The “IRF Industry Outlook for 2020" study shows a positive outlook for the incentives industry based on an expected strong economy, sponsor the Incentive Research Foundation says. Budgets are increasing in most areas, and it is anticipated the use of rewards will continue to grow,
The study was conducted with 377 incentive industry professionals comprising 45 percent corporate buyers, 21 percent suppliers, and 33 percent third-party incentive providers. The data was collected in July-August 2019
CONIFDENCE IS UP Incentives industry professionals remain optimistic about both the economy and corporate performance.
The key findings include:
- The net optimism score for the economy is 41 percent (compared with 43 percent in 2019).
- The net optimism score regarding the economy is nearly double that of 2017 (22 percent.)
- The net optimism about the economy for those involved in event gift giving was 42 percent.
- 85 percent agree or strongly agree that their companies will have a strong financial performance next year.
- 68 percent believe the U.S. economic outlook to be strong.
- 90 percent agreed or strongly agreed that their companies’ financial forecasts influence the design and implementation of incentive programs.
BUDGETS BLOOMING Consistent with a positive economic environment, the data show net increases in budgets. Compared with last year, there are higher percentages of respondents who expect spend and budget to increase. One explanation for budget increases is that companies continue to grow and there are more qualifiers. Budgets are also growing to accommodate anticipated higher costs.
Significant net Increases include:
- Number of participants earning a reward (50 percent in 2020, up from 38 percent in 2019)
- Overall budget (43 percent up from 38 percent)
- Merchandise spend (34 percent up from 29 percent)
- Communications budget (31 percent up from 27 percent)
- Administration budget (23 percent up from 17 percent.
There is an expectation that experiential rewards, gift cards, and merchandise will increase at an even greater rate than the prior year.
- Net increase for experiential rewards has grown to 44 percent (compared with 28 percent in the 2019 forecast)
- Net increase for gift cards is 42 percent (compared with 38 percent in 2019 forecast)
- Net increase for merchandise is 35 percent (compared with 28 percent)
BAD NEWS: PROGRAMS CANCELED Despite the positive economic outlook, there was a slight uptick in the number of programs cancelled this past year compared with the prior year. More than a quarter of respondents (28 percent) reported that they, or their clients, discontinued a program within the past year, up from 18 percent the previous year.
The data suggest the program discontinuations are less likely to be because of budget losses and lack of executive support than in the past. While fewer respondents than last year indicated that loss of executive support was the driver for program cancellations, this loss of executive support still continues to be a top driver. This year, the impact of participant feedback on program cancellations increased to the same rate as executive support. The importance of the attendee experience reflects a stronger focus on the role of incentives as a builder of corporate culture and engagement.
Top Reasons Programs Were Discontinued
Lack of executive support...........................................................................................19 percent
Program-specific participation feedback (surveys, focus groups, etc.).....................19 percent
Program achieved objects and is no longer needed...................................................14 percent
Lack of results......................................................................................................... ...14 percent
Compliance / HR / legal concerns..............................................................................14 percent
No budget....................................................................................................................10 percent
RESULTS STUDIED NOW Incentive and reward programs are frequently maintained simply because they have long been part of the corporate culture in their current form. There has often been little reporting and analysis to validate the efficacy of these programs. Reporting and analysis, however, has dramatically increased since last year, particularly for corporate users:
- Only 27 percent of corporate program owners stated that they do not use reporting or analysis, compared with 53 percent in 2019
- The percentage that look at participation reports is up to 40 percent for 2020, compared with 27 percent in 2019
- Corporate users conducting the analysis on program increased to 44 percent, compared with 25 percent in 2019.
Satisfaction level of participants is the most common measure of program success used by both corporate and third parties. Last year, level of participation was more common as an activity measured, but this year declined from 57 percent to 44 percent among corporate users and from 87 percent to 67 percent by third parties. This shows a shift from simple participation to satisfaction as the key metric.
