Creating A Successful Business Reward Program

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As companies continuously seek opportunities to increase bottom line results, prepaid corporate incentive cards should be considered as part of an overall corporate strategy to retain and attract customers and employees. Prepaid products can be deployed as an effective motivation tool for virtually any audience and their potential impact on the bottom line should be an integral consideration to your business planning process.

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<ul><li> 1. A W hi te Paper :Creating a SuccessfulBusiness Reward Program www.americanexpress.com/giftAmerican Express CompanyGlobal Prepaid November 2009 Client Management Group </li></ul><p> 2. Creating a Successful Business Reward Program www.americanexpress.com/gift Executive Summary As companies continuously seek opportunities to increase bottom line results, prepaid corporate incentive cards should be considered as part of an overa ll corporate strategy to retain and attract customers and employees. Prepaid products can be deplo yed as an effective motivation tool for virtually any audience and their potential impact on the bottom line should be an integral consideration to your business planning process. Whether you are a business which already uses prepaid cards for an incentive program within your company or if you are an issuer or marketer in the incentive products industry, you have likely asked: How do prepaid cards enable companies to achieve their business objectives? This white paper answers that question and cites examples of how prepa id cards can be applied to drive specific behaviors in support of achieving desired business results. It shares reasons for the trend towards plastic as a preferred medium, and outlines best practices for a successful deployme nt strategy. As the popularity of prepa id incentive cards continues to rise, it is important to understand the many card types and applications and what results can be reasonably expected. Equally paramount to choosing the appropriate business application for prepaid incentives is knowing how to effectively deploy your strategy using a structured model to ensure maximum results. Like any successful business strategy, you must assign resources to it, plan out the project and plot your metrics, or your outcomes will fall short of your objectives.1 3. Creating a Successful Business Reward Programwww.americanexpress.com/gift Table of Contents A Long History in Prepaid Markets 2 Product Applications3 Why Are They So Popular?4 Business Results5 Corporate Incent ives Rooted in Human Behavior6 Deployment Framework7 Summary 1 Sources 6 16 A Long History in Prepaid Markets American Express is steeped in experience in the prepaid product space. The company itself is 159 years old. 118 of those years have been in some line of prepaid financial instruments, beginning with the Travelers Cheque product and later followed by Gift Cheques. Today, prepaid corporate incentive products including branded, personalized and theme- based Cards in both pre-denominatedand variable loads, are purchased in bulk by thousands of clients for incen- tive and promotional use. American Express is set apart from other providers due to its holistic approach to the three key partners in the supply chain: the bank, the Card holder, and the merchant. They own the direct relationships with each of these pla yers as the issuer of the product, owner of the merchant network and administrator of the program with the ir partners using specialized resources. The ability to leverage these long-established relat ionships, in tandem with its world-recognized brand, positions American Express as a market leader in the prepaid industry. 2 4. Creating a Successful Business Reward Program www.americanexpress.com/gift Product Applications There are dozens of different products when one refers to corporate incentive applications, with each offering different capabilit ies, marketing and technical options. These applications can be used for business-to-business (B2B), business-to-consumer (B2C) and business-to- business-to-consumer (B2B2C) applications. So me exa mples of marketplace applicat ions of corporate incentives are shown here:3 5. Creating a Successful Business Reward Program www.americanexpress.com/gift W hy A re T hey So Popular ?T her e has b een a v ir t ual ex plosion in t he r elatively r e c ent p opularit y of plas tic pr ep aid cor p or at e inc entive pr o duc t s. A s pr ep aid pr o duc t of ferings c ontinue to ex p and and evolve, t he demand for plas tic pr o duc t s is ev ident in t hedr amatic up s w ing in pr ep aid s gr ow t h. T his incr e ase ddemand is p ar t of a lar ger evolu tio n aw ay f r omp ap er pr o duc t s, such as gif t c er tif ic at es, w hich ye ar sago w er e of t en not r eplac e able w hen los t or s tolenand had adminis t r ative and e c ono mic challengesfor user s. Benefits vs. Paper T he sw itch from paper to plastic of fers three main benefits. First, plastic is easier to adminis- ter, especially in the case of managing fraud and program customization. Second, plastic o f