Incentive Travel Primer
Your company is interested in the incentive travel business and related areas of motivational meetings for good reason: They could represent a significant market for your travel service or product. However, success depends upon the right mix of product, service, and marketing savvy. This article provides background on the business of incentive travel and motivational meetings as well as insight into how to succeed.
Scope of the Market
A Study of the Incentive Merchandise and Travel Marketplace (1997), the first comprehensive research study in five years of the incentive field, reported that $22.8 billion was spent by U.S. business on incentive travel and merchandise in 1996 to motivate consumers, employees, dealers, and salespeople as a means of improving performance. U.S. businesses spent more than $3.5 billion on incentive travel in 1995 for use in incentive programs for salespeople, other employees, and dealers/distributors/agents.
Incentive travel primarily is used in programs to increase sales, purchases, or, in the case of employees, productivity or quality. The official definition by the Society of Incentive & Travel Executives (SITE) says that incentive travel rewards people for specific results in formal incentive programs. Many companies that offer travel, however, use it in loosely structured programs in which employees or customers are singled out to attend a motivational meeting. What distinguishes incentive or motivational travel from traditional travel is the focus on creating an extraordinary experience for the winner, or an experience that builds morale, communicates the corporate message, or fosters improved communications between the company and its employees or its customers. Businesses use incentives to:
- Motivate employees to work toward a common goal;
- Recognize performance;
- Get people to make a purchase they might not otherwise make;
- Reinforce a marketing message.
Noncash awards such as travel are used to avoid the pricing or compensation issues raised by the use of cash. Individual incentive travel has grown increasingly popular at companies that realize they can inspire a higher level of performance by letting their winners travel independently. This trend represents a profitable, easy-to-handle business for travel companies with the right approach. Major players in today's incentive travel and motivational meetings business include airlines, cruise lines, hotels, destination management companies, adventure travel suppliers, corporate-events consultants, restaurants, and attractions (see Industry Players). The incentive travel and motivational meetings businesses often can account for as much as 30-50 percent of a supplier's group business.
Today's Buyer
When it comes to incentives, today's corporate buyer is not a purchasing manager but a midlevel manager in sales, marketing, operations, customer service, production, training, human resources, or product management who has the responsibility of motivating and recognizing key people. Because of downsizing, the typical buyer has many duties that have little to do with incentives or meetings. In addition, many of these companies are only occasional buyers of incentives and promotional items, and it's impossible to predict whether their orders will be large or small.
To make things more confusing, the market is filled with several types of middlemen with different levels of involvement. These include incentive companies, meetings services companies, corporate travel agencies, and, sometimes, promotion and advertising agencies. Some of these companies have only sporadic involvement with various aspects of the corporate market. Entering the incentive travel and motivational meetings businesses is a challenge because they require high levels of service that many suppliers can't, or don't want to, offer. Examples: coming up with an exciting product that will motivate and inspire participants; special services that make people feel like winners; and a creative approach to make the program stand out. But putting forth the extra effort has its rewards, because there are experienced corporate buyers who know they'll have to pay more to get more.
Unlike the meetings business, corporate buyers of incentive travel and motivational meetings often change venues. They'll make a lot of demands, and they're unlikely to show much loyalty to one particular property or destination. That's because they have to mix their offerings in order to keep participants engaged.
^^ Return to Top ^^
What It Takes to Succeed
Not just any company can make it in the incentive travel business. Success starts with having a product or service that people want. Who can you motivate, recognize, or communicate with by using a low-cost motel in an undesirable destination? Suppliers who succeed usually have something desired by an identifiable demographic group, and they have demonstrated that appeal in the consumer market. Most companies, in fact, get into the corporate market simply because some company or organization calls and requests to book a group for an incentive travel program or motivational meeting.
Despite the potential, success is not as easy as it looks. The highly fragmented usage and distribution of corporate business has frustrated many a major supplier, some of which have abandoned the marketplace simply because they initially threw more resources than justified at a significant but fickle business. Fortunately, the number of decision makers and influencers involved with large incentive travel and motivational meetings is less than 20,000, a number that can be sold and marketed to relatively inexpensively using the right approach (see Sales and Marketing.) Here are the issues that your company has to address before expanding its effort in the corporate market:
- Who wants your product or service?
