Channel Incentive Travel: A Case Study Presented to the Incentive Research Foundation October 2011
Kimberly Swinson Severt, Ph.D University of Central Florida Rosen College of Hospitality Management Orlando, Florida
[email protected]
Tom Rutkowski, Ed.D Castleton State College Business Administration Department Castleton, Vermont
[email protected]
Table of Contents Executive Summary......................................................................................................................... 2 Background ..................................................................................................................................... 6 Objectives of the Study ................................................................................................................... 7 Research Questions ........................................................................................................................ 8 Incentive Travel Literature .............................................................................................................. 8 Methodology................................................................................................................................. 13 Findings ......................................................................................................................................... 16 What is Channel Incentive Travel? ........................................................................................... 16 How Does Channel Incentive Travel Work?.............................................................................. 16 Impact of the Channel Incentive Travel on Key Stakeholders .................................................. 18 Participants ........................................................................................................................... 18 Executive Managers from the Sponsoring Company ........................................................... 24 Non-Participants ................................................................................................................... 31 Suppliers................................................................................................................................ 34 Questionnaire Results ............................................................................................................... 36 Table 1. Mean Comparison for the Survey Items ................................................................. 38 Table 2. Frequency Distribution of Responses ..................................................................... 40 Table 3. Relationship between Satisfaction and 4 Independent Variables (Fairness, Relationship, Word-of-Mouth, and Additional Purchases ................................................... 43 Table 4. Relationship between Loyalty and 5 Independent Variables (Positivity, Recommendation, Destination, Word-of-Mouth, Relationship) .......................................... 46 Conclusions ................................................................................................................................... 50 References .................................................................................................................................... 53 Appendices.................................................................................................................................... 55 Appendix A: Interview Questions ............................................................................................. 56 Appendix B: Survey Questions for Participants ....................................................................... 61
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Executive Summary Objective of the Study There were three primary objectives for this study. The first was to define what a channel incentive travel program is and how it works. The second objective was to determine the impact of the program on key stakeholders (dealer principles, dealer participants, sponsor, and suppliers). The third objective was to investigate the success factors of the channel incentive travel program. Methodology Four stakeholder groups were interviewed; the executive management from the sponsoring company, participants of the channel incentive travel program, non-participants (people who have not participated in the incentive program), and suppliers (companies who provide support services to the incentive travel programs). Based on interview results, an online survey was developed and administered to incentive travel participants. Findings The results revealed the sponsoring company uses the channel incentive travel program as a motivational tool to help reach their business objectives in term of promoting steady growth in sales. The executive management team understands the value in the program as it not only helps promote growth but also creates an environment to strengthen business-tobusiness relationships with their dealers. Participants interviewed said they appreciate the sponsoring company offering a channel incentive travel program and that they feel it is an added bonus for a job well done at 2
the end of the year when the trip is earned. Participants were in consensus that the earning criteria was fair although some indicated they would like to see the sponsoring company tailor earning criteria more specifically to their business and consider placing more emphasis on market share and less on growth in sales. Non-participants were also interviewed and most agreed that the earning criterion was fair. The two primary reasons for non-participation were: 1) they do not enjoy traveling and are not motivated by travel, and 2) the recent downturn in the economy did not allow for the necessary growth to earn the incentive travel. Suppliers of channel incentive travel programs were also interviewed and indicated they have recently seen an increase in incentive travel. Suppliers view the incentive travel market as being a desirable and lucrative part of their business. The quantitative analysis conducted provides empirical support for three success factors (satisfaction, loyalty, and motivation to increase sales), which were identified in this study. The one independent variable that was significant in all three models tested was, “I would recommend other dealers try to reach the goal of earning an incentive travel trip.” This is a strong indication that participants understand the value and benefits of the channel incentive travel program and would recommend that others try to earn the award. The three models tested represent positive relationships between key variables. For example, building stronger business relationships, recommending products (from suppliers who offer an incentive trip) to customers and incentive travel being positive for their business were significant in two of the models tested. This result provides empirical support that incentive
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travel programs do motivate dealers to sell more products, create stronger business-tobusiness relationships, and are positive for dealers’ businesses. Conclusion Channel incentive travel is a tool used to create and sustain business growth for the sponsoring company. Since the earning criterion is based on growth in sales, the dealers who participate also see a growth in business as a direct outcome of earning the required growth in sales to earn the incentive travel trip. This project provides a better understanding of what a channel incentive program is and the benefits for implementing the incentive travel program from both the sponsoring company’s perceptive and the participant’s perspective. This study also supports the findings from a previous study (Anatomy of an Incentive Travel Program, 2010) that there are positive impacts to both the destination and the suppliers who provide services for incentive travel programs. The benefits of both incentive travel and channel incentive travel programs reach beyond the participants and the sponsoring company. The findings of this study reveal incentive destinations rely heavily on the incentive market to generate jobs and revenue. The interview results shed light on the positive economic impact incentive travel has on both the destination and the suppliers of the incentive market.
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Acknowledgement
This project would not have been possible without the support of the sponsoring company. The company provided access to all stakeholders and worked to facilitate the survey distribution. It is only through the dedication and support of such companies that the incentive travel industry can be better understood and the value of incentive travel measured.
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Background The incentive travel industry has been subject to negative media coverage and political positioning in recent years. The ‘AIG effect’ brought many corporate entities under intense scrutiny and was the onset of skepticism regarding the value of incentive travel. For decades, companies have used incentive travel to motivate and reward employees and business partners for reaching high performance levels. Companies, whether they are selling products or services, have used incentive travel as an intricate part of their business model to maximize revenue. The combination of the AIG effect and the downturn in the economy has caused many companies to scale back or eliminate incentive travel in fear of customers, suppliers, and investors retaliating because incentive travel was being misrepresented and misunderstood. Unfortunately, this created an emotionally charged environment, in which it was almost impossible to sort out facts and to maintain some sense of perspective. While researchers have studied many aspects of incentive programs, there are no studies that have taken an in-depth look specifically at channel incentive travel programs and the perspectives of the participants, the sponsors, non-participants, and suppliers. It is for this reason that the Incentive Research Foundation (IRF) funded the current study to provide evidence-based and objective insight into a channel incentive travel program and its benefits. According to the Travel Market Report (2011), Steve O’Malley, senior vice president of Maritz Travel and president of SITE (Society of Incentive Travel Executives), expects a 32% increase in incentive travel in 2011 over that of 2010. It appears that even though economic conditions have not improved significantly, companies understand the positive role incentive travel plays in achieving business objectives. Although budgets have been tightened and 6
programs are being reevaluated, the projected increase in incentive travel validates the importance of corporate incentive travel programs. This increase in incentive travel may well be the consequence of lower productivity levels as a result of the elimination of incentive travel programs. A recent study published by the IRF (2010), “The Anatomy of an Incentive Travel Program”, demonstrated that incentive travel programs can be used in different ways. Some companies may use an incentive travel program to stimulate sales of their products or services through distributors; thus the distributors are the recipients of the travel incentive. This scenario is referred to as a channel incentive program because the sponsoring company uses multiple channels to distribute products/services. The other scenario occurs when a company uses an incentive travel program to reward, recognize, and motivate employees for meeting or exceeding performance goals. Although the recipients of the incentive travel reward may be different, non-employee versus employee, the ultimate benefactor is the sponsoring company offering the incentive travel program. It would not be lucrative to offer incentive travel programs if the incremental results generated from the participation in these incentive programs didn’t at least offset the cost and play a role in meeting overall business objectives.
Objectives of the Study There are three primary objectives of this study. The first is to define a channel incentive travel program. Specifically, what are channel incentive travel programs, how do they work, and what is the impact of the program on key stakeholders (dealer principals, dealer participants, sponsor, and suppliers). The second objective is to investigate the perspectives of the channel 7
incentive travel program from each of the stakeholder groups. The last objective is to identify the benefits the channel incentive travel program provides to both the participants and the sponsor.
Research Questions The research questions addressed in this study include: 1. What is the primary value of the channel incentive travel program to the identified stakeholders (dealer principles, dealer participants, sponsor, and suppliers)? 2. What is the purpose of the program, and how does a sponsor measure its success? 3. What are the drivers of a successful channel incentive travel program? 4. What are the major benefits for the sponsor of the channel incentive travel program? 5. Why do dealers participate? 6. Do dealers enroll in multiple channel incentive programs? If so, what is the selection criterion? 7. Why is channel incentive travel programs included in the business model?
