I recently had a somewhat mundane, yet ironically valuable, experience that highlighted for me the importance of establishing an appropriate value proposition in your customer incentive or channel sales incentive program.  Here’s the story.

I purchased a number of items at a national-chain drugstore that has a loyalty program. After supplying my program ID and checking out, I received a coupon for future use at one of this chain’s stores. I glanced briefly at the coupon and saw that it was of modest value – but still somewhat valuable. So, I filed it away for future use.

Fairly shortly thereafter, I recognized that I needed some additional items, all of which I knew I could obtain at this chain’s stores. I retrieved the coupon and planned a visit to the drugstore. But then other factors intervened.

Specifically, I happened to be passing a discount chain store that also carries the items that I needed. I also knew that, on balance, those items would be a bit cheaper at the chain store. So, I turned into the parking lot, jumped into the store and made my purchase. The drugstore chain had lost my business – at least this time.  And the principal reason why is that the coupon was not of sufficient value to cause me to select its issuer (i.e., the drugstore) over another seller of the same undifferentiated products. The value proposition was simply not strong enough to overcome other factors like convenience and a slightly better price.

Establishing the value proposition is a key consideration in the early stages of incentive program design, as we and our clients seek to allocate the program’s budget. Many times there is a desire to make the program investment more “affordable” by reducing the award value assigned to individual program KPIs. And clearly, there is a balance to be struck between affordability and motivation.

But as you consider your program award rules, please keep in mind two of the best practices that we highlight on our web site:

•  Create a value proposition that resonates with your partners
•  Offer meaningful rewards at a range of levels

And then contact us to help you strike the critical balance that will drive your program’s success.