The Benefits of Incentive Travel For Channel Partners Channel Incentive Travel: A Case Study A channel incentive travel program is a travel experience awarded from a manufacturer to a retailer for meeting predefined goals. Although the overall spend on incentive travel is estimated at more than ten billion dollars annually 1, few publicly available studies of incentive travel programs have targeted the perspectives of participants, sponsors, non-participants, and suppliers. To fill this void, the Incentive Research Foundation (IRF) funded a study to provide objective insights and evidence of the benefits for channel incentive travel programs. This study provides a better understanding of what a channel incentive program is, their benefits, and important considerations for implementing the incentive travel program from the perspectives of the company and its participants. The purpose of this study was to determine: What a channel incentive travel program is and how it works; The impact of the program on key stakeholders (dealer principles, dealer participants, executive sponsors, and suppliers); Key success factors of the channel incentive travel program. First, Some Definitions Appropriate with academic approaches to answering how and why questions 2, the IRF conducted an in-depth case study of a channel travel program. In a channel incentive program, the sponsoring company (often a manufacturer) is one that relies on dealers or channel partners to sell its products or services. Dealers in turn rely on the sponsoring company to provide products, which meet the demands of their customers. For the program studied, 2000 dealers had the opportunity to earn within the incentive travel program each year, based on meeting year-over-year sales growth and product mix goals. Approximately, 20% of dealers earned the trip annually. Key Success Factors A literature review revealed that although few studies have provided solid empirical evidence on measuring the success factors of incentive travel, Kastner (2010) 3 cites six main factors for successful incentive programs:
Program and Communications Strategy Educated Stakeholders Audience Analysis Program Design Measurement The Overall Travel Experience the decades-old program and reported progress to dealers on a monthly basis. Measures of Success The sponsoring organization measured success in terms of business volume growth generated by participants in the program. Program Design & Communication The sponsoring company communicated the criteria for earning program incentive awards up front, stipulating that in order to earn the incentive trip, the dealer must increase growth and product mix by a pre-defined, absolute amount within the program period. Dealers were required to opt-in to participate and, once enrolled, became ineligible for other varying levels of merchandise and travel award programs offered. The sponsoring company tracked their dealers progress in Recent Studies -- The ROI of Channel Programs A Dealer Channel Incentive Program for a hand tools manufacturer found that the average sales for dealers in all categories of firms who participated in the program exceeded the average sales of nonparticipating dealers in all categories. Total ROI was calculated at 112%. 4 A Dealer Engagement Program found that 90-94% of dealers presented, quoted, and sold more products after the program. 5 A Sales Incentive Program for a Fortune 500 manufacturer and distributor found that during the nine-month program, total revenues increased by 32%, market share increased in nine out of twelve months, and net operating income increased to 19% of revenue. Comparing each dealer s sales performance year-to-year, they assessed percentage growth by individual dealer and overall. Participating dealers sales growth provides the sponsor a measure of program-generated sales growth. The sponsor acknowledged that there were other external variables that could contribute to volume increases and that some dealerships would grow regardless of the program; the sponsor considered the program successful if participants meet individual sales and product mix goals year-over-year. Copyright 2012. The IRF Page 2 of 7
The CEO and VP of the sponsoring company felt that if the company stopped the program, business would decrease. They also strongly agreed that the manufacturer was supporting them with quality products. Benefits: Participant View Dealer participants in the study cited two primary reasons why they participated in the incentive travel programs offered by the sponsoring organization: Over half stated it was important for creating and strengthening business-tobusiness partnerships. Over 80% agreed or strongly agreed the manufacturing company provides competitive quality products which help increase my sales and opportunity to earn the incentive trip. Benefits: Sponsoring Company View Many also said it provided a way to reward, retain and continue motivating deserving employees within the dealership. Participants agreed strongly that the program was both rewarding and appreciated: 87% agreed or strongly agreed that manufacturer incentive travel programs provide a bonus for a job well done; 85% agreed or strongly agreed that they appreciate the manufacturer providing an incentive travel trip. We feel incentive travel programs from suppliers to vendors allow us to meet the people within the organization from the vendor side. We are able to use it as a tool for our people to meet the vendor people and make a connection. It also enables us to make a connection with our counterparts in the industry. Responses from Executive Managers of the sponsoring company cited three primary purposes for the channel incentive travel program: Grow their business Build relationships Motivate and reward Because the sponsor in the study did not have exclusive relationships with their dealers, they vied with competitors for dealer attention and market share. Dealers had the ability to select from very similar products, so the channel incentive travel program helped the sponsoring organization to differentiate itself from other suppliers. Copyright 2012. The IRF Page 3 of 7
