BUILDING CHANNEL AND EMPLOYEE LOYALTY: ENGAGEMENT SERIES PART 2: REWARDS

BUILDING CHANNEL AND EMPLOYEE LOYALTY: ENGAGEMENT SERIES PART 2: REWARDS

BUILDING CHANNEL AND EMPLOYEE LOYALTY / 02 BUILDING CHANNEL AND EMPLOYEE LOYALTY ENGAGING, MOTIVATING AND INCREASING PERFORMANCE THROUGH THE RIGHT REWARD MIX HOW DO YOU RECEIVE THE MAXIMUM IMPACT FROM YOUR CHANNEL OR EMPLOYEE INCENTIVE PROGRAM? Is there clarity? Motivation? Sustained impact? Did your program or portfolio improve relationships you strive to build with your employees, your channel partners or their sales and service teams? Are they more loyal as a result of your efforts? Are the program objectives in alignment with your corporate goals? Or is your program simply lost in translation? We invite you to continue on this journey with us to investigate the cornerstones of engagement. Discover the critical elements needed for building an effective incentive program. Soon all four parts will work in cooperation to drive your employees or channel partners to higher levels of performance and greater loyalty to your brand. > Part 1: Rules. Driving desired behavior through effective program rules > Part 2: Rewards. Driving consistent engagement through the right reward mix > Part 3: Communications. Omni-channel strategies that engage and motivate your audience > Part 4: Technology. Platform and emerging digital solutions that foster loyalty to your brand RULES What do I have to do? CORNERSTONES OF ENGAGEMENT REWARDS What do I get? SUCCESSFUL PROGRAM Each part in this series will focus on these critical elements, and we ll look at meaningful analytics that prove your program and improve your design going forward. We ll even take a look at identifying and quantifying the future value of your sales force so you can strategically target the groups with the highest potential value. This paper focuses on the second of our four elements Rewards. Part of the rewards strategy is determining the optimal budget parameters, which can be calculated in a number of ways. The biggest challenge is often found in creating the right reward mix. > What are the various award options? What are the benefits of each? > How can individual awards and team awards support overall program objectives? > How can the budget be optimized? COMMUNICATIONS How do I know about the program? How am I doing? ANALYTICS TECHNOLOGY Where do I engage? > How can engagement technology be leveraged to overall engagement and efficiency? The following pages detail Aimia s approach supported by third-party research to creating a rewards strategy in support of a successful program.

BUILDING CHANNEL AND EMPLOYEE LOYALTY / 03 PART 2: REWARDS. DRIVING CONSISTENT ENGAGEMENT THROUGH THE RIGHT REWARD MIX CASE STUDY Industry: Professional Turf, Herbicides, Insecticides and Pesticides Solution: Centralize Reward Platform. Creating a single-reward platform facilitated a more efficient reward allocation for both distributor channel and end user business customers. Results: > 88% of all main customer participant segment purchases were made by program members > Members purchased 5x the quantity of product of nonmembers HOW DOES MOTIVATION WORK? To determine the right rewards for any given program, understand what motivates people in general and then what will motivate your participants. There are many motivation theories. One was presented via the study in the Harvard Business Review: Employee Motivation: A Powerful New Model. According to this study by Nohria, Groysberg and Lee, four drives have been identified along with the primary levers: 1 2 DRIVER THE DRIVE TO ACQUIRE THE DRIVE TO BOND The four employee motivation drivers hardwired in our brains include: the drive to acquire, bond, comprehend and defend. @Harvardbiz Tweet PRIMARY LEVER REWARD SYSTEM CULTURE > Members were 15x more likely to purchase 3 or more of the manufacturer s products 3 4 THE DRIVE TO COMPREHEND THE DRIVE TO DEFEND JOB DESIGN PERFORMANCE MANAGEMENT & RESOURCE-ALLOCATION PROCESS > Members who redeemed for a reward in the previous year doubled the average sales in the subsequent year Read More @AimiaInc s reward solution provides participants with choice, selection, convenience, value and brand #AskAimia #engagement #rewards It is easy to understand how a rewards strategy is part of The Drive to Acquire. Program participants want to be rewarded for their performance in a way that sharply differentiates good performers from average or poor performers. The connection for The Drive to Bond is in selecting rewards consistent with your organization s culture and using the overall strategy as a way to encourage teamwork. While reward strategies cannot directly affect job design, the lever for The Drive to Comprehend encourages proper alignment with the participants roles and responsibilities. The Drive to Defend can be supported by ensuring the reward strategy combined with an appropriate rules structure builds trust by being just and transparent in granting rewards, assignments and other forms of recognition. Given the universal power of rewards, it is important to determine which rewards are the most likely to motivate your specific group of participants. A variety of reward types should be considered. Source: Employee Motivation: A Powerful New Model, by Nitin Nohria, Boris Groysberg and Linda-Eling Lee. Harvard Business Review. July 2008.