Incentive Travel Literature The meetings, incentive, conventions, and exhibitions (MICE) industry is one of the most important sectors of travel and tourism. Incentive travel represents approximately 5% of the total MICE industry (CEIR, 2008). According to the most recent economic significance study of the meetings industry, is estimated to be a $263.4 billion industry. In 2009, there were an estimated 1.8 million meetings with 205 million participants; incentive meetings represented 8
4% for a total of 66,000 incentive meetings and approximately 8,154,000 participants (Russell, 2011). This economically significant study also reported that the total dollars spent associated with each incentive participant was $1,620, which was the highest in all the meeting types (Russell, 2011). A portion of incentive travel is channel incentive travel. Channel incentive travel programs offer incentive travel opportunities to other companies who sell the sponsoring companies’ products or services and therefore the recipients of the incentive travel are owners or employees of the channel partner, not employees of the sponsoring company. Noting the limited amount of empirical based peer-reviewed research, the researchers examined the available literature surrounding: (a) Incentive Travel Research, (b) Sales Incentives, (c) Enterprise Engagement, and (d) Incentive Success Factors. Incentive Travel Research Shinew and Backman (1995) outlined the conceptual framework of incentive reward systems (CFIRS). The CFIRS models accounts for the effect of goal setting on performance mediated by various cognitive processes underlining motivation. Shinew and Backman (1995) went on to test the model for incentive rewards in the workplace. They found that employees who receive the reward recognize the organization’s appreciation of their hard work. Many organizations also use financial incentives to motivate their employees (DeCenzo & Robbins, 2007), yet smaller organizations do not have the flexibility of larger organizations in issuing financial rewards. Some of the reasons for this reduction in flexibility in smaller businesses
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would be lack of revenue, market share or the need to reinvest the capital back into the organization for growth (Milkovich & Newman, 2008). For many organizations the use of non-monetary rewards is critical for the motivation of employees, especially those in sales positions. While the majority of larger organizations focus on the use of monetary rewards, smaller organizations have turned to non-monetary reward and recognition programs. By recognizing the employee the organization can benefit by either reducing turnover levels or increasing organizational commitment when the incentive is tied to discounts at a restaurant, spa, or travel, with paid time off (Mintzer, 2006). Travel incentives aid in organizational camaraderie and company loyalty generated by the trip and the trip memories strengthen participants’ feelings towards their employer. The travel award has a trophy value, which allows the incentive to have a long-lasting effect, a positive reinforcement, and has been shown to be a more effective motivator than monetary rewards (Shinew & Backman, 1995). Channel Incentives A channel incentive is a payment, rebate, discounts or travel that is awarded from a manufacturer to the retailer (dealer) based on their sales to end consumers (Taylor 2002). Taylor describes that there are two common forms of channel incentives. The first is a linear incentive where the incentive is delivered for each unit sold. The second form of incentive is target incentives where the incentives are awarded based on a set target, usually associated with sales. In the case study being analyzed, the earning criterion for the incentive travel is based on growth in sales and volume of new products sold.
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Radin and Predmore (2002) found that many manufacturers offer incentives or perks to entice salespeople to promote certain products. Manufacturers use incentives so that certain models or materials are sold above others as the salespeople are rewarded for the selling of their products versus a competitor’s. Sales contests that revolve around incentive programs are designed to motivate sales personnel to achieve sales targets. According to Murphy and Sohi (1995), throughout the last two decades commitment to incentive programs continued to increase. In 1971, expenditures related to incentive programs were $1.6 billion and by the end of the 1980s, those expenditures reached $8 billion. The 1990s also saw a continued growth until an economic downturn in 2008. By 2009 this economic downturn brought about criticism from lawmakers and media figures on the use of corporate funds for groups to travel, when certain organizations in the financial and auto industries were receiving bailout money from the U.S. government. Despite the importance of the incentive market to the hospitality industry, many lawmakers and media figures in 2009 criticized the use of corporate funds for group travel designed to motivate employees. While the criticism may have been directed at particular companies, the overall tone in the media caused some companies to cancel and/or eliminate group incentive travel. Sales Incentives There are many different types of sales incentives. There are both monetary and nonmonetary rewards as previously discussed and there are benefits to using both types of incentives. When examining incentives it is important to examine the contributing factors from 11
the participants’ point of view. The participants need to understand: (a) the perceived value of the award, and (b) the value of earning the award (SITE Executive White Paper, 2003). When a recipient perceives the award, they perceive its ‘evaluability’ and ‘separability’. In evaluability, when the non-cash incentive is a travel award, it needs to be considered as a pleasurable experience (versus just a financial transaction). Separability refers to the employee’s needs to mentally segregate and differentiate the value of their non-cash incentive trip from their normal perception of household cash. This separation can be in time, reward and/or perceived value. Incentive Travel Success Factors One of the main elements of using an incentive travel program is the ability to design the program based on certain success factors. There have been few studies that have solid empirical evidence on measuring the success factors of incentive travel. According to Kastner (2010) there are six main factors for successful incentive programs are: 1) educating stakeholders, 2) audience analysis, 3) program design, 4) communications strategy, 5) the trip experience, and 6) measurement. This is a great framework for examining critical areas for an incentive travel program; however, Formica and Goldblatt (2005) found that there are many environmental forces, both internal and external, that need to be taken into consideration when designing an incentive travel program. Formica and Goldblatt (2005) listed the external environment as: (a) economic, (b) socio-cultural, (d) technological, (e) ecological, and (f) political. They continued on by describing the internal environment as: (a) financial, (b) marketing, (c) human resources, (d)
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operations. According to the study both external and internal environments must be considered to modify the incentive travel promotion for it to be successful. Formica and Goldblatt broke down elements within the external and internal environment and developed four main strategies for a successful travel incentive program. The four strategies were: 1) competitive methods, 2) where to allocate resources, 3) how to implement during economic fluctuations, and 4) general feedback from incentive practitioners. The strategies proposed for competitive methods focused in marketing, strategic partnerships and alliances, and internal marketing. The strategies proposed for the allocation of resources focused on the creativity of the program, financial knowledge, excellent personnel, and sound training programs. The strategies proposed for successful program implementation during economic fluctuations focused on creating programs with the ability to respond to a major international crisis, and designing them with uniqueness of the destination and the activities offered. The last portion of the study examined the practitioner feedback from international SITE members. These strategies focused on carefully monitoring the external forces, accessing the characteristics of your organization, analyzing competitive methods or strategies, assessing the creative assets and evaluating program success.
Methodology To meet the study’s objectives, a case study was deemed the most appropriate research approach. According to Xiao and Smith (2006) a case study is one way to conduct social science research when “why” and “how” questions are important to the investigation. For the current study, this approach will assist in answering why channel incentive travel is utilized by 13
companies and how channel incentive travel programs work. “As a research strategy, the case study is used in many situations to contribute to our knowledge of individuals, groups, organizational, social, political, and related phenomena” (Yin, 2003, p. 1). Since the aim of this study is to better understand why dealers participate, who the different stakeholders are, and what the benefits of a channel incentive travel program are, a case study approach was most applicable. The first step in the research process was to enlist a channel incentive program sponsor. A manufacturing company who has been producing products for over seventy years and has been offering incentive travel for their dealers/distributors for over twenty years, agreed to participate in this study. The company participation was critical to gaining a holistic understanding of a channel incentive program and this cooperation cannot be underestimated. For confidentiality purposes the company’s identification will not be disclosed; however there are some interesting facts to share about the sponsoring company. Two thousand dealers have the opportunity to participate in earning the incentive travel program each year. Approximately four hundred earn the incentive travel trip each year, or 20 percent. The company offers other incentives besides incentive travel e.g. rebates, free products, or discounts off new products. A dealer would not be eligible for both the incentive travel trip and the rebates. It is one or the other. The company also tracks dealer’s progress on a monthly basis and sends the monthly statements to the customers (dealers) to communicate where they stand in the earning process.
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After a thorough review of literature, interview questions were developed for each of the channel incentive travel stakeholder groups: 1) executive managers from the sponsoring company, 2) participants which included dealer owners or dealer managers, 3) nonparticipants, and 4) suppliers. Interview questions for each of these groups are provided in Appendix A. Interview questions were reviewed by two incentive research specialists and the sponsoring company to verify face validity. The interview questions went through several iterations before interviews were conducted. Although the interview questions were used as a guide, some responses led to additional questions for inquiry into specific meaning. The sponsoring company provided the researchers with a list of potential interviewees from each of the four categories. There were a total of 21 telephone interviews conducted; three with top executives from the manufacturing company, eleven with participants (seven dealer managers and four dealer owners), four with non-participants, and three with suppliers. Interviews were digitally recorded and transcribed for analysis. Interviews ranged from 9 minutes to 44 minutes. The transcribed interview responses were then entered into NVivo 9 to assist the researchers in detecting themes, patterns, and key phrases. Based on interview results, an electronic survey was developed for participants of incentive travel. The sponsoring company sent an email to the 175 potential respondents with the link to the electronic survey and encouraged them to participate in the study, yielding a 51% return rate. Participant survey questions are provided in Appendix B. Quantitative analyses of the survey results include frequency distribution of responses, mean comparisons, and multiple regression models were tested. 15
Findings What is Channel Incentive Travel? Many manufacturing companies who distribute their products through dealers utilize channel incentive travel programs to motivate and reward dealers for meeting the earning criterion set forth by the manufacturing or sponsoring company. Dealers play a vital role in the continued business success of the sponsoring companies, which rely on channel distribution as a means of promoting and selling their products or services.
