horse. We've actually helped the company buy several horses in past years for this particular employee. This guy dreamed of owning horses. Now, thanks to his hard work, he does.
 Cool Car or Cool Threads
"The Unity Marketing Luxury Consumption Index for the third quarter of 2007 showed that despite lower consumer confidence levels, spending on luxury experiences rose by 11 percent last year. For Chris Kemp, a web programmer from Ontario, Canada, his luxury experience is driving a million-dollar racing car. "I am an avid car racing fan and I noticed that in our catalog we have a 'Formula 1 Fantasy' where you get a half-day with professional training on racing techniques, then take the car out for a spin," says Kemp, who works for Toronto-based I Love Rewards Inc., an incentive company that creates online points-based solutions.
According to Razor Suleman, CEO of I Love Rewards Inc., the items like the Formula 1 Fantasy are worth well over $10,000. "The problem with larger-ticket items is that they are generally not an immediate form of recognition," says Suleman. "But it is important to have these larger-ticket items as an option for people."
Kemp eventually earned enough points to make his dream come true. "An experience like this is on the higher end of point costs in our catalog, so it took me a while to save up," says Kemp. "But that was all the more motivation to work harder, get noticed and earn more points so I could get to my goal. I can't wait for the snow to melt before I can hit the track."
While personal experience rewards appeal to some personalities, others like to receive a branded, prestigious item that they can display—on their bodies, inside their homes or on the road. Frequently, the more well-known the brand is, the better it works as an incentive reward. "Clients and employees respond better to brands and items that they've seen and read about for years," says Taraci.
 Acquisitions Well Beyond Their Means
In a survey conducted last year by Pine Brook, N.J.–based Rymax Marketing Services, participants were asked to rank a variety of attributes used in determining whether a brand was considered a "luxury" brand. According to the survey, the top five attributes weighed in as follows: quality (83%), expense (51%), popular name brand (30%), aspirational (16%), and trendy (8%). "Brand recognition is [also] important to our clients, because they are looking to offer aspirational gifts to their employees and/or clients," says Donna Davis, a purchasing manager for Rymax Marketing Services. "A highly recognizable brand translates to a true aspiration and motivator, and most of our clients' programs are geared to motivation of the employee and/or client," she says.
Well-branded clothing, jewelry and accessories are always in fashion as incentive rewards. Davis reports that items from Gucci and Judith Leiber, whose designs can be found on the runways in Paris, Milan and New York City, are extremely popular among Rymax clients.
"One of our most popular programs was for custom-tailored sports jackets, blazers and suits from [upscale store] Paul Stuart," says Taraci. "Recipients get to choose the fabric and often the cut of the garment as well as experience the expert customer service and tailoring that has made [the brand] Paul Stuart famous," he says. What's the retail cost for a custom-made wardrobe from Stuart, an award-winning British designer? Not cheap. A wardrobe of suits could easily set you back $10,000, depending how many items you purchased.
The respected Movado Group Inc. offers high-end luxury watches like Ebel, Concord and Movado that can cost anywhere from $4,000 to $650,000. "Wristwatches are always in vogue," says Joe Zanone, senior vice president of the Movado Group Inc. in Paramus, N.J. "Ours are all handmade Swiss watches, with high-end, luxury finishes like 18-karat gold or white gold, diamonds and other precious stones," says Zanone. "Our clients [and our own company] use them as top performance and high-end sales rewards, and retirement gifts," he adds. High-quality Swiss watches like these, with handmade movements, appeal to both men and women. And they are built to last a lifetime. "A fine watch is like upgrading your car in some ways," says Zanone. "As you advance to the next state in your career and lifestyle, you want to upgrade." The Movado Group Inc. offers watches at a wide variety of corporate price points.
For those who are more interested in items that are found on the highway than the runway, Incentive Concepts Inc., in Maryland Heights, Mo., offers Victory motorcycles, which retail for over $16,000, as incentive rewards. "I think when you offer something with significant retail value, the recipient really remembers how hard they worked to earn it," says Vince McDonald, vice president of sales and marketing. "Especially when the economy is rough. Family budgets probably don't include a Victory motorcycle," he says. "But how exciting it must be for an employee to earn one."
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