- What demographic group or audience buys and enjoys the product or service your company sells or the destination where you are located?
- Is it a large market?
- Difficult to reach?
- Who wants your category of product or service, and how strong is the demand?
Answering these questions will help define your market potential.
Product positioning. Where does your product or range of products fall in the corporate marketplace? Are you upscale or mass market? Do you have a product or service that most companies will need as part of a meeting or incentive program (examples: hotels, air travel, restaurants, or something unusual, such as adventure travel)? Can your product or service be used to motivate and engage people? Do you have the ability to handle large groups? Are your employees capable of providing personal service?
Adaptability to the marketplace. Can your company handle the special requirements of the incentive travel and motivational meetings markets? Examples: having to offer multitiered pricing to middlemen and end users; using multiple distribution channels; meeting erratic and difficult-to-project volume and timing demands; having to live with big swings in group sizes. If a major corporate user is counting on having a large group at your property, he or she doesn't want to learn at the last minute about a new construction project that could negatively affect the experience. Management will also have to live with the fact that a program sold this year may not result in actual guests until as much as a year later. Tip: Determine the average group size your company is prepared to handle. The corporate market offers some high-volume prizes but also lots of small orders flowing through numerous sources.
How will you go to market? The major companies with adequate resources can sell both to resellers, such as incentive companies, meetings services companies, and corporate travel agencies, and to the end user. Others sell primarily through resellers. However you go to market, remember that success lies in identifying the key people most likely to buy and resell your product or service and in giving them meaningful rewards for doing business with you.
Develop the overall strategy. This step should precede the process of selecting specific tactics. The tactics you use will depend on your overall plan, market positioning, and distribution channels. The strategy should spell out such things as reasonable goals, market opportunity, unique selling proposition, current and future market positions, projections, and methods of going to market. Most of all, it must define your market positioning as specifically as possible.
Devote the necessary resources. Many companies send a lone manager out into the incentive business with little in the way of staff or marketing support. Fortunately, this market's size makes it relatively affordable to penetrate, but that doesn't stop some companies from wasting significant resources in programs that bear little fruit.
Develop an account-based strategy. Since relatively few companies will make up a huge percentage of your organization's revenues in this marketplace, every sales and marketing effort should be entered in a continually updated database of your best prospects. Through the use of sales automation, this information can be applied to all of your organization's sales and marketing efforts. Companies using account-based management get far more mileage from advertising, trade shows, and direct mail because they are able to translate the marketing into measurable sales.
Don't market unless someone follows up. Most companies in the corporate marketplace spend considerable sums on advertising, direct mail, and trade shows and almost nothing on making sure the leads are followed up, tracked, and acted upon. Lead follow-up is so tedious and seemingly unproductive that most salespeople would rather not do it at all, so you will have to consider outsourcing the process or hiring part-time salespeople to do the job. Lead follow-up not only helps you find golden opportunities amidst the considerable number of poor-quality leads generated by any marketing effort but enables you to determine your cost-per-customer, the best index for use in determining how to apply your marketing dollars.
^^ Return to Top ^^
Types of Events and Special Requirements
Group incentive travel rewards groups of winners, usually salespeople and resellers but, in some cases, nonsales employees as well. To distinguish these programs from ordinary meetings, companies usually make sure they involve special events, banquets, outdoor activities, and lots of free time. These groups often demand unusual creative twists, room comparability at hotels, and special recognition for participants. Most programs include spouses, and some even include children. About three quarters of the programs conducted by U.S. companies take place in this country. Many include little in the way of meetings other than the big awards banquet.
Individual incentive travel is used in all categories of incentive programs for salespeople, resellers, consumers, operations employees, and others. Many travel suppliers get this kind of business without ever knowing it, because these travelers book and travel like other consumers traveling on their own. However, a growing number of hotel properties, airlines, cruise lines, and even destination management companies have developed special products offering enhanced personalized services for winners--at a price, of course. Many of these products are resold through incentive companies and corporate travel agencies on a commission basis in the form of individual certificates.
Motivational meetings are a hybrid of a traditional meeting and a group incentive travel program. The idea is to motivate, communicate, and train, all at the same time. These groups make the same demands as an incentive group but require considerable meeting and audiovisual services as well.