How Does Channel Incentive Travel Work? Channel incentive travel programs are created and designed to enhance and contribute to the sponsoring companies’ business goals and objectives. In this case study, the sponsoring company is a manufacturing company, which produces products and uses dealers as a distribution channel for the sales of their products. The sponsoring company sells products to dealers at a wholesale price. The wholesale price is based on the cost of manufacturing and/or distributing the products, variable and fixed costs, with a built-in profit margin that allows the manufacturing company to be profitable. The dealers then sell the products at retail, a percentage above the wholesale price plus a percent of profit. The sponsoring companies rely on the dealers to sell their products and the dealers rely on the manufacturer to provide products, which meet the demands of their customers. This business-to-business relationship plays an important role in the success of both the manufacturers’ and dealers’ businesses. The manufacturing company in this case study bases the earning criteria on year over year growth and a percentage of new products purchased. This 16
earning strategy is designed to sustain the manufacturing business since they do not sell directly to the end consumer. Figure 1 illustrates the channel incentive travel process. All dealers may participate in the incentive travel program but only dealers who meet or exceed the criteria earn the incentive trip.
Manufacturing Company - Produces products - Sell products to Dealers at wholesale - Set earning criteria for the incentive trip
Dealer
Dealer
Dealer
Dealer
sells products to customers at retail
sells products to customers at retail
sells products to customers at retail
sells products to customers at retail
Incentive Travel Earners - Dealers who show a growth in sales over last year by a set percentage and - Sell a certain percentage of new products
Figure 1. Channel Incentive Travel Earning Process
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Impact of the Channel Incentive Travel on Key Stakeholders The key stakeholders for a channel incentive travel program are: 1) dealers who earn the incentive trip, 2) management of the sponsoring company, 3) suppliers, who help with group travel services, and 4) non-participant dealers who do not earn the incentive trip. Interviews were conducted with each stakeholder group to gain an understanding of their perceptive of channel incentive programs and its impact.
Participants There are two types of participants in this channel incentive program: owners or dealer principals of the business and dealers who are managers. This section includes the results of both groups collectively. There were 11 participants of the incentive travel program interviewed. “What is your overall perspective of incentive travel programs?” It was unanimous from the participants that incentive travel was well accepted and positive for their business. Comments such as, “Incentive trips are great!”, and “I think incentives trips are phenomenal,” suggest the participants believe in the program and are positive about the role incentive travel plays in the motivation and sales increases in their individual businesses. The participant responses advocate the belief in the purpose of incentive travel. One respondent said, “I think incentive travel is a great idea because it works, it is an added bonus for us,” and “It builds loyalty every time.” 18
“Why does your dealership participate?” Two primary responses were repeatedly stated: the importance of creating and strengthening business-to-business partnerships and providing a means of awarding deserving employees, a practice which helps motivate and retain good employees. “We feel incentive travel programs from suppliers to vendors allow us to meet the people within the organization from the vendor side. We are able to use it as a tool for our people to meet the vendor people and make a connection. It also enables us to make a connection with our counterparts in the industry.” Incentive trips provide a scenario what connects people outside the normal business environment. “Whether it’s over dinner, drinks, or in general conversation you get a chance to discuss items that we run across and how we deal with it and also hear things others run across and how they deal with it. It gives us insight and if something comes up…I remember Joe telling me about that, I think I’m going to give him a call.” These relationships create an unstructured support system within the industry. The other key reason for participation is to pass the incentive onto key employees. “I sometimes go but if I can send a well deserving employee, then it is a way to help promote positive morale within my company.” One respondent did bring up an interesting fact about participation in incentive travel programs, “We buy from the company no matter what. So I mean, they offer it, so it’s a win-win situation. There’s no reason not to do it actually.” For companies that are going to buy products no matter if an incentive trip is offered or not, then the cost of the incentive trip becomes a cost to the sponsoring company. “How many incentive travel programs do you participate in annually?” 19
The majority of respondents participate in at least one incentive travel program annually. With the downturn in the economy, many manufacturers eliminated incentive travel programs. One respondent said, “There are a lot fewer incentive programs lately. I would say at the peak, before the housing bubble burst, it was maybe 4 to 6 vendors who offered them. And we qualified for most all of them. These days there are only a couple vendors offering them.” “How many incentive trips have you taken?” Out of the eleven participants we interviewed, all were repeat incentive travel earners. Two people had been on three incentive trips, four people had gone on four incentive trips, two had gone on five incentive trips, one had gone on seven and two had gone on ten or more incentive trips. “How would you describe these incentive trips? What do you like best and least about the incentive trips?” “Unbelievable. It is first class all the way. You are treated very well,” and “they’re fabulous!” sums up the majority of the responses from participants. When ask what they liked best about the incentive trips the responses fell into three primary categories: Destinations they would have never had the opportunity to go to, all the trip details being taken care of, which makes the trip more enjoyable and less stressful, and the benefit of meeting people. The following comments…
“I’m getting to see places that I might not normally have gotten around to traveling to on my own, so that’s definitely the best part.”
“I think it’s lovely to have all the details taken care of for you.”
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“They put on a nice program. There is always something to do. They have dinners for us and overall a nice program.”
“The best part is meeting the people. It allows you to do your job a little better, to know the people a little better, put a face to a name, to get that personal development, even in making calls and conducting business, you have that next level up.” When asked about what the participants liked least, there were mixed reviews
stemming from individual preferences. Some participants reported they thought the trips were too long while others thought they were too short. One common issue was the travel time to the destination and back, because many times it impeded on the overall pleasure of the trip. Even though the company sponsoring the trip may be well planned and organized, many travel incidents are beyond their control, e.g., weather delays and cancelations. A couple of people interviewed said they did not like it when they earned a trip but the sponsoring company only took care of the accommodations and sometime both the travel and accommodations but didn’t handle the trip arrangements. “After going on an all-inclusive incentive trip the others are a little disappointing,” said one respondent. “What is the primary value of an incentive travel program to you?” The majority, 7 out of 11 participants, stated the primary value to them was the creation and building of relationships.
One interviewee said, “I think it bonds you with that
manufacturer in a way that nothing else does. I think it definitely cultivates brand loyalty and you get to know key people in that company which is hard to do that in any other way.” The other important result from this question was the value of getting recognized for a job well
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done. As one person said, “It’s a pat on the back. It’s just one of those, good job you made the goal.” The act of appreciation cannot be under estimated. “Do you think incentive travel programs motivate you to sell more products?” The fact that a manufacturing company is offering an incentive trip does play an important role in the mind of the seller. Nine interviewees answered “yes” it does motivate them to sell more products of the company sponsoring the trip. If a customer is deciding between two very similar products and one of the products is from a company offering an incentive trip, they try to suggest the product that gives them more of an award for selling the product. Ultimately, their customer’s preferences decide, but the dealers can and do influence the decision making process in several ways. One interviewee explains that by having a stronger relationship with a particular manufacturer it naturally brings more of their products into the selling area.
“I do know that because the incentive programs are set up, it’s part and parcel of a tool for us to develop and build stronger relationships, which a side-effect is that we bring more of their products in and thus sell more. We are more committed to that company. We have a deeper relationship, deeper sense of trust, deeper sense of working together. And one of those tools is because of incentive travel.” By going on incentive trips and building a relationship with the manufacturer and other
dealers, it also provides a dealer with a way to solve problems which may arise. For example, there may be a customer that needs 12 of the same product but the dealership only has 8 in stock. When dealers have created strong relationships with the manufacturer, it can help in satisfying a customer. The dealer picks up the phone and calls the manufacturer to get the 22
other four he needs for his client. But what if they are on back order? Then, the dealer calls another dealer he met on the incentive trip last year, and asks if he has the products in stock. If so, they arrange the products to be shipped to fulfill the customer’s request. “Do you feel communication about the incentive travel program is effective?” Everyone agreed the communication about the incentive travel program was effective and keeps them informed as to where you are in the earning process. Most of the channel incentive travel programs are built on a point system allowing dealers the ability to track points earned easily. In larger organizations where incentive travel information is passed down through departments, it appears the information becomes more vague. Instead of “you have earned 3500 points out of the qualifying 5000 points to earn the incentive trip to Italy,” it can be more general, such as: “Hey, you are doing great.” “Do you feel the sponsoring company communicates the benefits for participation?” There are different benefits and advantages in participation for different types of dealers. There were mixed reviews on this question. Sponsoring companies do a good job communicating about the incentive trip and what a dealer needs to do to earn it but several people interviewed said they felt the responsibility was on them, the dealer, to take advantage of the opportunity to get the benefits. One dealer said, “I think it is up to the participant. You know, you only get back what you give in. We really have formulated this in our company values so we’re getting out of it a lot more than, let’s say Company B.” Another dealer said, “I don’t think they can even relate the benefit that I see out of it because every customer is different.”