BUILDING CHANNEL AND EMPLOYEE LOYALTY / 04 EXPLORING YOUR REWARD OPTIONS Just over a quarter of millennials rate providing for others as a top concern. @TheHartmanGroup Tweet The rewards continuum ranges from financial to non-financial, and even to something as simple as bragging rights. An effective reward strategy includes options. The strategy must align to the effort required to earn the reward and the value to the organization. Due to cultural diversity in the workforce, it is important to consider the perceived value of the reward for all. For instance, someone might consider being atop a sales leaderboard as trivial while on the flip side, it is considered a key motivator for another. Today there are four distinct generations in the workforce: Silents, Baby Boomers, Generation Xers and Millennials. Each of these generations is unique and the varying segments within those generations are equally unique. With this in mind, Aimia believes it is critical to offer as many relevant choices as possible best ensuring all your participants will find a reward to suit their specific interests and needs. When a participant can envision earning a highly valued reward, he/she will work hard to earn it. CASH IS KING Cash, in many forms, will always be a popular reward. It can be an increase in pay, stock options or distinct payments associated with specific performance, as in a recognition or reward program. Over the long term, cash rewards can lead to negative behaviors such as entitlement, with participants performing only as long as the program is in place. Prepaid reward cards often are considered part of the cash category. However, they offer several features to mitigate any potential negative impact on motivation, even when used in long-term programs. For example, cards carrying the sponsoring company s logo offer all the flexibility of cash while maintaining brand identity a reminder of how the reward was earned. Many participants view them as even more motivating than money that shows up in their paycheck or is presented as a check. Unfiltered cards can be used like any other major debit card and offer almost unlimited choice. Financial rewards mainly generate shortterm boosts of energy. #engagement @McKinsey These cards continue to be powerful motivators across many types of recognition and reward programs. Tweet Source: Motivating people, getting beyond money, by Dewhurst et al. McKinsey Quarterly. November 2009. Outlook on the Millennial Consumer 2014 Report. The Hartman Group, Inc.

BUILDING CHANNEL AND EMPLOYEE LOYALTY / 05 EXPLORING YOUR REWARD OPTIONS NON-MONETARY REWARDS Non-monetary rewards include merchandise, travel and gift cards. Opportunities to make charitable contributions have become popular as well, especially as millennials saturate the workplace. In some cases, these rewards can be earned through relatively short-term programs, such as sales incentives. Group travel has been an effective reward for incentive programs and has seen a significant resurgence over the past few years. According to the Fall 2014 Site Index, over 50% of respondents believe the overall use of motivational travel experiences will increase or substantially increase in the next six months. Why wouldn t they, when over 95% of respondents say their programs were very effective or effective in achieving their program objectives? Offering a variety of non-cash rewards at varying price points is recommended for longer-term or ongoing programs. This reward strategy can be effective as part of annual programs that encourage employees to adhere to corporate values or programs focused on processes to drive customer satisfaction and loyalty. Non-monetary rewards often extend any number of points for a given set of behaviors and/or achievements. In addition to having many reward options, participants also have the choice to redeem often for smaller rewards or accrue points for the major reward. NON-FINANCIAL REWARDS In the McKinsey study, the research revealed three non-financial motivators praise from immediate managers, leadership attention and a chance to lead projects or task forces. These motivators rank higher than the highest-paid financial incentives cash bonuses, increased base pay and stock or stock options. Aimia assists clients looking for opportunities to incorporate non-financial rewards across all of our recognition programs. We can build ample time with executive hosts into incentive travel agendas or provide managerial tools to identify and recognize top performers. @AimiaInc s reward solution provides a breadth of rewards through integrations with more than 40 suppliers #AskAimia #rewards Sources: Site Index Annual Study 2014, Site Global. Employee Motivation: A Powerful New Model, by Nitin Nohria, Boris Groysberg and Linda-Eling Lee. Harvard Business Review. July 2008.