fers technical sophistication for greater capabilit ies in back- end repor ting, tracking and other uses. A nd third, organizations have been intrigued by improved abilit y to place brand impressions in millions of wallets. Proliferation of PlasticAlthough cash and check pay-ments still represent a large per-cent age of spend, the prolifera-tion of plastic continues to rise.According to a recent study bythe Mercator Advisor y Group1, there was a tot al of $ 218.3B across 3 3 prepaid segments in 07, w hich represented a 10.3% increase over 0 6. There were over $10B alone in the Employee &amp; Partner Incentives sector of the prepaid market. Closed loop cards redeemable only at certain mercha nts or reta ilers - were st ill the largest compone nt but experienced a slowing growth rate. Open loop cards - usable on a wide network - represent a smaller segment but with an impressive growth rate of 83.4%.This is one segmentof the market to watch for continued expansion and investment.4 6. Creating a Successful Business Reward Program www.americanexpress.com/gift The products continue to be popular, in part, due to the desire of many firms to supplement or vary their compensation formats. Consider these statistics from a September 08 Deloitte Consult ing LLP study 2 surveying 151 companies: 58% expected to pay out below target on their incentive plans in 2008 11% believed that their current annual incentive plan would not yielda bonus at all last year 53% were planning to adjust the ir plans this year, including modifyingperformance targets while keeping the same performance measures Versatility is Key Appeal is high for the products versat ility. According to The Incent ive Federation 3 , these types of cards, vis--vis other forms of incentives, are reported to be the fastest growing segment of the non-cash incentive industry. Open Loop cards offer versatilit y and cho ice that is as diverse as the numerous incentive participants. While a new iPod may appeal to one, dinner in a restaurant may appeal to another. Open Loop prepaid incentive cards provide cho ice of options that other incentive products have traditionally not provided. Business Results Popularity aside, the ultimate litmus test to any incentive strategy is measured by its impact on the bottom line: How do prepa id corporate incentives enable co mpa nies to achieve their business objectives? With plastic as the pre ferred medium, prepa id corporate incentive cards continue to be effective because incentives themselves work. In a recent survey of 500 executives, the Incentive Manage ment Associat ion (IMA) and Andersen Consulting 4actually tied a bottom line fina nc ial benefit to retention and reward programs. There was as much as a $40M lift to a $1B business, much of which is rooted in prepa id incentive cards. The biggest pa yback, $13M, came from efforts to motivate and reward emplo yees. Programs to draw and retain talent added $10M. Incent ives Magazine 5 reported in recent research that 69% of the companies they surveyed reported gift cards and certificates to be equally or more effective than cash in motivating and rewarding employees.5 7. Creating a Successful Business Reward Programwww.americanexpress.com/giftWith results such as these, corporate incentives need to be integral to any business plan- ning process. Clearly, as co mpanies continuously seek ways to increase bottom line results, prepaid corporate incentive cards are a key driver in achieving fina nc ial object ives and must be considered in the overall corporate strategy.Corporate Incentives Rooted in Human Behavior The basis of establishing program object ives effectively is founded in basic huma n behavior. In the most primal form, prepaid cards are essentially a mechanism to drive behavior. The incentive program you craft is driven by what you want to have happen. It begins by examining how your emplo yees or customers perform today and then identifying consequences which influe nce how they will act on what you want to have happen. And ultimately, once you launch a program, determining the feedback that gauges how theyre doing. A deplo yment framework that applies a repeatable process and allows for measurable results is crucial to any prepaid incentive programs success. This four-phase deplo yment process begins by setting program objectives. Next, is identifying program mechanics, such as budget and target audience. Third, is determining appropriate co mmunication vehicles and their corresponding tactical elements. And mostimportantly, trackingthe programs progress and evaluating outcomes is the fourth and final phase.To bring this model to life and easilydemonstrate how to effectively deploya prepaid incentive card strategy, anactual application that many readers canrelate to in real life experiences will beused a veterinary pharmaceutical firmwho provides lifesaving medicat ionsand devices for your pets.Properly structured incentive programs can increase performanceof individuals by 22%, and of teams by 44% or more. 6 6 8. Creating a Successful Business Reward Program www.americanexpress.com/gift Deploy men t F ramework W ith compelling reasons as to the W hat? and W hy? of ef