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The dealer participants indicated how important the role of the manufacturer’s sales representative is in the communication of the incentive program. The sales representatives are the ones who help a dealer stay motivated and keep the dealer informed on their earning status. I think we’ve missed some trips because we didn’t know what we should have done to get there. So no, I think they could do a little bit better because it is dumb to find out that you missed a trip if all you needed to do was place a couple thousand dollar order or something like that.” Executive Managers from the Sponsoring Company Three interviews were conducted with the executive management team of the sponsoring company; the Chief Executive Officer (CEO), Vice President, and the Chief Financial Officer (CFO). Each question will be provided with an overview of the answers collectively from the three interviewees. The first question was: “What is the purpose of the incentive travel program for your company?” The responses revealed there are three primary purposes for the channel incentive travel program: 1) grow the business, 2) build relationships, and 3) motivate and reward. “The top priority is to grow our business,” says the CEO. The earning criterion is designed to grow the manufacturing business because it is based on growth over last year. The industry is not a brand driven business; therefore, many suppliers offer dealers very similar products. The channel incentive travel program is a business strategy that allows the company to differentiate themselves from other suppliers by offering the dealers incentives. “If the dealers consolidate their purchases into more of our product line, they will be rewarded,” CEO. “How do you measure the success of the channel incentive program?” 24
The company measures the success of the channel incentive program based on the business volume growth the program generates. By comparing the sales performance of the dealers who earn the trips in the current year to the sales performance from the previous year, a percentage of growth can be determined. Due to the nature of the business, some dealers may earn a trip based on volume growth that would happen despite offering an incentive trip. In that situation the trip becomes a cost to the company because they would have received the growth in sales no matter what. The sponsoring company understands the overall growth of the company can be only partially attributed to the motivation the incentive travel program provides. There are other external variables that contribute to the growth in volume (e.g. the design of new products, economy, other markets, supply and cost of materials). “How are you involved in the channel incentive program?” The executive managers play a critical role in the design and execution of the channel incentive program. The CEO approves the program, the destination for the trip, and sets the earning criteria for the channel incentive program. Since the Vice President manages the Sales operations for the company, he is responsible for training the sales force on how to use the channel incentive program as a tool to dealers to change behaviors in a way that will positively affect growth. The sales force is charged with communicating the benefits of the program to the dealers to create interest in the program, monitor dealers earning status, and motivate dealers to reach the earning performance level for the trip. To meet the business objective for using the program to build business relationship, executive management are heavily involved in the execution of the incentive trip. They want to 25
be actively involved in creating meaningful relationships believing people will be more likely to purchase from people they know opposed to people they do not know. “How are the major program elements determined for the incentive travel program? The channel incentive travel program revolves around a 12-month cycle that meets the business calendar year. The earning criteria are communicated to the dealers by providing them with the dollar amount in growth they will need to earn for the trip or they will need to purchase a certain dollar amount of new products during the earning cycle. Sometimes, combinations of these two are used but these are the primary earning criteria. “What are the primary drivers for the company’s continued use/sponsorship of this incentive travel program?” Growth, measured by a “return on investment” to the company and the development of relationships are the two primary drivers for the continued use of the incentive travel program. “Do your competitors offer similar incentive travel programs?” Since the downturn in the economy, many of the competitors in the industry have eliminated offering incentive travel programs. In the past, the competitors offered annual or every other year programs. “What do you feel are the primary drivers for dealer enrollment into the incentive travel program?” According to executive management, there are 3 main reasons dealers participate in incentive trips. First it provides the dealers an opportunity to have a luxury travel experience to some great destinations. Second, some dealers conduct business as usual and earn the trip at the end of the years and consider it a bonus for doing what they were going to do any way. The 26
third reason dealers participate is because they are loyal customers, which the president of the sponsoring company refers to as “friends”. The business relationship between the manufacturer and the dealers becomes a partnership where the manufacturer is dedicated to providing quality products so the dealers can sell the products to have a successful business and the dealers keep the manufacturer in business through the purchasing of products. “Why do some dealers not participate?” Executive management realizes that not all people are motivated by travel. They offer dealers a rebate, which is based on a percentage of products purchased or the incentive trip but not both. The incentive trip is worth more than the rebate; however, dealers are good business people and they ultimately do what is best for their business. Since the downturn in the economy, the sponsoring company reported more dealers are taking the rebate over the incentive trip and many of the dealers who earned the incentive trip have given the incentive trip to key employees as a way to foster loyalty and professional development within their own business. “Do dealers “cycle” on and off with their participation?” Yes, some dealers cycle on and off with their participation. For example, a dealer may get an unusually large order because one of their customers landed a special contract and they need the products so the dealer earns the qualifying growth that he may not have earned otherwise. The sponsoring company builds in rules for qualifying that eliminates dealers from earning every other year based on ordering patterns. “What are the major benefits to the dealers for participating?”
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The two major benefits are: 1) the opportunity to travel to places they may not have traveled to in their lifetime and, 2) the opportunity to network with the manufacturing company’s executive team and other dealers. “What are the major benefits to the company, as the sponsor, for dealer participation?” The sales growth is definitely the major benefit because it sustains the manufacturing company.
The other benefits mentioned were dealer loyalty and long-term relationship
building creating friends. “What are the strengths of the incentive travel program?” According to the CEO, “Destination moves the needle. I think our reputation of putting on a first class trip. They know that we’ll do it right. And I think that is important to them,” so the destination for the incentive trips is a definite strength in conjunction with the detailed planning and execution. The VP agreed that destination selection is strength, “we go to places that most people would not go on their own”. “Do you see any areas of the incentive travel program needing improvement?” Although the company has been using incentive travel as part of their business model for over twenty years, there remain areas that need improvement. One of the areas is in tracking and monitoring if buying behavior is being changed to benefit the sponsoring company. The CEO said, “We’ve got to do a better job in making sure that these trip incentives really do change buying behavior.” Most dealers sign up for the incentive program but many do business as usual and if they earn the trip at the end of the year, it is an added bonus. In this scenario, the sponsoring company’s incentive travel program has not changed buying behavior and the
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trip becomes a cost more than an award. The executives are looking for a way to specifically link the incentive travel program with the change in buying behavior. The other identified improvement is to do a better job marketing the trip to the dealers and actively building interest and excitement about the trips, and keeping them motivated throughout the earning period. “Do you track the incremental revenue generated by the program?” “Yes, once they qualify. We know that they qualified because we tracked it, so if they had to grow $50,000 we tracked it. We know if that happens.” said the CEO. The earning criterion for this company clearly states that to qualify for the incentive trip, the dealer must increase growth by a certain amount. The sponsoring company tracks the growth for each of the dealers enrolled in the program which allows the sponsoring company to determine overall sales growth generated by the program. “How much additional revenue is generated due to the dealers qualifying for this program?” “I don’t know,” said the CEO. It is difficult to determine because the sponsoring company knows that a percentage of the sales growth would happen despite having the incentive travel program but they feel the incentive travel program’s contribution is worth the investment because it does helps motivate a good portion of that growth year to year. “What is the overall impact of the channel incentive travel program on business results and how is it tied to business outcomes”? The manufacturing company relies heavily on dealers to sell their products. Setting growth over last year, as a percent or specific dollar amount, as part of the earning criteria, helps reach the business objective of growth for the sponsoring company. 29
“What do you think would happen to your business outcomes if the channel incentive programs were eliminated?” Both the CEO and the VP of the sponsoring company agree that if the incentive travel program was eliminated that there would be a decrease in business. The CEO said, “Well, the sales department says we won’t sell as much. I’m not convinced of that. I think in fairness, it would impact our business downward. I believe we could lose some business. I don’t know if it would be a permanent loss or it would be for just that year but I would have to say that we would do a little less business.” The VP made an excellent point about the timing and current market situation. Most of their competitors have already eliminated their incentive travel program so the impact may not be as severe based on the timing of the decision. The VP said, “I think we would see a decline. But I would say that since most of our competitors have already stopped doing the incentive trips that it would not be as significant. If everyone else was still doing the incentive trips and we were the first to drop the incentive travel program then it would be a more significant decline in business.” “How do you communicate the incentive travel program enrollment information and earning criteria with prospective principal participants?” The sponsoring company utilizes the annual industry convention each year to launch the new incentive travel program, generate excitement, market enrollment from the dealers, and provide literature about the destination and earning criteria. The company also posts information on the company website and sends information through direct mailings to the dealers. A big responsibility for the face-to-face communication is through the sales representatives who visit dealers regularly. They play an important role in not only the 30