Benefits: Supplier View Suppliers for channel incentive travel consist of hospitality and tourism-related businesses that support and service the trip. There are some challenges associated with servicing incentive groups. One of the goals with any incentive travel program is to offer the earners a unique experience they could not otherwise duplicate themselves. For that reason, this sponsor s incentive trips often go to unique destinations; however, being unique, these destinations may have limitations requiring careful planning and management. For example, limited hotel accommodations; challenging geography and transportation needs; and a disconnect on the part of people serving the program who may not understand or fully appreciate the high service expectations of the sponsoring company and participants. Suppliers in this study noted that incentive travel programs require more maintenance than a regular meeting due to the high expectations and necessary attention to detail. Despite these challenges, the suppliers interviewed agreed that incentive travel programs are a very important part of their business and are extremely rewarding. Overall Travel Experience Clearly, the incentive trip destination is important, as is the detailed planning and the travel operation. As the sponsoring CEO put it, the strength of their travel program is twofold: Destination: Destination moves the needle. Program Operations: [We have a] reputation of putting on a first class trip... They know that we ll do it right. And I think that is important to them. Non-Participating Dealer Audience It was important for the sponsor to understand why some dealers chose to opt out. Non-participants consist of dealers who chose not to enroll or participate in the channel incentive travel program. These dealers cited two primary reasons why they did not participate in the program: They do not like to travel; Timing of the incentive trip interfered with previous obligations. It is therefore important for sponsoring organizations to consider the travel interest level and timing of their events if they are to Copyright 2012. The IRF Page 4 of 7
maximize participation (and therefore, sales results). Analytical Analysis To gain a better understanding of the relationship between incentive travel success, loyalty and sales motivation, several multiple regression models were tested using the data from this study. This rigorous analysis helped answer three important questions: 1. What is the best predictor of satisfaction for an incentive travel program? 2. What is the best predictor of loyalty created by an incentive travel program? 3. What is the best predictor of what will motivate dealers to sell more products? Predicting Incentive Program Satisfaction The study found that 60% of participant s satisfaction with the incentive travel program could be explained by the following: Fair earnings criteria; The opportunity to get to know the top leadership of the sponsoring company; The dealer s willingness to recommend incentive travel to others (i.e. his/her positive feelings toward incentive travel); The dealer s likelihood of purchasing additional products during the earning period. Driving Dealer Loyalty and Sales Efforts Regression analysis of responses from dealers also shed important light on what predicts loyalty in a travel program and sales efforts by participants. For example: 62% of a participating dealers loyalty could be explained by the dealer s view of incentive travel; their willingness to recommend the product, how much the program s destination influences them; their overall positive or negative view of the program; and if the program offered access to top leadership at the sponsoring company. 66% of the dealers motivation to sell the sponsor s products could be explained by whether or not the dealer had a positive view of incentive travel; if they put effort toward earning incentive travel; how willing they are to recommend products from manufacturers with incentive Copyright 2012. The IRF Page 5 of 7
programs; and how willing they were to recommend others participate in incentive travel. It is very important then, for sponsoring companies (and manufacturers in general) to understand their dealers' experiences with incentive travel and to account for these experiences before starting, stopping or modifying an incentive travel program. top executives. This finding supports the need for sponsoring companies to maximize networking opportunities on incentive trips. Quality time with peers and executives has a positive influence on business-tobusiness relationships and should not be underestimated: Executive management s involvement in, and availability on-site during, the incentive travel program is critical to success. The Importance of Fairness & Relationship Building These findings have important implications for companies offering incentive travel programs: 1. Companies should understand that the perception of fairness in the earning criteria has the most impact on satisfaction with the program from the participant s point of view. It is recommended that companies carefully review the earning criteria and its communication with all potential participants. 2. The second most important variable in increasing satisfaction was the opportunity to build relationships with Key Program Support Elements There are three key support elements for the sponsoring company to consider: 1. Promotion. Promotion and encouragement to participate in the incentive travel program motivates dealers to sell more products, which leads to profitable results. 2. Training. The sponsoring company should provide training to its sales associates to increase recommendations of their products to both dealer sales representatives and dealer principals. Sales representatives of the sponsoring company play an important role in creating excitement and motivation for the dealers and sales representatives to participate. Copyright 2012. The IRF Page 6 of 7
3. Measurement. The sponsoring company should monitor its sales representatives success in increasing dealer participation. Implementing a user-friendly system to monitor representatives sales and how it relates to earning the incentive travel award may increase participation. References 1. Russell, M. (March, 2011). Quantifying Meetings. PCMA Convene, Retrieved on August 26, 2011. 2. Kastner, N. (2010). Designing Effective Incentive Programmes. Meetings and Incentive Travel. February 24. 3. Xiao, H., & Smith, S. (2006). Case Studies In Tourism Research: A State-Of-The-Art Analysis. Tourism Management, 27(5), 738-749. 4. IRF. Measuring the ROI of Sales Incentive Programs: http://theirf.org/r.measuring-theroi-of-sales-incentiveprograms.6000057.html/. 5. The ROI of Channel Partner Conferences. http://theirf.org/.roi-in-channel-partnerconferences.6078871.html) Copyright, 2012. The Incentive Research Foundation Copyright 2012. The IRF Page 7 of 7