fective applications of cor- porate incentive cards answered, nex t fo llows the more challenging question of How? In A merican E xpress experience, the best programs are deployed keeping four tenets in mind:P hase 1: P ro gr am Ob jec t i vesP hase 2 : P r o gr am Mechanics o F it wit h C or p or ate Go also Audience Tar get o P r e - P r ogr am F ac t F inding o T imef r ame/ B udget o C hoosing Driver s o Aw ar d S ele c tion o P r ogr am Me asur es P hase 3 : P r o gr am C ommunica t ions P hase 4 : P r o gr am E valua t ion o Ty p eso Tr acking P r ogr ess o Tac tic so A nal y sis/Ou t comes7 9. Creating a Successful Business Reward Program www.americanexpress.com/giftPhase 1: Program Objec t i vesFit with Corporate Goals In the example of the veterinar y pharmaceu- tical firm, corporate goals were identified, an approach strategy was implemented and success measures were defined. The ini- tial question to be addressed is, What You Need. Corporate goals st ated a t arget of $ 8M in sales of the new drug and a 9 8% or greater satisfaction of client veterinar y of fices using the new product. T he strateg y to achieve those goals was aimed at motivating client vet of fices to generate sales and trial feedback through year-end. Three specific success measures were set for sales, feedback and client satisfaction with the new drug, as noted above.Phase 1: Program Objec t i vesPre-Program Fact Finding The second element of establishing the right program objectives has to do with the right fact finding. Even in todays resource crunch, you or your clients should be able to identif y top-of- mind business drivers that you are hoping to achieve. Here, the question of, What Happens Today, is considered. For this par ticular firm, the areas for improvement were: (1) take-up rates of the new drug, (2) response rates to existing tear-of f cards in drug packaging and (3) per formance feedback through of ficial channels. 8 10. Creating a Successful Business Reward Programwww.americanexpress.com/gift Sources of information for this current situa- tion were identified and included the regional sales teams, the Customer Relationship Man- agement (CRM) tool, in-house tabulation of response returnlogs and a toll-free suppor t line which identified call t ypes. Simply driv- ing to improving these basic items is a major step in justif ying the initial investment you plan to make. Phase 1: Program Objec t i vesChoosing the Drivers A third element to est ablishing program objectives ask s the question, W hat drives them? T hese drivers can t ake many for ms. In the case of the veterinar y pharmaceutical firms, they formulated their strateg y based on three key drivers: (1) emotion, (2) excitement and (3) economics. T his company felt that they did not have a strong direct relationship w ith their veterinar y practices. T hey decided to drive an emot ional response by est ablishing a philanthropic element to their campaign with a donation to an animal shelter for each reply card returned. T hey also personalized a large por tion of their correspondence, as well as the physical incentive product itself. T hey pushed excitement in a big way by providing a post age-paid reply card direct mail piece w hich communicated the shelt er donation, w hile giving vets an oppor tunit y to benefit from a sweepst akes enrollment. T he t hird driver pushed was econo mic in nature.T heir plan was to distribute a financial incentive to veterinar y of fices using a $10 0 open loop prepaid incentive card. T his three- pronged approach to identif ying and pushing key drivers provided a resounding answer to the question of, W hat drives them? 9 11. Creating a Successful Business Reward Programwww.americanexpress.com/giftPhase 1: Program Objec t i vesProgram Measurements T he last tenet of Phase 1 is all about baseline measures to be improved how do you k now the program is working? Essentially, this is the, How T hey A re Do ing, component. T he three program success measures that the firm had identified were (1) sales go als reached by year- end, (2) trial feedback from minimum 10% of par ticipating distributors and (3) a minimum of 9 8% satisfaction for new drug.T his par ticular application st ar ted out with amission w ith the prepaid card at the coreof it and it was highly successful. T heyexceeded t wo of the three goals with salesat 110% and trial responses at 18%, butfell just slightly shor t on the third with9 6% satisfaction.Phase 2 : Program MechanicsTarget Audience Phase 2 of the deploy ment mo del suggests that est ablishing the basic program mechanics, and par ticularly the t arget audience, plays an impor t ant role in the success of the program. In the simplest form, many people might think that the only t argets of an incentive program are the individuals or teams administering the incentive program, and the recipients of the incentives.But w ith proper planning, you realize that the most successful programs broaden their t arget audiences to ma ximize the programs exposure. In the case of the veterinar y phar maceutical company, the t arget audiences were classified into three buck...</p>

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