distribution of information but also the status on where the dealer may be in sales in relationship to what is needed to earn the incentive trip. The CEO indicated there is room for improvement for how enrollment and earning criteria information is distributed and keeping everyone informed of their progress. He said, “That’s one of the two things we need to do a better job on. We sign customers (dealers) up, we send them a brochure, and we send them some form letter every once in a while and it’s pretty sterile. We tell our sales representative on a quarterly basis where their customers are in the earning status.” Non-Participants The non-participants are dealers that have not participated in the channel incentive travel program offered by the sponsoring company. There were 4 non-participant interviews conducted. The purpose of these interviews were to investigate why they did not participate in incentive travel and determine if there may be something the sponsoring company could do to engage their participation. “Have you ever participated in a channel incentive program in the past?” Out of the four respondents, only one respondent indicated they have participated in a channel incentive trip. The one who did participate in an incentive trip indicated they have participated in a few of the incentive travel programs but only a couple trips and none from the sponsoring company for this project. “Why do you not participate?” The answers to this question varied depending on the incentive travel program and the previous experience with incentive travel programs. The two primary reasons the non31
participants did not participate were because (1) they do not like to travel, and (2) the timing of the incentive trip interfered with previous obligations. All interviewees indicated they were not motivated by travel and seek other types of incentive rewards. “What would the sponsoring company need to do to get you to participate in an incentive travel program?” The majority of the respondents stated the sponsoring company shouldn’t change anything about the incentive travel program and that it was based on sales, and that due to the economic conditions, it was too hard to achieve the sales necessary for an incentive. A couple of the respondents agreed that it needed to be changed to offer discounts in place of an incentive trip. “Do you feel the earning criterion is fair? If not, why?” All four of the respondents were in agreement that the earning criteria for the incentive travel programs were fair. All were also in agreement that the economic downturn caused a decrease in sales, which made it impossible to earn the incentive trip. “How many incentive travel programs do you have available to you in which to participate?” Most of the participants were in agreement that there were about three to four travel programs. “Do you think the sponsoring company makes enrolling easy?” This question produced a few different responses based on the respondent. A couple of the respondents thought that enrolling was easy. The rest of the respondents stated the communication process about the criteria, updates and present standing in points needed to be communicated more effectively. “Any closing thoughts you would like to share regarding these incentive travel programs?” 32
One non-participant suggested that companies should consider offering domestic incentive travel. The benefit is would be the decrease in travel time and an increase in other activities. “Many Americans have not had an opportunity to see most of the United States and these trips would appeal to them in comparison to some of the international destination trips outside of the US,” said a non-participant. “Do you feel the communication of the incentive travel program (enrollment information and earning criteria) is most effective? Do you have any suggestions for improvement?” All of the respondents were in agreement that the communication about the incentive program needed to be improved. All agreed that the criteria were not as clear as they needed to be. A couple of the respondents agreed that the updates on the points earned were not consistently updated and this caused a decrease in the program participation, as employees were not sure of their present standing in relationship to other participants. Suggestions for improvement were to have the communications relayed daily in relationship to sales and points earned for the trip. Another participant said it would be great to know your standing in relationship to other participants. One of the respondents stated that it would be more valuable to receive discounts instead of incentives. “Do you feel the communication of the advantages to participants and the status for earning the incentive travel trip are communicated in the most effective and efficient ways?” All four of the respondents were in agreement that the advantages of participating in the programs are not communicated or communicated clearly. One talked about the company representative not talking or pushing the incentive program enough. It was said that most of the information about the advantages are lost, as they are never communicated. All agreed that 33
communication was the main issue in the lack of the advantages of participation for them to participate. All respondents suggested that the communication be clear from the very beginning and that the representative should communicate this across the board. Some discussed a consistent method of communication with emails or continuous emails about the program, people’s standing in the program and who was ahead and by how much they were ahead. The respondents stated that the way the different incentive programs have been communicated in the past has been very inconsistent, and due to this inconsistency it has been difficult to get a clear understanding of the advantages to participate in the program. Suppliers Suppliers for channel incentive travel consist of hospitality and tourism related businesses that support and service the incentive trip. Three suppliers were interviewed to gain their perspective on channel incentive travel programs. These suppliers included a: destination management company (DMC), a travel agency, and a third party company that specializes in travel adventures. The suppliers interviewed provide services and support that include arranging individual air travel, hotel accommodations, ground transportation, meeting support, and unique adventures. Although each incentive travel trip has different program components, the role of the suppliers is to support the incentive travel trip from the beginning to the end. There are some challenges associated with servicing incentive groups. One of the goals with incentive travel programs is to offer the earners an experience they would not otherwise have access to if they were planning a typical vacation. Often incentive trips go to unique destinations. These destinations may have limitations that need to be carefully planned and managed. For example, the destination may have limited hotel accommodations, the 34
geography may be unique for transportation access, and the people servicing the earners of incentive travel do not understand the high service expectation the sponsoring company wants to provide to these earners. The channel incentive trips are an opportunity for the sponsoring company to show the dealers their appreciation and reward them for reaching high performance levels by selling the sponsoring companies’ products. The sponsoring company has a limited amount of time on the incentive trip to show the dealers their appreciation, personally get to know the dealers, gain their loyalty, and learn ways to improve the business-to-business relationship; which will ultimately sustain their business. The sponsoring company does not have a second chance for getting the incentive trip right, therefore the planning and execution of the incentive trip is critical to the success. When asked what percent of the suppliers’ revenue was generated by incentive travel, the responses ranged from 75% to 90%. This is a strong indication of the value incentive travel contributes to other suppliers in the hospitality tourism industry. Without the incentive market many such suppliers would lose their business. The recent economic downturn (from 2008 to 2011) has certainly negatively affected business volume but the suppliers indicated that the demand for executing such programs is still there and they are starting to see a comeback. One supplier said, “There will always be a company that wants to say thank you in a special way and we are here to make that happen. People work hard to get these trips and knowing that makes us better at what we do.”
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The three suppliers interviewed reported that incentive travel programs are very lucrative. They are also high maintenance due to the high expectations and necessary attention to detail but extremely rewarding.
Questionnaire Results The sample size (n=89) represents 51% of the total study population of 175 people. The study population of 175 was based on participants of the incentive travel for the sponsoring company within the past 5 years. Of the 89 respondents, 40 (45%) were owners, 22 (25%) were managers, 16 (18%) were the President or Vice President of the company, and 11 (12%) responded as other. Table 1 provides a list of survey questions with the corresponding mean value and standard deviation. The survey question with the highest mean value (4.26 out of 5.0) was, “I appreciate manufacturers providing an incentive travel program.” Following was, “Manufacturer incentive travel programs provide a bonus for a job well done,” with a mean value of (4.20). The highest mean questions pertained to the individual directly while the questions following appear to be more related to communication, quality products, recommendations etc. The two lowest reported means were “Earning an incentive trip is all a matter of luck,” (2.07) and, “There are no real benefits for participating in an incentive trip,” (1.92). The question, “Earning criteria being based on growth in sales or new product orders are fair” was modestly low (3.28) in comparison to the question, “Manufacturers should work with the individual dealers to tailor earning goals by customer size, type, and market share,”
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which had a mean value of (3.91). This may be an indication that dealers would like to see earning criteria on something other than growth especially in a weak economy.
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Table 1. Mean Comparison for the Survey Items Questions I appreciate manufacturers providing an incentive travel program. Manufacturer incentive travel programs provide a bonus for a job well done. Manufacturer incentive travel programs are positive for our business. One of the greatest benefits for participating in an incentive trip is going to a place I would have never gone otherwise. Incentive trips offer me an opportunity to get to know top leadership of the manufacturing company. One of the greatest benefits for participating in an incentive trip is building relationships with the manufacturer and other dealers. Incentive trips are a great way to meet other dealers and learn from them. The manufacturers provide competitive quality products which help increase my sales and opportunity to earn the incentive trip. The manufacturer should work with the individual dealers to tailor earning goals by customer size, type, and market share. I would recommend other dealers try to reach the goal of earning an incentive trip. The destination for the incentive trip influences my participation. I am very satisfied with the manufacturer’s incentive travel program. The manufacturer representative does a good job providing me with where I stand in earning the incentive travel trip. I am more loyal to the manufacturers that offer incentive travel programs. Manufacturer incentive travel programs motivate me to sell more products. The manufacturer representative provides suggestions for increasing my sales and how that relates to the incentives the company offers. When selling products, I first want to meet the customer's needs but where possible I recommend products from manufacturers that offer incentive travel programs. The earning criteria for the incentive trip are fair. I am likely to purchase additional products during the contest period to earn the incentive trip knowing I will sell the product. Earning criteria being based on growth in sales or new product orders are fair. I do not actively try to earn the incentive trip. Incentive travel programs do not match our business model. The manufacturing representative knows I am not interested in incentive travel so he/she does not promote it. Earning an incentive trip is all a matter of luck. There are no real benefits for participating in an incentive trip.