How Buyers Choose Suppliers
To help you better understand your customer, take a moment to put yourself in his or her shoes. Here are some of the factors that a typical buyer must consider when developing an incentive travel program or a motivational meeting:
- Determine goals. What, in specific terms, should the program accomplish? (example: increase sales 10 percent in a given period). Specify what the increased sales would mean in profits.
- Determine how much to invest in the incentive program.
- Determine whom the program should target: consumers, salespeople, dealers, distributors, customer service employees. Understand their demographics, tastes, and lifestyles through surveys, if possible.
- Determine what type of incentive award will get the attention of the target audience and still be clearly distinguishable from compensation or pricing strategies.
- Decide how to track performance.
- Make sure that what the audience is asked to do is reasonable in light of past performance or behavior.
- Determine what obstacles to achieving the program's goals may exist because of such things as market conditions or employee morale.
- Determine what incentive travel award will reinforce the message, fit the budget, suit the tastes and demographics of the audience, and be commensurate with the action that management is requesting.
- Determine whether the program will be managed internally or outsourced to an agency.
- Determine the tax implications. Travel can be taxable to recipients under certain conditions, and special tax forms may be required.
- Develop a clear way to measure results.
- In selecting travel suppliers, make sure they can deliver precisely what was promised at the cost budgeted. Make sure to understand their cancellation policies in case the program doesn't generate as many winners as planned.
- When the program is completed, carefully measure the results to determine if it has achieved the objectives. Survey both winners and nonwinners.
^^ Return to Top ^^
Sales and Marketing
Compared to most consumer markets, the incentive travel and motivational meetings businesses are relatively inexpensive to penetrate in terms of sales and marketing dollars. And new technology, such as sales automation and the Internet, are reducing costs even more. The basic sales and marketing procedures differ little from those that prove successful in any business-to-business situation. They include the following:
Advertising. While not necessarily required, advertising offers a rapid way to get known in the incentive business. It can be relatively inexpensive, since there are only two primary magazines in the marketplace. Advertisers that have a system for conscientiously following up leads will invariably see their advertising break even, and they may even come out several dollars ahead.
Direct mail. Because most corporate customers buy on an occasional basis, any type of response-oriented advertising yields relatively little return. There are few offers that will get a company to do an incentive program when they don't want to do it. Direct mail in this business works best when targeted at a specifically defined prospect list and fortified with useful information and added-value offers that encourage people to sample the product. It becomes even more productive when used to build databases of qualified buyers.
Trade shows. Because most of the industry's key middlemen and buyers go to The Motivation Show at McCormick Center in Chicago (see Trade Shows), suppliers who know how to exhibit can more than pay for their investment at these shows. They also get invaluable names of future prospects and get the critical face-to-face contact that has become increasingly difficult to get through sales calls. Critical steps for success include a pre-show marketing plan to make sure buyers know you're there; some sort of at-show visibility to direct them to your booth, and a post-show program to reach buyers looking for merchandise throughout the year. Most important of all, however, is a lead follow-up program.
Lead follow-up. Most companies fail to follow up effectively on leads generated from advertising, direct mail, and trade shows. Why? Nobody wants to do it. Most leads generated from marketing efforts are not serious prospects, and many involve tedious phone-tag and calls that go nowhere. However, the benefits of effective lead follow-up warrant finding a solution: If only two leads in ten represent viable prospects (the average return of the best marketing program), you can more than pay for your marketing investment and build a long-term, continually updated database of serious prospects.
Database management. If your company doesn't use a contact-management program, you are missing out on the lowest-cost way to identify and focus on the people most likely to buy. (The software can be as basic as ACT, Maximizer, or Gold Mine.) By having your salespeople using their contact-management programs and uploading their databases regularly into a central location, you can significantly reduce your costs by identifying the organizations most likely to buy your products and services, then communicating systematically with them.
Relationship-building. Many companies that manage to come up with a good database of serious prospects do little more than send out brochures or trade show invitations. Savvy marketers go a step further and send out informative newsletters or other forms of communication on a regular basis. By providing potential customers with useful information in a concise, benefits-laden format, you stand a better chance of being chosen when people are in a buying mode.
