performance program planning ©1990-2011 the performance alliance, inc. this document and the...
TRANSCRIPT
Performance Program Planning
©1990-2011 The Performance Alliance, Inc.This document and the concepts contained are the property of The Performance Alliance, Inc.
No part may be employed or reproduced without express permission of TPA.
Performance Design Excellence: Incentive Program Design and Operation across all business applications,
whether the goal is to increase sales and profits, improve market share, or reduce costs ... or all of the above.
Cold Truth
It’s mid-year. Do you know where your financial
goals are?Locked InLooking GoodSo-SoSidewaysWho Came Up With These?Look For CulpritsRun Screaming Into the Night
Outline• Credentials• Applications• Will Do/Won’t Do• Immutables: OB, P/R and Permanent
Change• Non-Cash Awards Vs. Cash/Derivatives• Performance Primer: Lift, Shift, Payback• Case Histories• Rules Not For Fools• GP Rules• Recommendations
Steve Erickson Credentials• CEO, The Performance Alliance, Inc. • Director of Sales and Marketing, Winsert, Inc. (alloy
mfgr.)• Director of Marketing, Motivation Excellence, Inc.• Senior Vice President, S&H Motivation, Inc. • Director of Marketing, Carlson Marketing Group (PIC) • President, Avenue North Organization, Inc. (lead
generation)• Marketing Director, Dahlberg Electronics, Inc. (Miracle
Ear®)
2,500 incentive, performance and “loyalty” programs designed and operated
What I DidWhat I DidApplied: Creative non-cash awards Innovative, interactive communications Sophisticated performance measurement
methods
To one product: Programs that generated maximum performance Programs that generated maximum performance
in a clearly accountable, financially-justified in a clearly accountable, financially-justified and carefully orchestrated system.and carefully orchestrated system.
In Short, Moved In Short, Moved the Performance Needle. the Performance Needle.
2,500 Times.
Core PrincipleCore PrincipleIn the pursuit of Performance In the pursuit of Performance
Excellence:Excellence:
Participant knowledge is not enough Product and price parity are not
enough. All the marketing research, data and
intelligence you can create & deliver are not enough.
Action plans and “initiative platforms” are not enough.
Knowledge Without Motivation Knowledge Without Motivation = =
Competent Inertia.Competent Inertia.
Conversely: Conversely:
Motivation Without Knowledge Motivation Without Knowledge = = Energized Incompetence.Energized Incompetence.
The foundation of Performance The foundation of Performance Excellence:Excellence:
Knowledge Knowledge X X Motivation Motivation (incentive) = Performance.(incentive) = Performance.
All Performance Paths All Performance Paths Cross at the Same Point:Cross at the Same Point:
Causing your people to do what you want, but for their own reasons. Everyone applies conscious or
unconscious optional behavior to every choice, every opportunity.
Every business challenge faces that reality.
The people you depend on to make your future have other plans.
• Your customers and their customers. • Your employees, reps, vendors.• Every point of influence over your
future, all with different agendas. • They opt in or opt out. • You and your objectives are not their
primary concern. You have to change that. We will help.
Optional Behavior
Superior achievement Superior achievement can't be mandated.can't be mandated.
It has to beIt has to be soughtsought..
Major Difference Between Major Difference Between
““Incentives” and PerformanceIncentives” and Performance
What Are SomeWhat Are SomeDependable Performance Dependable Performance
Applications?Applications?
Conventional sales and/or market share improvement
Employee performance systems
Quality improvement
Customer relationship building
Product introductions and reinforcement
Training reinforcement
... and much, much more.
The Average Workforce is Out of Work 45.5% of the Time It’s
Employed.
• Over $900 billion is lost annually through non-productive use of time on the job.
• The average worker only uses 4.4 hours productively out of every eight
• BUT, they know how to save money, reduce cost and improve efficiencies, if it’s worth it to them to tell you.
Consider a few stats…
• An average organization loses 50% of its customers every 5 years
• But, a 5% increase in customer retention results in profit increases of 25-125%
• Costs 5-10 times more to acquire a new customer than it does to retain one
• Repeat customers spend 67% more than new customers
• Avg. firm has 60-70% probability of selling again to “active” customers
• 20-40% probability of selling to lost customers• 5-20% chance of a sale to prospect • After 10 purchases, a customer has referred up to 7
people
My Skinner Box
• Not a simple issue resolved by simple means• Incentive devices (the awards) are not the
“solution” and are not “the program”• 2-dimensional approaches like
"loyalty systems“, contests, sweeps & promotions don't work
• “Loyalty” programs are passive by definition
What do we mean by a program “Working?”