N= 89 Mean SD 4.26 .920 4.20 .841 4.12 4.04
.889 1.04
4.04
.888
4.03
.938
4.02 3.96
.834 .868
3.91
.937
3.78
.868
3.73 3.70 3.66
1.07 .879 1.08
3.64 3.63 3.59
1.05 1.00 .996
3.52
1.10
3.44 3.35
.977 1.09
3.28
.904
2.44 2.19 2.12
1.09 1.04 .997
2.07 1.92
.868 .910 38
When examining the frequency distribution of responses provided in Table 2, the question, ”manufacturer incentive travel programs provide a bonus for a job well done” had the highest number of “agree to strongly agree” responses (77 or 87%). The second highest “agree to strongly agree” response (76 or 85%) was from the question, “I appreciate manufacturer providing an incentive travel trip.” The third highest “agree to strongly agree” response (71 or 80%) was from the question, “The manufacturing company provides competitive quality products which help increase my sales and opportunity to earn the incentive trip.” When examining the most “disagree to strongly disagree” responses, the question, “there are no real benefits for participating in an incentive trip” had by far the most with 71 or 80%. The second most “disagree to strongly disagree” responses were from the question, “earning an incentive trip is all a matter of luck” with 64 or 72%. There were 6 questions that had 25% or more of the respondents “neither agree or disagree” with the question. These questions were: 1) “Earning criteria being based on growth in sales or new product orders are fair,” (28 or 31%); 2) “I am more loyal to the manufacturers that offer incentive travel programs,” (27 or 30%); 3) “I would recommend other dealers try to reach the goal of earning an incentive trip,” (26 or 29%); 4) “I am very satisfied with the manufacturer’s incentive travel program,” (25 or 28%); 5) “The manufacturer representative provides suggestions for increasing my sales and how that relates to the incentives the company offers,” (24 or 27%); and 6) “Manufacturer incentive travel programs motivate me to sell more products,” (26 or 25%).
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Success
Benefits
Involvement
Place
Earning
Comm.
Beliefs
Table 2. Frequency Distribution of Responses Survey Questions (N=89) Manufacturer incentive travel programs are positive for our business. Incentive travel programs do not match our business model. Manufacturer incentive travel programs provide a bonus for a job well done. My representative does a good job providing me with where I stand in earning the incentive travel trip. My representative knows I am not interested in incentive travel so he/she does not promote it. My representative provides suggestions for increasing my sales and how that relates to the incentives the company offers. The earning criteria for the incentive trips are fair. Earning an incentive trip is all a matter of luck. Earning criteria being based on growth in sales or new product orders are fair. The manufacturer should work with the individual dealers to tailor earning goals by customer size, type, and market share. The destination for the incentive trip influences my participation. One of the greatest benefits for participating in an incentive trip is going to a place I would have never gone otherwise. I appreciate manufacturers providing an incentive travel program. I do not actively try to earn the incentive trip. When selling products, I first want to meet the customer's needs but where possible I recommend products from manufacturers that offer incentive travel programs. The manufacturer provides competitive quality products, which help increase my sales and opportunity to earn the incentive trip. There are no real benefits for participating in an incentive trip. Incentive trips offer me an opportunity to get to know top leadership in the sponsoring company. Incentive trips are a great way to meet other dealers and learn from them. One of the greatest benefits for participating in an incentive trip is building relationships with the manufacturer and other dealers. I am more loyal to the manufacturers that offer incentive travel programs. Manufacturer incentive travel programs motivate me to sell more products. I am very satisfied with the manufacturer’s incentive travel program. I would recommend other dealers try to reach the goal of earning an incentive trip. I am likely to purchase additional products during the contest period to earn the incentive trip knowing I will sell the product.
Strongly Disagree Neither Agree Disagree 2 0 18 34 24 36 21 4 2 1 9 42 4 9 21 34
Strongly Agree 35 4 35 21
26 3
36 9
20 24
4 38
3 15
3 24 1 2
13 40 19 5
23 19 28 16
41 6 36 42
9 0 5 24
3 3
11 6
13 9
39 35
21 34
3 18 4
1 32 14
7 21 17
35 13 36
41 3 16
2
4
10
50
21
31 2 1 2
40 2 2 5
11 14 17 9
3 41 41 42
2 28 26 28
2 2 1 1 5
10 10 6 4 16
27 23 25 26 20
26 35 39 38 35
22 17 15 18 11
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Several multiple regression models were tested using the data from this study to gain a better understanding of how some variables influence or have a relationship with other variables. Multiple regression analysis allows us to learn about the relationships between several independent predictor variables and a dependent variable. In this study, the multiple regression analysis helped answer the questions: 1) “What is the best predictor of satisfaction for an incentive travel program?” 2) “What is the best predictor of loyalty created by an incentive travel program?” and 3) “What is the best predictor of what will motivate dealers to sell more products?” Although there were many variables, or questions asked in the survey, only a few of the variables had a significant impact on each of the dependent variables (satisfaction, loyalty, and motivation to sell more products). The first multiple regression model was used to predict the changes in the dependent variable (satisfaction with the incentive travel program) in response to the changes in the independent variables (the earning criteria are fair, opportunity to know top leadership of the manufacturing company, recommend others to participate or word of mouth (WOM), and likely to purchase additional products to earn). The equation is as follows: Y(satisfaction) = b0 + F1x1(fairness) + R1x1(relationship) + WOM1x1(positive word of mouth) + P1x1(additional purchases) A significant relationship was found (F = 31.286), with an R2 of .607. This means that 60% of the variance in satisfaction is associated with the earning criteria being fair, the opportunity to get to know the top leadership of the sponsoring company, willing to
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recommend incentive travel to others, and the likelihood of purchasing additional products during the earning period. This finding provides important implications for companies offering incentive travel programs. Companies should understand that the perception of fairness, in the earning criterion, has the most impact on satisfaction with the program from the participant’s point of view. It is recommended that companies carefully review their communication of earning criterion with all potential participants. It may be a matter of clearly identifying why it is fair for both the sponsoring company and for the participant. The company may need to provide participants with a better understanding of why the earning criterion is set the way it is. To maximize the positive perception of fairness, the sponsoring company may offer participants a voice in part of the earning criterion. This involvement may improve the perception of fairness because the potential participants would feel they played a role in the process. The second most important variable in increasing satisfaction was the opportunity to build relationships with top executives. This result supports the need for sponsoring companies to maximize networking opportunities on incentive trips. This time investment has a positive influence on business-to-business relationships and should not be underestimated. Executive management’s involvement in the incentive travel program is critical to the success of the incentive travel program. In the current study, the manufacturing product is not driven by brand and therefore incentive travel provides the sponsoring company with an opportunity to put a face to the product. Dealers appear more likely to purchase products from someone they have met on a trip and built a personal relationship, then someone they communicate only through email, by 42
phone, or through a website. In this scenario, the relationship provides the sponsoring company a chance to get to know their customers better and it provides the participant of the incentive trip the opportunity to get to know whom they are doing business with. Both parties play a role in the success of the other. The other two variables that had a positive relationship on satisfaction were positive word of mouth and the purchasing of additional products. Positive word of mouth means that other participants have good things to say about the incentive travel program and encourage others to try to earn the incentive trip. Purchasing additional products to earn the trip may be a consideration for some dealers but only if the situation does not negatively affect business objectives. The results of this study provide empirical support that the perceived fairness of the earning criterion, relationship building, word-of-mouth, and purchasing additional products all have a positive relationship on satisfaction of the incentive travel program from the participant’s perspective. Table 3. Relationship between Satisfaction and 4 Independent Variables (Fairness, Relationship, Word-of-Mouth, and Additional Purchases Independent Variables Fairness
M 3.44
SD .977
.429
.482
t 6.72
Relationship
4.04
.888
.255
.259
3.31
Word-of-mouth
3.78
.868
.236
.233
2.47
Additional Purchases
3.35
1.09
.147
.183
2.14
F distribution
31.286
R2
.607
Adjusted R2
.588
*p<.01.
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The second multiple regression model tested in the study was used to predict the changes in the dependent variable (loyalty to the manufacturer) in response to the changes in the 5 independent variables: 1) incentive travel programs are positive for our business (positivity), 2) when possible I recommend products from manufacturers who offer incentive travel programs (recommendation), 3) the destination for the incentive trip influences my participation (destination), 4) recommend other dealers to participate (word-of-mouth), and 5) opportunity to get to know top leaders of the sponsoring company (relationship). Y(loyalty) = b0 + P1x1(positivity) + REC1x1(recommendation) + D1x1(destination) + WOM1x1(word-of-mouth) + R1x1(relationship) A significant relationship was found (F = 27.005), with an R2 of .625. This means that 62.5% of the variance in loyalty is associated with the 5 independent variables. The results provide evidence that the sponsoring company is building loyalty with the use of their incentive travel program. All 5 of the variables build loyalty to the manufacturer offering the incentive trip. Dealers believe the incentive travel being offered is positive for their business, they recommend products to customers to help them earn incentive travel, the destination selections influence their participation in trying to earn the trip, they recommend other dealers participate in trying to achieve the incentive trip, and the opportunity to get to know top leadership within the manufacturing company builds loyalty. While many companies are finding new ways to attract new customers, retaining current customers is proven to be less costly and provides a reliable steady customer base, which leads to profitability. According to Buchanan and Gillis (1990), long-term loyal customers are more profitable for 6 reasons: 44
1) regular customers place consistent orders 2) longer-established customers tend to purchase more products 3) satisfied customers may pay premium prices 4) retaining customers make it difficult for competitors to gain access to your customers 5) satisfied customers often refer other customers 6) the cost of acquiring and serving new customers can be substantial Although all companies strive for satisfied and loyal customers, there has not been empirical support to indicate the role incentive travel programs have on establishing satisfied and loyal customers. These results support the value in establishing loyal and satisfied customers for the company sponsoring incentive travel. While some companies may question the cost of managing and executing an incentive travel program, the results of this study indicate that an incentive travel program plays a vital role in establishing satisfied and loyal dealers to the company sponsoring the incentive travel trip. This should lead companies to question if incentive travel is a cost or an investment.
