Calculating ROI for Incentive Programs: Analyzing Sales Channels

Return on investment (ROI) is always top of mind for business owners when considering new endeavors such as incentive programs. Calculating ROI for incentive programs requires a thorough and complete analysis of all sales channels. This means taking into account all the factors of distribution, product, price, and promotion. When all of these elements are present, they impact both the business and the consumer directly. Businesses analyze their sales channels and determine the most cost-effective method and most fulfilling means of delivering incentive programs.

A successful campaign is one in which everyone gets their expected outcome. Employees get the bonus they work for, and in return, employers get the results they want. However, no campaign is successful without the input of valuable consumer feedback. Whether the information or feedback is obtained through written or oral communication is not as important as the data itself. There are some important factors to consider when opting for a successful campaign. The truth is too many businesses lose money creating a successful campaign and fail to measure its ROI on a regular basis. No program should run on autopilot without proper supervision or regular monitoring. Just as time changes the way companies run their business, time also diminishes the monetary value of an award system.

Regardless of how well-planned a program or campaign might be, the key element must always be measured out- the ROI or return on investment. Although consumer participation, sales increase, and employee morale are all direct benefits, the overall goal is not to spend more on an incentive program, without the expectation of receiving profits. The question to ask is will this program cost me more than its worth? Things to consider are:

• What is hoped to be gained from the campaign?
• How much will it cost?
• What is my expected ROI
• Is it worth the risk?

In order to receive a return on investment, businesses need to implement a measurable program. The benefit of operating a measurable program is the ease of calculating return on investment profits. Measurable programs are funded through a formula that is designed to cover the cost of the incentive program, by investing up to 10 percent of incremental sales. Meanwhile, the larger percentage of the budget goes toward communication and administration.

In an ideal environment, every campaign works out perfectly without risk, consumers are great participants, and sales team members are greatly motivated. Nevertheless, that is not always the case. Incentive marketplaces are performance-based, and the main purpose of incentives is to achieve business goals. What most businesses fail to realize is that intangible prizes are often difficult to measure, but none the less, they are just as valuable. The one magic formula to remember is:

Profit – Less Cost of Investment = Return ON Investment

A good example is that if the profit from a sales incentive program is $6 million, and the total cost of the incentive investment is $2.5 million (including gift cards, merchandise, vouchers, and cash), then the total return of investment is $3.5 million. This is the simplest method to use when calculating an ROI (return on investment).

Consider the Cost of Rebates and Rebate Processing

When initiating any type of incentive award program, two costly factors should always be included in the equation, the cost of the rebate and the cost to process the rebate. Be sure to choose a rebate processing system complements the business, and not penalize the business. Some companies charge additional fees if rebates are not cashed in or redeemed after a specific deadline. Make sure the rebate amount is worthy of the cost. For example, no one really wants to spend $2 to send in a rebate worth $5. it is too costly, and not worth the time. Consider the response a business can receive if it were to offer a rebate of $75 dollars. Nevertheless, the product must match the expectation and excitement of the redeemer. When consumers redeem their rebates, this opens the door to a wider, target marketing audience.

Value the Information From Consumer Data Reports

Consumer data reports are a vital part of any growing and thriving business. The information obtained over a period of time will reflect the success or failure of any given campaign or promotion. The obtained data can help vendors and employers determine whether or not sales goals were met, and if there were any delays in delivering promotional promises. Reports are two-way communication vehicles, input, and feedback. When business owners have access to purchasers contact information they can analyze consumers shopping habits, and payout choices. Contact information can be shared with partnering vendors to ensure product availability and future promotional campaigns. Stores can create their own in-house database of their and build a rapport with new customers.

Value of Sales Boost Vs Competition, Sales Channel Success

Healthy competition in the marketplace is common and widely acceptable, and wholeheartedly encouraged. The best way to get a boost in sales is to engage in several marketing channels, and consider the benefits of channel partnership. Channel partnership offers several methods of delivering successful campaigns, promotions, and sales incentives. In fact, channel partnership is the ideal way to boost the sale of specific products or introduce new products. However, this requires strategic marketing strategies. So, what are the benefits of channel partners?

• Boost sales
• Decrease marketing time
• Provide access to most competitive markets
• Form lasting relationship
• Help increase customer database

Expect and Embrace Competition

A good incentive program will bring in a healthy ROI, but it can also create some in-house competition. Sales team members’ willingness to help drive a successful campaign to be overwhelming, if the prizes are adequate. Any and all successful incentive programs must include and embrace every intangible and tangible element. Prizes should reflect their value in time and worth, and rebate processing fees should not exceed the value of the redeemer expectation. Make sure the incentive program is not costing the company of the business more in either party is willing to invest. If the current rebate program is not working, step out and try another rebate redemption system. Expect more than you put in, and do not settle for less.