BUILDING CHANNEL AND EMPLOYEE LOYALTY / 06 INDIVIDUAL OR TEAM REWARDS? CASE STUDY Industry: High Tech Solution: Design flexible online business application to administer rewards. Single system manages rewards and payouts for 200+ partner manufacturers. Each manufacturer has differing goals and program objectives to accomplish. Results: > The sales incentive resource center manages over 3,000 promotions per year > Incentive payout has increased 7%+ per year, based on increased sales volume > Dynamic reporting available to partners showing effectiveness of their promotions Read More Motivating the behaviors that drive incremental performance and create loyalty is at the core of most incentive programs. The above and beyond efforts drive outstanding results and efficiently maximize performance that would not have happened without the program. Referencing back to the four drivers of motivation, it is clear the overall reward strategy supports The Drive to Acquire. Including team rewards can also support The Drive to Bond. Aimia recommends considering individual and team rewards to create an effective reward mix. REWARDING INDIVIDUALS Also noted in Employee Motivation: A Powerful New Model, everyone is driven to acquire scarce goods that contribute to our well-being. This drive is relative. We compare what we have to what others have. The feeling is insatiable because we always want more. The most motivating rewards are those perceived by the participants as being aligned to their interests and expectations. REWARDING TEAMS Every organization has superstars and these individuals should be rewarded and recognized for their accomplishments. Still your top performers should be encouraged to work as part of their teams, acting as dynamic motivators to all other participants. Offering rewards to everyone on a team based on the collective performance best ensures everyone is working toward overarching business goals. Reinforcing teamwork gives top performers added incentive to share best practices so all participants can grow professionally. To leverage The Drive to Bond, the rewards strategy might reinforce a culture that promotes teamwork, collaboration, openness and friendship. Team rewards can help participants bond to the benefit of your organization. One of Aimia s long-standing clients operated a successful, long-term sales incentive program rewarding only the sales representatives with a percentage of sales. Recently, a professional sales support team has been added to assist the sales reps. Broader, more engaging rewards were required to reward both the support team and the sales reps. The result? Sales have boosted significantly. @AimiaInc s reward platform allows clients to display company logo, brand colors and customized welcome copy #AskAimia #rewards Source: Employee Motivation: A Powerful New Model, by Nitin Nohria, Boris Groysberg and Linda-Eling Lee. Harvard Business Review. July 2008.

BUILDING CHANNEL AND EMPLOYEE LOYALTY / 07 MAKING THE MOST OF YOUR INVESTMENT Approach reward and recognition strategy with a plan to invest financial resources in participants most likely to generate a return on that investment. REWARD DISTRIBUTION While each business is different, the long-held 80/20 rule often prevails: 80% of your business is likely driven directly or indirectly through 20% of your partners or employees. The remaining 80% of employees typically fall into one of two categories. The bulk the next 50% or so are mid-level performers. The remaining 30% are likely very low performers. Each of these groups is motivated differently, and the related investment should be reflected. An article from Salespeople: Incentive Overview from the Incentive Performance Center presents it this way: @AimiaInc s reward platform provides almostimmediate in-store pick-up from @bestbuy locations #AskAimia #rewards Top performers are naturally motivated and engaged and likely to outperform their colleagues without incentives Middle performers can be inconsistent, based on level of motivation, engagement and capability They do, however, appreciate recognition and are motivated by status Rewards can help focus their efforts Low performers can be on their way up or out Those who are new/on their way up can view recognition and reward programs as aspirational, reinforcing their efforts A rewards strategy stands the best chance of affecting performance if it takes into account both your top performers and middle performers. With limited resources, it is sometimes difficult to reach deeper into the organization than that top 15-20%. This discrepancy can be overcome through the use of non-financial rewards in order to maintain engagement across all segments. An incentive strategy stands the best chance of affecting performance if it takes into account your top and middle performers. @Aimiainc Tweet Sources: Salespeople: Incentive Overview, Incentive Performance Center. 2008. Incentive Performance Center www.incentivecentral.org/, Motivation moves people People move business, 2008. <http://www.incentivecentral.org/salespeople/incentive_overview.1863.html>, accessed on August 5, 2015.