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Table 4. Relationship between Loyalty and 5 Independent Variables (Positivity, Recommendation, Destination, Word-of-Mouth, Relationship) Independent Variables Positivity
M 4.12
SD .889
.319
.268
T 2.88
Recommendation
3.52
1.10
.382
.401
4.79
Destination
3.73
1.07
.218
.222
2.81
WOM
3.78
.868
.354
.291
3.44
Relationship
4.04
.888
.241
.203
2.45
F distribution
27.005
R2
.625
Adjusted R2
.602
*p<.01. The third and final multiple regression model was used to predict the changes in the dependent variable (motivation to sell more product) in response to the changes in the 4 independent variables: 1) incentive travel programs are positive for our business (positivity), 2) do not actively try to earn the incentive travel trip (no effort), 3) when possible I recommend products from manufacturers who offer incentive travel programs (recommendations), 4) recommend other dealers to participate (word-of-mouth). The equation is as follows: Y(motivation) = b0 + P1x1(positivity) - NE1x1(no effort) + REC1x1(recommendations) + WOM1x1(word-of-mouth) A significant relationship was found (F = 39.961), with an R2 of .661. This means that 66% of the variance in motivation to sell additional products is associated with the 4 independent variables. In this equation unlike the others, there was a negative relationship
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between not putting in an effort to earn the incentive trip and motivation to sell more products, which is expected. Someone who is not interested in earning the incentive travel trip will not put in the effort nor be motivated to reach the required level of sales volume. The other variables (positivity, recommendations, and positive word-of-mouth), all had a positive relationship with “manufacturer’s incentive travel programs motivate dealers to sell more products.” In essence, if dealers believe participating in incentive travel programs offered by manufacturing companies is positive for their business they will sell more products. In doing so, they recommend products from manufacturers that offer incentive travel programs and positively recommend other dealers try to reach the goal. There are several implications for the sponsoring company to consider. First, promotion and encouragement to participate in the incentive travel program does have a positive effect on dealers selling more products, which leads to profitable results. Second, the sponsoring company should provide training to sales associates to increase recommendations of their products to customers both internally from the sales representative perspective and from the dealer perspective as well. Sales representatives of the sponsoring company play an important role in creating excitement and motivation to the dealers to participate. The sponsoring company should monitor sales representatives’ success in increasing dealer participation. Dealer training is also important. Implementing a user-friendly system to monitor sales and how it relates to the earning of the incentive travel program may increase participation.
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Table 5. Relationship between Motivation to Sell and 4 Independent Variables (Positivity, No Effort, Recommendation, WOM)
Independent Variables Positivity
M 4.12
SD .889
.308
.272
t 3.15
No Effort
2.44
1.09
-.140
-.152
-1.93
Recommendations
3.52
1.10
.367
.406
5.21
WOM
3.78
.868
.234
.203
2.62
F distribution
39.961
R2
.661
Adjusted R2
.644
*p<.01. The one independent variable that was significant in all three models tested was, “I would recommend other dealers try to reach the goal of earning an incentive travel trip.” Since the respondents to the survey had all participated in an incentive travel trip, it gives value to the importance of incentive travel to participants and indicates incentive travel plays a role in establishing customer satisfaction, loyalty, and motivation for customers (dealers) to sell more products. It is suggested the sponsoring company initiate ways for participants and nonparticipants to interact. This would provide an opportunity for participants to communicate with non-participants and allow the positive word-of-mouth to generate additional participation in the incentive travel program. It is recommended that sponsoring companies monitor participation rates and trends of dealer participation in the incentive travel program. The third implication is to provide the necessary resources to the internal staff of the sponsoring company who plan, monitor, and execute the incentive travel trips. One of the
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reasons dealers would recommend the incentive travel trips to other dealers is because they have a wonderful experience. The people planning the incentive trips for the sponsoring company have an ongoing responsibility to make each trip exceed the expectations of the participants while at the same time meet business objectives for each trip. Everyone participating may have different expectations of the incentive trip creating a challenge in scheduling the right activities to appeal to the majority of participants. Another important component of the incentive travel trip is incorporating adequate face-to-face time with the participants and executive managers, as this is a proven benefit for both the sponsoring company and the dealers. Channel incentive travel earning criteria is often tied to a set amount or a percentage of growth in sales year over year that the dealers must attain to qualify for the incentive trip. Sponsoring companies should track dealer participation to determine if there is a cyclical rotation of earning one year and not earning the next year but earning the next. This may indicate purchasing strategy from the dealers to earn the maximum number of trips. Another issue the sponsoring company should address is properly allocating sales that are a direct cause of trying to earning the incentive trip and those sales that the sponsoring company would get no matter if they had an incentive travel program or not. Knowing the dealers and understanding their business is the first start in deciphering how many additional sales are generated directly by the incentive travel program. As one person interviewed said, “We buy from the company no matter what. So I mean, they offer it, so it’s a win-win situation. There’s no reason not to do it actually.” This ties into what the executives were saying about a percentage of businesses will purchase no matter what, so the incentive trip changes from an 49
award a to a gift which becomes a cost. The survey results revealed that even though a dealer’s trip may be considered a cost to the sponsoring company (because they were going to get the sales anyway), it is also an investment in creating a long-term valued customer who becomes more satisfied and loyal over time.
Conclusions This case study fills a void in the current research by thoroughly examining a channel incentive travel program. Channel incentive travel programs offer incentive travel opportunities to other companies who sell the sponsoring companies’ products or services and therefore the recipients of the incentive travel are non-employees of the sponsoring company. Just as incentive travel programs are used as a motivational and recognition tool for corporate employees to help achieve business objectives so is the case with channel incentive travel programs. The major difference is that the incentive travel participant is a non-employee. This study used qualitative interviews with key stakeholders in a channel incentive travel program to determine the impact of the channel incentive travel program from their perspective. The results revealed the sponsoring company uses the channel incentive travel program as a motivational tool to help reach their business objectives in term of promoting steady growth in sales. The executive management team sees value in the program as it not only helps promote growth but also creates an environment to strengthen business-to-business relationships with their dealers. Participants interviewed said they appreciate the sponsoring company offering a channel incentive travel program and that they feel it is an added bonus for a job well done at the end of the year when you earn the trip. Participants were in consensus that the earning 50
criteria was fair although some indicated they would like to see the sponsoring company tailor earning criteria more specific to their business and consider market share and not as much on growth in sales. Non-participants were also interviewed and most agreed that the earning criterion was fair. The two primary reasons for non-participation were: 1) they do not enjoy traveling, and 2) the recent downturn in the economy did not allowed for the necessary growth to earn the incentive travel. Suppliers of services in support of channel incentive travel programs were also interviewed and indicated they have recently seen an increase in incentive travel. Suppliers view the incentive travel market as being a lucrative part of their business. Companies offering incentive travel have a high level of expectation when it comes to the services they provide. The quantitative analysis provides empirical support for three success factors (satisfaction, loyalty, and motivation to increase sales) for a channel incentive travel program. The one independent variable that was significant in all three models tested was, “I would recommend other dealers try to reach the goal of earning an incentive travel trip.” This is a strong indication that participants understand the value and benefits of the channel incentive travel program and would recommend to others try to earn the award. The three models tested represent positive relationship between key variables. For example, building stronger business relationships, recommending products to customers (from suppliers who offer an incentive trip) and incentive travel being positive for their business were significant in two of the models tested. This result provides empirical support that incentive
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travel programs do motivate dealers to sell more products, creates stronger business-tobusiness relationships, and is positive for dealers businesses.