Long-term sales follow-up. Most suppliers leave it to salespeople to keep up with prospects; often, there's no consistent plan for long-term follow-up. Developing a means of consistently following up with prospects can pay off handsomely, since these are the people most likely to buy. This sort of follow-up often can be provided by the same organization charged with doing initial lead follow-up.
Taxes and Legal Issues
The most critical regulatory issues affecting incentive travel involve taxation of awards. Generally, a trip offered to employees in a qualifying program is treated as income to the employee and should be reported at its fair market value on the employee's income statement. A Form 1099 must be issued to employees and nonincorporated customers for travel awards with a fair market value greater than $600. The program can be deducted by the company. If the primary purpose of the travel event is a meeting, it may be deducted as a business expense by the company and is nontaxable to the employee. However, tax regulations contain strict definitions as to what constitutes a meeting. Also, tax advantages do not apply to meetings on foreign-flag cruise lines or to meetings held outside North America, except in certain destinations in the Caribbean. Tax laws have become more strict about the deductibility of guests' travel to such meetings (for more information on this subject, see article #4030, Travel Tax Laws). Federal Trade Commission regulations forbid offering travel awards in contests or sweepstakes requiring people to make a purchase. Many states have strict regulations on the way travel awards are used in consumer sweepstakes, including requirements for full disclosure of the precise travel award. Jim Gossett, attorney for the Society of Incentive & Travel Executives, will answer simple legal questions free; there's a fee for more complex consulting. Call 312-876-7833.
^^ Return to Top ^^
Industry Players
Depending on your product or service, you may sell through more than one channel and will encounter numerous other suppliers. Here's an overview.
Incentive companies range from small shops offering specialized services to large full-service agencies offering merchandise, training, communications, reporting, catalogs, gift certificates, and travel. There are probably no more than 100 incentive companies in the U.S. and only a few dozen that have sales of over $10 million. Most incentive companies won't get involved with small groups unless other business is involved.
Travel fulfillment companies provide only the travel portion of an incentive or meeting program. They don't provide much promotional support, can't help much with developing program structure or performance measures, and won't be able to help if merchandise is involved. Often these companies are small or are associated with corporate travel agencies.
Corporate travel agencies often have group divisions that handle incentive travel. These companies are lumped with incentive companies in most industry directories. Most corporate travel agencies seriously involved with incentive travel belong to the Society of Incentive & Travel Executives (SITE), which maintains a directory of names and addresses (see below).
Destination management companies are an often overlooked but critical resource for companies with incentive groups too small for incentive travel companies to service. These companies, based in popular travel destinations, can arrange everything from rooms and ground transportation to elaborate events, special meals, and unusual experiences most travelers can't obtain on their own. These are not large companies, so expect to deal directly with the owner or other senior management. Membership in SITE often is a sign that the company has targeted incentive travel as a market segment. These companies are listed in industry directories, generally under the location where they operate.
Hotels active in the business-travel arena often have a meetings/incentive travel department that can assist with the special requirements of incentive users: room comparability for winners, group check-in, volume pricing, and special events, such as theme parties. Talk directly with an incentive salesperson if possible. The most comprehensive directories for this category are available through SupplierFinder.com (see Online Services) and in directories published by Successful Meetings and Meetings & Conventions magazines (see below).
Cruise lines active in incentive travel also have special departments to handle the needs of incentive users: such things as cabin comparability, special events, entertainment, promotional material, and meetings with the captain. If a cruise line doesn't have a meetings or incentive department, it's probably not in the business.
Airlines often have meetings/incentive departments that can provide group pricing, promotional material, and special in-flight amenities, although the last have become hard to obtain.
Tourist boards are one of the most valuable, but often overlooked, resources for incentive travel planning. Most overseas destinations and many of their U.S. offices have someone familiar with incentive travel who can provide you with promotional material, off-the-record recommendations of hotels and destination management companies, and other information about the destination.
Directories of Suppliers
Industry directories (usually annual) that include listings of most of the types of suppliers described above are listed here with their prices:
Incentive magazine has the best directory of incentive companies and travel fulfillment companies. Call 212-592-6263.
Potentials magazine. Call 612-333-0471.
Successful Meetings magazine. Call 212-592-6263.