1. Measurably improved performance that stays that way
2. The real solution must pay for itself, predictably and acceptably, out of clearly defined performance improvement.
So, What Does Work?
• Do you really want to do what everyone else does (contests, gift cards, cash, passive “loyalty” programs) and expect your points of influence to react differently? Those are simply defensive tactics.
• Or, do you want to create an environment that will seize true, sustainable performance advantage tailored to your circumstances?
• Take the offensive. Create and keep demand.
Here’s What You Can Do
• Capture all the optional behavior you can stand.
• You supply the challenge and the courage and we will build a 3-dimensional performance solution.
• Enjoy eye-popping ROIs you can trust. • Delight your people and baffle your
competition.
Preachy Part:NON-CASH AWARDS VS. CASH
(Including Gift Cards, Discounts)!
• Non-cash award programs stimulate the imagination and raise sights.
• Cash is not an award in itself – it’s effective only in terms of what it buys.
• Non-cash awards eliminate guilt• Cash is dissipated into everyday expenses. • Non-cash awards are demonstrable • A singular benefit of a non-cash award is its
visibility ... allowing the recipient to boast of an accomplishment.
• You won’t flash a bank deposit
NON-CASH AWARDS VS. CASH (Including Gift Cards, Discounts)!
• Non-cash awards are once-in-a-lifetime– A trip to Rome or Cancun creates “buzz” like
nothing else, and the experience keeps paying off for you
• Non-cash awards are “something extra"• Cash awards = increased income ... easily confused
with normal compensation • Cash (and equivalents) cost 100%, bill on
redemption maybe 80%• Simply put: non-cash costs less and does more.• Remember, “loyalty” programs are simply for
defensive purposes, because everyone else has them
Planning for PerformanceFirst, Go For The Lift.• Practically anyone can run a contest, call it an
“incentive program”.• So what? Contests create winner(s), but mostly
“losers”.• Contests reward top performers, who tend to always
be the top performers anyway, or the “lucky”.• Unintended consequences: Demotivate good people
who can’t “win”. • And, they don’t “work”.• Everyone qualified to participate should be qualified
to earn.
The Greatest Opportunity For “Lift”?
• Always in the middle. • Not with the top people, firebreathers
who will be leaders no matter what. • Not with bottom-feeders unless they’re
rookies and need time to develop.
• The “middle” is the breadbasket of your performance prospects.
• Tailor an appealing program to them and things start to cook, even in flat or declining markets.
• Play offense in the middle and defense at the top (take care of the 600-lb. gorilla, but know he’s not going to grow).
Second, Go For The Shift.• Another axiom: There is always “room to
move”. There is always discretion. • Employees and customers pick their own
spots and set their own dials in terms of time and effort.
• That’s “optional behavior”. We all use it. We “know” where “acceptable” is.
• Optional behavior is the “big idea”. You just need to know how to tap it.
Enrolled Category ACategory A Category BCategory B Category CCategory C Cat. PCat. P Total
Volume $100,000+ $25,000 -
$99,000$2,500 -
$24,999 New
Base period $66,107,068 $37,899,198 $19,823,635 ($1,029) $123,828,873
Program period 70,902,809 49,240,731 35,385,632 2,052,347 157,581,520
Change 4,795,740 11,341,532 15,561,996 2,053,377 33,752,647
% Change 7.20% 29.90% 78.50% 27.20%
Real Life: Actual Outcomes from Segmented
Performance
CategoryBase PeriodPurchases
Program PeriodPurchases
Variance (-) or +
Enrolled customers $123.8MM $157.6MM $33.8MM+
Non-enrolled customers $83.5MM $77.6MM ($5.9MM)($5.9MM)
Total $207.3MM 235.2MM $27.9MM
More Actual Outcomes:Compare Performance From Enrolled vs. Non-Enrolled Customers. No better proof that expertly designed performance plans deliver!
Third, Make It Pay For Itself.
• Performance Improvement is an art and a science. • The science used to create a program that pays for
itself out of incremental performance is an art.• It’s not the travel award, it’s not the toasters or
the virtually unlimited choice of merchandise awards.
• It’s not the award-winning creative communications and robust information technology.
• It’s all of these things, and it’s pure magic when it’s done right, of course.
Independent Distribution Independent Distribution Performance Programs? Here’s How:Performance Programs? Here’s How:
Set clear & realistic financial and human goals. Don’t stop with the principal. Ensure top-to-bottom
channel participation by all “points of influence”: Your field sales (assign enrollment and dollar
goals) Distributor or Dealer principal Distributor/Dealer sales managers & branch
managers Distributor/Dealer Outside Sales and Inside Sales
representatives Ultimate customers (consumers) Distributor call center/customer service staff
Include all qualified participants. Yes, we repeated that.
