Why “one size fits all” incentive programs don’t work

Too often, incentive program professionals, whether it be for their consumer loyalty programs or their B2B channel incentive programs, shortchange their programs’ effectiveness in fielding single programs for all participants.

Take, for example, the case where an incentive program is designed to reward participants for making a certain dollar-amount value of purchases, or closing a certain dollar amount in sales of a particular product in a quarter (a very popular model!). This type of incentive performance model favors the big buyers and big sellers, respectively.

But the small guys feel left out, and often don’t participate in your programs as a result. Now, you may say you don’t care, that their contributions are negligible. But that ignores the long tail phenomenon (“The Long Tail,” by Chris Anderson, Hyperion 2006) – in essence, that the hundreds or thousands or tens of thousands of smaller buyers and sellers, aggregated, can account for significant revenue and productivity increases.

So, in this case, you may want to target incentive programs involving specific threshold goals (what Fielo terms a “Fixed Goal” model) to larger buyers/sellers, and programs that reward improvement over time (as a percentage) (“Performance Improvement” model) to smaller buyers/sellers.

And that’s not all. There’s another important reason for targeting smaller buyers/sellers: identifying the up-and-comers. Oftentimes “gems” can be found in that long tail, i.e., the small buyers and sellers today that, with the right catalysts applied, can become your big buyers/sellers of tomorrow.

Of course, size is the only thing that makes your customers and channel partners react differently from one another. Consider skills differences, macro-economic differences, cultural differences, and even circumstance differences (e.g., where they are in the lifecycle, life/business changes).

The key is to target specific populations with incentive programs designed for the needs and circumstances of those populations – a technique many marketers are familiar with, segmentation.

To learn more about how to apply segmentation theory and best practices to get more out of your incentive/loyalty programs, contact marketing@fielo.com.

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