On the surface, the corporate incentive and rewards market looks straightforward. Dig down a little and it is a seriously flawed bazaar. Let’s take a look at incentive and reward mysteries.
Gift cards, rewards and incentives are an important component of recognition and appreciation programs for organizations.
In the not-too-distant past we’d just buy Starbucks or other gift cards, and then manually distribute them to worthy recipients. That isn’t an efficient or scalable model.
Incentive companies were created so that organizations wouldn’t have to handle the logistics of buying gifts cards and distributing them.
It didn’t take long to realize how much waste existed in gift cards and see the profit potential in concealing what’s happening behind the scenes.
Now there are dozens and dozens of companies vying for your gift card, incentive and rewards business. Many of them advance the fiction that they are “no cost” to you!
But most incentive and rewards programs on the marketplace are not cost-effective and strip value from your reward budget. That leaves you less to devote to the very people who deserve the gift.
The incentive and reward industry developed around a broken financial model that isn’t beneficial to the organizations giving the awards. It’s a model that gambles on the hope that your gifts may never be successfully redeemed.
Far too much of the value of gift cards ends up in the coffers of the companies that sell the programs, and not in the gift cards and rewards that recipients get. There is little transparency as to what’s being paid for versus what’s being delivered. The model isn’t conducive to a good user experience for reward recipients.
A lot of value is just lost.
You want to reach 100% redemption. You want your program to be a complete success.
The gift card industry is hoping you don’t reach everyone you intend and that your program has breakage.
Gift card programs come with a lot of variety and options, but also with a lot of terms and conditions, expiration dates and potential areas that can strip value from your programs.
When incentive companies sell you gift cards, they receive the full value of the cards regardless of whether the card is ever redeemed. You pay full price, no matter if the gift is ever successfully redeemed.
Incentive companies know that redemptions don’t reach anywhere near 100%. They get to bank the unredeemed value, not you.
According to the National Retail Federation, about $1 billion in gift card value goes unused each year. A new survey from CreditCards.com found that nearly half (47%) of Americans have at least one unused gift card, voucher, or store credit.
In many states and in many countries, cards can have expiration dates. When that date passes, the card is no longer redeemable. The unused money is kept by the incentive company, not by the organization paying for the reward. Incentive companies make extra profit off your programs by keeping the value from cards that don’t get redeemed on time.
If you can’t track the redemption status of cards, you don’t know how much of your program dollars are actually used. You also can’t help recipients redeem the cards and gifts before the end date.
Unredeemed value is a loss to you, and a loss to your program goals.
Reminders to redeem gifts are a great branding opportunity and allow you an additional opportunity to get back in front of your recipient. Sending a gentle nudge to redeem the gift or award before it expires lets recipients know how much you appreciate them!
Incentive companies profit from the unredeemed cards.
When digital reward redemption instructions are lost in the ether, or cards are lost, it’s difficult to recover the value unless there is adequate tracking and reporting. And any lost value goes to – you guessed it – the incentive company.
Limiting your selection of gift card choices to just one type of card makes it less likely that incentives will be redeemed. If recipients can’t find a gift choice to their liking, they often delay or forget to redeem. Unredeemed gifts increase the profit that incentive companies wring from your programs and decrease the impact of your programs. The CreditCards.com survey found that 52% of millennials and 51% of Gen Z have at least one unused gift card around.
Give recipients plenty of choice. Providing choices to recipients is a great strategy to make sure your rewards and incentives are redeemed, and your goal of rewarding and incentivizing recipients is met.
It isn’t always easy to redeem a merchandise card at full face value. Where does the unused money go if the recipient doesn’t capture it when they redeem the award? This incentive and reward mystery means the unused value usually goes to the card or incentive company. That’s all money lost.
Incentive companies want to steer you into their recommended choices. That’s usually because they get a steep discount on specific cards from the issuer and can turn around and sell the card to you at or above face value. Incentive companies often receive cards at a highly discounted rate from the card issuer, but you pay full price. The card issuer knows that many cards will never be redeemed, and they figure that into the discount.
What if you send out merchandise gift choices and your recipients see choices the card value won’t cover? Frustration to recipients. That is irritating to recipients and might make you seem cheap. Recipients may hesitate to redeem an award because they can’t get what they want. It’s better to just send the recipients gift selections that are within the value of the award given. They only see gifts that they can get with the award. And you are only charged for the value of the actual selection.
It is essential to have your incentive and reward program branded with the look and message that you choose. Email notifications, SMS messages, redemption pages and reminders should all carry the message and the look that you want. Generic, or unbranded incentive communication does not enhance the value of the gift. Yes, you are doing a good thing in recognizing an employee or customer. Why not make sure they know where it comes from?
Cards and online gifts are convenient. They can reduce much of the guesswork involved in choosing the right incentive for employees and customers by providing recipients with a selection from a vast number of choices.
Don’t get fooled by common incentive and reward mysteries.
Make sure you maximize the value you get from your good deeds.
TruCentive was founded to simplify reward delivery and incentive fulfillment.
A design session is the perfect way to show you how TruCentive can help you realize your rewards, gifts, or payout goals in a real-world scenario, building a complete project with everything from your logo, design options, and messaging to incentive selection, deliveries, and reminders.
When we’re done, you’ll:
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