Formal, active (not passive) enrollment is mandatory.
“Automatic” enrollment = passive response and wasted dollars.
Make it a big deal for field reps/mgrs. to get enrollment done.
You will not believe the difference in performance between enrolled/unenrolled.
Offer the opportunity for everyone to earn. Offer an appropriate performance/reward
balance. Without it, nothing else counts.
Keys, continuedKeys, continued
Visible backing from the client sponsor THROUGHOUT is indispensable. Don’t let your CEO intro and then forget it.
It’s a full-term commitment from all your own people: Don’t “kick off, then forget.”
Give participants a chance to accumulate award points/credits.
Find A Fully-Integrated, Full-Service Find A Fully-Integrated, Full-Service Performance Marketing CompanyPerformance Marketing Company
Or, an expert who knows the difference between ho-hum “loyalty” drills and permanent, tub-
thumping performance
Your Performance Expert Must Have:
Incentive program design and operation skills Promotional communications and creative services
skills Group incentive travel program planning and
operation skills Merchandise awards - catalog, custom & online Program administration and superior information
management skills (this is overwhelmingly different from simple data management)
An extraordinary sense of customer service throughout
Your Expert Must Demonstrate Your Expert Must Demonstrate This Performance ProcessThis Performance Process
Start with extensive situation analysis. Present a cost-justified performance
program recommendation. Design, launch and manage the program. Measure performance and provide
activity intelligence/reporting.
3 ComponentsA legendary, blow-the-doors-off
performance solution?It must be motivationally, operationally
and financially sound (all 3). • Motivationally sound means it must create
a compelling proposition and subsequent, active demand.
• Operationally sound means it must be fast, simple and efficient.
• Financially sound means it pays for itself out of incremental performance.
The Seven Smoking Gun Questions - Lifeblood Of A Good Incentive Program
1. What is your objective?2. When do you want it achieved?3. What is it worth to you to achieve the
objective? 4. Who are the people who must achieve the
objective for you?5. What portion of that gain are you willing to
share with the people who get it for you?6. What do you realistically think they’ll produce
for you if you don’t run a program?7. What are the obstacles in the way of
achieving your objective, if any?
EVERY INCENTIVE PROGRAM IS UNIQUE• Unique Blend of Four Distinct Variables: • Objectives ... Budget ... Timing ... ParticipantsEVERY INCENTIVE PROGRAM IS SIMILAR• Basic Rules Development Elements are Simple
and FewBUILDING THE BASIC RULES STRUCTURE• Define Unit of Performance (UOP) - Smallest
Measure• Select Participants - Rank by Impact• Select Award Type - Straight-line, Escalated or
Plateau
Rules Not For Fools
AWARDABLE PERFORMANCE CATEGORIES• Sales• Distribution• Non-SalesQUOTA-BASED AWARDS• Benefits• Typical Quota-based StructuresCLOSED-END vs. OPEN-END INCENTIVESEFFECTIVE CLOSED-END RULES STRUCTURES• Straight Competition• Plus-Performance Contribution• Beat-the-Average, etc.BONUSES, SPECIAL EVENTS & SPURT
ACTIVITIES
How Much Does Performance Cost?
• Nothing, really.• The real question is, “How much is it
worth?”• Cough up some up-front for
communications/promotion and the right kind of performance measurement (IT, web).
• Plan on 20% of incremental GP (it’s not that simple, but it’s good for starters.)
What Do These ROI Snapshots Have In Common?
Prog. investment as % of:
Total sales 1.19% 0.62% 1.59% 0.56% 0.23%
Total GP$ 3.72% 1.35% 3.63% 3.25% 0.94%
Incremental sales 7.15% 6.30% 12.16%
4.38% 3.43%
Incremental GP$ 22.34%
13.69%
27.82%
25.63%
12.66%
They’re all “Correct.”
If Your Agency Sees No Difference Between the “Award” and the “Program”, Shoot Them Now.
When the boss asks, “What did you get for all that loot you spent on that incentive program?”, you need to know what I know and your agency must:
• A good motivation agency gets paid for performance, not proposals.
• They have a major stake in program success.
• They win if you win.• If they don’t get it, they don’t get
the business. • A great performance agency doesn’t
cost you a dime.
Do you want to talk about it?Contact us:
The Performance Alliance, Inc.630-240-4473