Meetings & Conventions magazine. Call 800-637-6088.
Corporate Meetings & Incentives magazine. Call 609-786-6892.
The Motivation Show, which includes the Incentive Travel & Meeting Executives Show. Call 630-434-7779.
Society of Incentive & Travel Executives (SITE) will provide names of suppliers knowledgeable about incentive travel and names of suppliers in the destination of your choice. Free. Call 212-575-0910.
^^ Return to Top ^^
Associations
The Incentive Federation was formed to protect the rights of organizations to motivate customers and employees through the intelligent and ethical use of incentive programs. Comprised of the leading associations, trade shows, and some of the top suppliers in the incentive field, the Federation monitors Federal regulations that could affect the proper use of incentive programs and lobbies against proposals that could hinder the ability of businesses to properly use incentive programs. As part of its industry services, the Federation also conducts the only regular research on use of incentives by U.S. organizations, and manages the Incentive Promotion Campaign, the industry-wide effort to promote professional use of incentives and that underwrote this Web site. For information, call 908-233-4009, e-mail hhenry333@aol.com.
Society of Incentive & Travel Executives (SITE), the only organization devoted strictly to the field, has chapters throughout the world. Its primary mission is to increase the professionalism of users and suppliers of incentive travel. It offers an educational program (see Seminars) as well as seminars at The Motivation Show (see Trade Shows). Call 212-575-0910.
Trade Shows
For a list of Industry Events, go to #9510, Calendar of Industry Events.
Seminars
University of Incentive Travel is an annual education program designed by SITE for people who sell or use incentive travel. There are three separate regional universities each year in the Americas, Europe, and Asia. Call 212-575-0910.
The Motivation Show Buyer Education Days are seminars held by SITE during The Motivation Show (see above). Topics include how to run an incentive program, trade incentive strategies, and using certificates for travel and merchandise. Call 212-575-0910.
SITE seminars are customized programs that can be held at the location of your choice. Subjects range from basic training in incentive travel planning to budgeting, trip delivery, and incentive-travel selling strategies. Call 212-575-0910.
Key Research
Relatively little research exists in the field of incentive travel, but the quantity is growing. Several magazines conduct annual reader surveys that report on the attitudes and practices of incentive users as well as discuss the incremental sales achieved when incentive programs are used (current estimate: 10 to 20 percent). Leading research includes:
A Study of the Incentive Merchandise and Travel Marketplace (1997) was conducted for the Incentive Federation under the auspices of Ralph Head and Affiliates, Ltd., Marketing and was sponsored by the Association of Incentive Marketing (AIM), Association of Retail Marketing Services, Incentive Manufacturers Representatives Association, Promotion Marketing Association, Promotional Products Association International, the SITE Foundation, Hall-Erickson Inc., and Incentive and Potentials in Marketing magazines. The first national comprehensive research study of the incentive field in five years, it provides plenty of information about usage of various types of incentives by different industries and offers indications of the effectiveness of incentives. The survey summary was published in the September 1997 issues of Incentive and Potentials in Marketing magazines. A limited number of reprints are available at a nominal charge from AIM, which also has copies of the complete study for $9.95. Call 908-687-3090.
Incentive Travel Fact Book is a compilation of annual research conducted by Incentive, Meeting News, Meetings & Conventions, Successful Meetings, Incentivare (an Italian magazine), TW (a German publication), and SITE Hong Kong. This research quantifies reader attitudes about the value of their programs, how they plan and book their programs, how much they spend, how they spend it, what kinds of results they get, and popular destinations. $20 SITE members, $40 nonmembers. Call 212-575-0910.
The Attractiveness and Effectiveness of Incentive Reward Options measures employee attitudes toward incentives at a leading insurance company and ranks employee preferences. Conducted by Clemson University for SITE. $20 members, $30 nonmembers. Call 212-575-0910.
The Long-Term Impact of Incentive Travel in an Insurance Organization tracks the impact of various types of incentive programs at a top insurance company. $20 SITE members, $30 nonmembers. Call 212-575-0910.
The Trouble with Money shows what happened when Goodyear Tire & Rubber Co. did a test comparing cash and noncash incentives. Free from B. I. Performance. Call 612-844-4208.