BUILDING CHANNEL AND EMPLOYEE LOYALTY / 08 MAKING THE MOST OF YOUR INVESTMENT The sooner the award is delivered, the more likely it is your winners will remember they are being rewarded for a particular behavior or achievement performed on behalf of your company. Travel awards for a year-long incentive should take place as soon as the results have been verified, preferably in the first quarter of the following year. Individual travel certificates should be delivered within 72 hours of when they are won. Incentive Magazine COST CONSIDERATIONS Cash is generally the most costly form of recognition. Non-cash rewards, such as point-based programs are typically lower cost. Non-financial rewards do have some associated costs, although much lower than the others usually in the form of automated administration or some additional time commitments from managers and leaders. Using a mix of reward types helps drive desired behaviors and fully leverage your resources to drive performance at every level. ADDITIONAL CONSIDERATIONS In order to best ensure the highest return on investment, Aimia works with clients to explore all of the factors related to reward strategy. For instance: > How quickly should rewards be issued/redeemed? > If points are involved, do they expire? Over what period? > Do participants understand how to win? > Are the participants given effective tools to achieve high status? When a gap is identified, it may be possible to fill it directly through the overall program design. Additional research may be necessary or working with other departments within your organization such as training or human resources. @AimiaInc s reward platform allows participants to select from mechandise, gift cards, travel and sports/ event tickets #AskAimia Sources: Salespeople: Incentive Overview, Incentive Performance Center. 2008. Incentive Performance Center www.incentivecentral.org/, Motivation moves people People move business, 2008. <http://www.incentivecentral.org/salespeople/incentive_overview.1863.html>, accessed on August 5, 2015.

BUILDING CHANNEL AND EMPLOYEE LOYALTY / 09 COMBINING ART AND SCIENCE FOR SUCCESS CASE STUDY Industry: High Tech Solution: Develop streamlined learning and reward portal. The system provides efficiency and the ability to promote multiple incentives to unique audiences both client-owned and independent dealers. Results: > Annual program savings of over $500,000 Aimia develops rewards strategies that combine art and science to result in programs that inspire, motivate and drive behavior change with your audience. Aimia s technology, combined with strategy and design, acknowledges the need for a flexible reward mix. Strong communications and the ability to track performance in a comprehensive manner all benefit ROI. THE REWARD TECHNOLOGY SUPPORTS A COMPLETE PORTFOLIO OF OPTIONS IN MULTIPLE DENOMINATIONS AND BRANDS, INCLUDING: > Top brand merchandise > Sports and events tickets > Participants increased from 2,000 to 4,500 dealer reps > $8M in awards based on increased product sales Read More > Retail gift cards (physical and electronic) > Individual experiential and travel rewards > Charitable giving rewards > Client -branded/-owned merchandise @AimiaInc s reward platform allows you to pay for travel exclusively with points or points plus cash #AskAimia #rewards > Incentive travel > Prepaid reward cards: Visa and Mastercard, filtered (BOE & DBD) or non-filtered cards, single-use cards We have worked with many Fortune 500 brands on developing the right reward mix and would love to share our best practices with you.

BUILDING CHANNEL AND EMPLOYEE LOYALTY / 10 ABOUT AIMIA About Aimia Aimia Inc. (TSX:AIM) is a data-driven marketing and loyalty analytics company. We provide our clients with the insights they need to make smarter business decisions and build relevant, rewarding and long-term one-to-one relationships with their customers, channel partners and employees, evolving the value exchange to the mutual benefit of both our clients and consumers. With close to 4,000 employees in 20 countries, Aimia partners with groups of companies (coalitions) and individual companies to help generate, collect and analyze customer data and build actionable insights. We do this through our own coalition loyalty programs such as Aeroplan in Canada and Nectar in the UK, and through provision of loyalty, event, engagement and sales enablement strategies, program development, implementation and management services underpinned by leading products and technology platforms such as the Aimia Loyalty Platform and SmartButton, and through our analytics and insights business, including Intelligent Shopper Solutions. In other markets, we own stakes in loyalty programs, such as Club Premier in Mexico, Air Miles Middle East and Think Big, a partnership with Air Asia and Tune Group. Our clients are diverse, and we have industry-leading expertise in the fast-moving consumer goods, retail, financial services, automotive, technology, healthcare and travel and airline industries globally to deliver against their unique needs. For a full list of our partnerships and investments, and more information about Aimia, visit us at aimia.com.