A Cashless Society?
In the world of incentives, it pays to go cashless
The phrase “Cash is king!” has been repeated enough in modern vernacular that it could qualify as a cliché. But while there may be some truth to this adage in dealing with areas like finance and real estate, it’s a poor philosophy when designing incentive programs.
Academic research shows that when trying to motivate desired behaviors, non-cash items — including trips, merchandise, event tickets and other exclusive privileges — make much better reward “carrots” than cash.
It may seem counterintuitive. Ask anyone which they would prefer: cash or a non-cash reward of the same value. The response is likely to be a resounding, “Show me the money!” However, when it comes to tapping into the emotions that make incentive programs work, the results are very different. In practice, businesses have noted that tangible, non-cash rewards do a better job of attracting and holding people’s interest, getting them excited about possibilities, and motivating them to act in a way that meets business objectives. The theory is that, while cash is nice, and usually needed, the participant feels more “rewarded” when they receive something they have long wanted or may not have acquired otherwise. Think of being a kid, and getting an envelope of money for your birthday versus being taken to the toy store to pick out your present. Which would be more exciting? Furthermore, which approach creates more of a meaningful, positive, memorable experience?
It’s not a trivial issue. Reward offerings can make or break incentive program success. You need to understand what type of rewards will stimulate your unique participant group — and sustain their motivation over the life of their relationship with your organization.
An enlightening study
A Wichita State University study, published in the Journal of Economic Psychology, showed how emotion might play into the desire for a tangible alternative to cash. Researchers asked participants to choose whether they wanted cash, a high-definition television or a cruise. (All options were worth the same amount.) Nearly two-thirds of the respondents selected cash.
Yet the results changed when researchers asked participants how happy or satisfied they would be to receive a bonus of cash, or a HDTV or cruise (again, all of the same value). Consistently, the HDTV and cruise were selected over cash. The scientists hypothesized that the thought of receiving a “gift” that the participants wouldn’t necessarily go out and buy themselves created more excitement and enjoyment. In other words, these items are seen as unexpected treats to indulge in. However, if presented with a simple choice — cash or a tangible reward — without regard for emotion, the practical nature of cash is seen as a “wise” or “responsible,” if less-satisfying, choice, probably due to necessity. (“I need to pay a bill,” or “I’m saving for a new car,” etc.)
Priceless Business Evidence
Goodyear Tire demonstrated the value of non-cash versus cash during a sales incentive program that ran for 6 months in over 900 stores.The goal was to sell a specific type of tire. At half of the stores, employees had a chance to earn cash for every 12 tires sold. At the other stores, employees were offered merchandise rewards for every 12 tires sold. In the end, the stores working with non-cash incentives outsold the “cash incentive” stores by 46%. The non-cash program achieved a ROI of 31%…compared to an ROI of –20% for the cash program. These results indicate how non-cash rewards can positively impact the the quest to achieve a goal.
Articulating the Argument
The next time the subject comes up with your colleagues, here are some key points commonly made about the advantages of non-cash rewards over cash:
- While cash is useful, it’s not something that can be used to make an emotional connection. A dollar is a dollar, but to a Packers fan or a ski enthusiast, a trip to Lambeau Field or Vail is truly priceless. The emotional elements of non-cash rewards make these items seem to have a higher value than cash in the participant’s mind. As a result, non-cash is a more effective motivator.
- Cash is easily “lost in the shuffle” — it may get spent on bills or routine expenditures, with no long-lasting association to the program, the behavior that earned the reward or the company that sponsored it.
- Luxurious, non-cash rewards are palatable indulgences, whereas the participant may feel irresponsible or selfish spending a cash reward to acquire such luxuries. This makes the non-cash reward highly coveted and memorable.
- It is more socially acceptable to (and interesting) to tell the story of how you earned a non-cash item. (You might talk about how you earned that beautiful wine decanter; you wouldn’t “brag” that you were given $150.) This makes the participant feel good about their achievements.
- Travel awards create memorable experiences that can be shared with loved ones. These types of rewards create a positive association with the sponsoring company (“We’re going on a dive trip courtesy of Acme Company!”)
- Cash can become an entitlement, whereas when someone has the opportunity to earn a non-cash reward, it tends to be perceived as an added bonus and specifically earned for a particular achievement.
- Loved ones and friends can join in the fun of non-cash rewards, which furthers the “positive PR” of the program beyond the participant base. It also elevates interest and motivation by participants who want to earn something that others can enjoy.
Contact QIC to learn more about the debate over cash versus non-cash incentives and the potential of online reward programs.