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References Buchanan, R. & Gillies, C. (1990). Value managed relationships: The key to customer retention and profitability. European Management Journal 8(4). 423-526. Center for Exhibition Research (2008).Presentation at the Orlando Convention and Visitors Bureau. Decenzo, D. A. & Robins, S. P. (2007). Fundamentals of Human Resources Management, (9th Ed), John Wiley. Formica, S. & Goldblatt, J. (2005), Survey of Incentive Travel Program Business Strategies. Retrieved from http://theirf.org/direct/user/file/pdf/A-Survey-of-Incentive-TravelProgram-Business-Strategies.pdf Kastner, N. (2010). Designing effective incentive programmes. Meetings and Incentive Travel. February 24. http://www.meetingscanada.com/content/designing-effective-incentiveprogrammes-19413 Milkovich, G.T. & Newman, J.M. (2008), Compensation, McGraw Hill-Irwin, New York, NY. Murphy, W. & Sohi, R. (1995). Salespersons’ perceptions about sales contests: towards a reater understanding. European Journal of Marketing, 29(13), p.42 Mintzer, R. (2006). 20 low-cost employee perks. Entrepreneur, December http://www.entrepreneur.com/humanresources/compensationandbenefits/ article171630.html.
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Russell, M. (March, 2011). Quantifying Meetings. Convene, Retrieved from the World Wide Web on August 26, 2011, http://www.pcma.org/Documents/Economic%20Significance%20of%20Meetings%20St udy.pdf Radin, T.J., & Predmore, C.E. (2002) The Myth of the Salesperson: Intended and Unintended Consequences of Product-Specific Sales Incentives. Journal of Business Ethics, 36 (1-2). Shinew, K. J., & Backman, S. J. (1995). Incentive Travel: An Attractive Option. Tourism Management, 16(4), 285. Retrieved from EBSCOhost.
Stolovitch, H. (2002). Incentives, motivation and workplace performance: Research and best practices. New York: SITE Foundation
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Taylor, T. (2002). Supply Chain Coordination under Channel Rebates with Sales Effort Effects. Management Science, 48(8), 992-1007 Xiang, Z., & Formica, S. (2007). Mapping environmental change in tourism: A study of the incentive travel industry. Tourism Management, 28(5), 1193-1202. Xiao, H., & Smith, S. (2006). Case studies in tourism research: A state-of-the-art analysis. Tourism Management, 27(5), 738-749. Yin, R. K. (2003). Case study research: design and methods (3rd ed.). Thousand Oaks, California: Sage Publications. Travel Market Report retrieved on August 10, 2011 from http://www.travelmarketreport.com/meetings?articleID=5625&LP=1
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Appendices
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Appendix A: Interview Questions Interview questions for the executive/managers of the sponsoring company 1. What is the purpose of this incentive travel program, and how do you measure its success? Has this changed over time? 2. How are you involved in the incentive travel program? (Decision maker, approvals, host, advocate, etc.?) 3. How are the major program elements determined for the incentive travel program? (travel award and overall experience, budget, frequency, timing, etc.)? 4. What are the primary drivers for the company’s continued use/sponsorship of this incentive travel program? 5. Do your competitors offer similar incentive travel programs? If not, why not? 6. What do you feel are the primary drivers for dealer enrollment into the incentive travel program?
Are they different for the different dealer categories?
Why do some dealers not participate? If so, do you view this nonparticipation a problem?
Do dealers “cycle” on and off with their participation? If so, why is that?
7. What are the major benefits to the dealers for participating? 8. What are the major benefits to the company, the sponsor for dealer participating? 9. What are the strengths of the incentive travel program? 10. Do you see any areas of the incentive travel program needing improvement? 56
11. If you could do one thing to enhance the program, what would it be? 12. Do you track the incremental revenue generated by the program? If you do, how much additional revenue is generated due to the dealers qualifying for this program? 13. What is the overall impact of the channel incentive travel program on business results and how is it tied to business outcomes? 14. What do you think would happen to your business outcomes if the channel incentive programs were eliminated? 15. How do you communicate the incentive travel program enrollment information and earning criteria with prospective principal participants? 16. Do you feel the communication of the advantages to participate and provided to the dealer participants in the most effective and efficient ways? 17. Are there any other comments or areas you feel I should include in this study?
Interview questions for the dealer participant who is not a dealer principal/owner 1.
What is your overall perspective of incentive travel programs?
2.
Why does your dealership participate? Do these incentive travel programs make sense to you and the dealership? Explain…
3.
How many incentive travel programs do you participate in annually?
4.
How many incentive trips have you taken? (if you have taken more than 3 of these trips, do you meet with others who have attended these trips multiple times? Explain…)
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5.
How would you describe these incentive travel trips? What do you like best about them? Least? What would you like to see changed?
6.
What incentive travel programs that you have participated in do you feel is the very best (from your perspective)? Explain.
Interview questions for the dealer owners/principal participants 1.
What is your overall perspective of manufacturer sponsored incentive travel programs?
2.
Have you participated in this incentive travel program? Every year? Why do you participate?
3.
How many incentive travel programs do you participate in annually?
4.
How many incentive travel trips have you taken? (if you have taken more than 3 of these trips, do you meet with others who have attended these trips multiple times? Explain.
5.
How would you describe these incentive travel trips? What do you like best about them? Least? What would you like to see changed?
6.
What are your primary considerations when you select an incentive travel program in which to enroll? Do you have options as to what you receive from the program? If you do, how do you choose the award option?
7.
If you have more than one sponsor offering an incentive travel program, how do you chose which one you will enroll your dealership?
8.
Do you enroll in multiple programs? Explain…
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9.
What travel incentive program that you have participated in do you feel is the very best (from your perspective)? Explain…
10. Are there any programs for which you will not enroll? If so why not? Explain… 11. What is the primary value of the sponsor’s incentive travel program to you? 12. What other comments do you feel I should know about the incentive travel programs? 13. Do you think the incentive travel program motivates you to sell more products? If so, in what ways? If not, why not? Ask for the principal. 14. Do you feel the communication of the incentive travel program (enrollment information and earning criteria) is most effective? Do you have any suggestions for improvement? 15. Do you feel the communication of the advantages to participant and the status for earning the incentive travel trip is communicated in the most effective and efficient ways?
Interview questions for the non-participants 1. Have you ever participated in a channel incentive program in the past? 2. Why do you not participate? 3. What would the sponsoring company need to do to get you to participate in an incentive travel program? 4. Do you feel the earning criterion is fair? If not, why? 5. How many incentive travel programs do you have available to you in which to participate? 6. Do you think the sponsoring company makes enrolling easy? 59
7. Any closing thoughts you would like to share regarding these incentive travel programs? 8. Do you fell the communication of the incentive travel program (enrollment information and earning criteria) is most effective? Do you have any suggestions for improvement? 9. Do you feel the communication of the advantages to participant and the status for earning the incentive travel trip is communicated in the most effective and efficient ways? Interview questions for suppliers 1. What do you (or your company) provide in support of the channel incentive travel program? 2. What percent of your business/revenue is in support of these incentive travel programs? 3. Why do you include these incentive travel programs as a part of your business model and do you feel they are lucrative? 4. Are there challenges for you to pursue (sales) or support (operate) these incentive travel programs? 5. What is your biggest challenge servicing these incentive programs? 6. What is your overall view of these incentive travel programs? 7. Any closing thoughts you would like to share regarding these incentive travel programs?
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Appendix B: Survey Questions for Participants 1. How many incentive trips have you earned in the past 5 years? 2. How many incentive trips have you earned from ----------- and other manufacturers over the past 5 years? Questions 3-27 are measured (1 strongly disagree to 5 strongly agree) 3. Manufacturer incentive travel programs are positive for our business. 4. Incentive travel programs do not match our business model. 5. Manufacturer incentive travel programs provide a bonus for a job well done. 6. My representative does a good job providing me with where I stand in earning the incentive travel trip. 7. My representative knows I am not interested in incentive travel so he/she does not promote it. 8. My representative provides suggestions for increasing my sales and how that relates to the incentives the company offers. 9. The earning criteria for the trip are fair. 10. Earning an incentive trip is all a matter of luck. 11. Earning criteria should be based on growth in sales or new product orders are fair. 12. The company should work with the individual dealers to tailor earning goals by customer sixe, type, and market share. 13. The destination for the incentive trip influences my participation. 14. One of the greatest benefits for participating in an incentive trip is going to a place I would have never gone otherwise. 61
15. I appreciate manufacturers providing an incentive travel program. 16. I do not actively try to earn the incentive trip. 17. When selling products, I first want to meet the customer’s needs but where possible I recommend products from manufacturers that offer incentive travel programs. 18. The company provides competitive quality products which help increase my sales and opportunity to earn the incentive trip. 19. There are no real benefits for participating in an incentive trip. 20. Incentive trips offer me an opportunity to get to know top leadership of the sponsoring company. 21. Incentive trips are a great way to meet other dealers and learn from them. 22. One of the greatest benefits for participating in an incentive trip is building relationships with the manufacturer and other dealers. 23. I am more loyal to manufacturers that offer incentive travel programs. 24. Manufacturer incentive travel programs motivate me to sell more products. 25. I am very satisfied with _____ incentive travel program. 26. I would recommend other dealers try to reach the goal of earning and incentive travel trip. 27. I am likely to purchase additional products during the contest period to earn the incentive trip knowing I will sell the product. 28. What is your current position held with the company? 29. What is your zipcode?
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