Understanding Incentive Travel: U.S., Great Britain, Singapore editions are three separate research reports documenting incentive travel buying practices and trends in these markets. Each report provides an in-depth analysis of how companies buy, why they use incentive travel, and for whom. $30 each from SITE. Call 212-575-0910.
Master Measurement Model documents how to develop measurement criteria for employees in incentive programs. It shows how to use involvement techniques to obtain objective information that can be used to qualify winners and to improve the quality of sales and operations. Prepared by the American Productivity and Quality Center for SITE. $15. Call 212-575-0910.
U.S. Tourism and Travel Administration (USTTA) is a federal agency that conducts research on U.S. and international travel patterns. It tracks travel trends that may help with destination selection and activity planning. Fax request for research catalogue to 202-482-2887.
U.S. Travel Data Center has information on domestic travel trends, including the economic impact of travel. Reports start at $135 for nonmembers. Call 202-408-1832.
^^ Return to Top ^^
Books/Articles/Self-Study
Incentives in Marketing & Motivation, by George Meredith and Robert P. Fried Ph.D., is a comprehensive text on the incentive marketplace. The content is illustrated and includes numerous case studies that reveal the breadth and potential of the incentive marketplace. Available through the Incentive Marketing Association, $34.95. Call Karen Renk, 630-369-7780.
Incentive Travel--The Complete Guide, by consultant Bruce Tepper, covers all aspects of creating, planning, and undertaking an incentive travel program and is essential for anyone who plans incentive travel for an agency or end user. $45. SITE. Call 212-575-0910.
Case Study Book and Guide contains 12 detailed incentive travel case studies documenting each step of the program from identification of the marketing goal and methods of qualifying winners to specifics on the trip offered and the results. $40. SITE. Call 212-575-0910.
Research Library Catalogue is a collection of articles and resources compiled by SITE and available for $5 each. Subjects cover everything from contracts and negotiations to international currency issues, motivation, program design, dealer incentives, and buy-in options. For an index of articles for sale, call SITE at 212-575-0910.
How to Conceive, Set Up, and Manage Successful Incentive Travel Programs is a comprehensive self-study course created for SITE by the MGI Management Institute. The 25-hour study program covers every aspect of program design. $162 plus postage and handling. Call 800-932-0191.
The Essentials of People Performance Management outlines the steps involved with planning incentive campaigns for salespeople and other employees, dealers, and distributors. 80 pp. $25. Selling Communications Inc. Call 914-591-7600, ext. 230.
Kiss, Bow, or Shake Hands: How to Do Business in Sixty Countries, by Terri Morrison, is useful for companies planning a program overseas. $17.95. Adams Media Corp. Call 617-767-8100.
Publications
No publication writes exclusively about incentive travel, but several have regular features on the subject. All of these publications are available free to businesses that use incentive travel. Subscription prices apply to nonusers.
Incentive magazine focuses on all aspects of motivation in business, with a special emphasis on noncash awards such as merchandise and travel. Its features include an annual directory in March and a survey on incentive travel. 12 issues/year; $55. Call 212-592-6263.
Corporate & Incentive Travel. 12 issues/year; $55 domestic, $95 foreign. Call 561-989-0600.
Corporate Meetings & Incentives. 12X p/year, explores trends in management and motivation as they relate to companies successfully communicating with employees, dealers, distributors and customers. Free for qualified subscribers. CMI is part of Primedia's Meetings Group of targeted publications. For more information, visit http://www.meetingsnet.com/.
Meetings & Conventions, 12 issues/year; $79.90/year. Call 800-637-6088.
Successful Meetings, 12 issues/ year, including directory; $55. Web site has current articles and some ability to search for facilities and past articles. Call 212-592-6263; go to http://www.successmtgs.com/.
Online Services
Plansoft.com is a comprehensive, advanced meeting services Web site offering the ability to select properties and e-mail formal proposals to several locations.
MeetWeb, at http://www.meetweb.com/, features a multilingual Supplier Databank containing information on more than 10,000 service providers to the meetings industry worldwide.
In addition to the Web sites of the magazines above, two meetings information malls offer limited abilities to search for facilities as well as some articles. Go to http://www.mmaweb.com/ or http://www.mim.com/.
^^ Return to Top ^^
