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Incentive's 2008 Industry Roundtable: Industry on the Move
June 09, 2008
Hosted May 06, 2008
Every spring, Incentive magazine gathers about a dozen leading incentive planners, travel and merchandise providers and corporate incentive managers and brings them together in New York for a wide-ranging discussion about the state of the industry. This year's roundtable, held in the Millennium Broadway hotel in Times Square, was a particularly good one, with some surprises, some contrarian positions staked out, and some controversy. We think you'll find it's worth the read.
The May 6 roundtable lasted nearly two hours, so what follows is just a selection of what was said. A longer version and full transcript is available online starting July 3 at www.incentivemag.com/roundtable2008. A podcast version of the audio recording of the event may be accessed at www.incentivemag.com/podcasts. Enjoy!
Editor's Note: Since the Roundtable was conducted, Pamela Valdez has left Millennium and taken a position at the New York City convention and visitors bureau, NYC & Company.
Moderators
Jennifer Juergens, Incentive magazine
Leo Jakobson, Incentive magazine
Alex Palmer, Incentive magazine
Particiapnts
1. BRIAN MARTENIS
Managing Director
Incentive Worldwide Travel
2.MARCELL KING
Senior Manager, Sales
ACI Gift Cards
(Exclusive gift card provider for Amazon.com)
3.STEVE MASELKO
VP, Individual Incentives and Gift Cards
Marriott
4.NORMA JEAN KNOLLENBERG
Owner and CEO
Top Brands Inc.
5.PAMELA VALDEZ
Director of Travel Industry Sales
Millennium UN Plaza, New York
Millennium Biltmore, Los Angeles
Millennium Broadway, New York
6.BRETT HATCH
Global Corporate Gifts Manager
Maui Jim
7.TIM HOULIHAN
Vice President, Reward Systems
BI
8.GAIL FITZGERALD
Vice President, Hotel Sales & Marketing
CityCenter Las Vegas
9.DAMON RIDDLE
Automotive Incentive Manager
American Suzuki Motor Corporation
10.MICHAEL ARKES
CEO
Hinda Incentives
11.DENNIS BORST
President and COO
Patriot Marketing Group
12.GLORIA LANDOW
President
Group Travel Specialists
Q. What trends are you seeing in the incentive business? What's new, and what's on the horizon?
BRETT HATCH: We are definitely seeing a trend towards the green movement. Over in Europe, 75 percent of the planners will even shun or avoid an area that's not eco-friendly. More and more companies are really bandwagoning.
MARCELL KING: On the gift card side, we're also seeing increasing use of the green effect in terms of leveraging electronic codes [that can be used like a gift card online] and e-mail access codes and mobile gift cards.
NORMA JEAN KNOLLENBERG: I think overall the biggest movement right now is the whole eco thing. On the merchandise side, we're being asked to provide merchandise that fits into that theme. Everybody wants it. People want to contribute in some way. Businesses see [incentive programs] as a great way to do it, because it gives them a theme that they can play upon.
DENNIS BORST: On the employee side of incentives and recognition programs, what we have noticed is that there's a real movement towards wellness programs. [Also], we have created two products—eco-friendly employee ride share, and alternate transportation programs—that operate online, and for the most part those have been door openers for us over the past couple of years.
MICHAEL ARKES: We're also seeing clients asking for merchandise that is green. We work with the company to develop a corporate responsibility theme. I think the other thing is that the recession hasn't bitten our business. It seems like the recession has been industry specific. So, construction isn't in good shape, retail isn't in good shape, but there's a lot of industries that are in good shape or haven't been impacted, and that seems to be the bulk of those who use incentives.
TIM HOULIHAN: On the eco question, and forgive me for sounding cynical, but I think that we are ahead of the curve. Requests by client sponsors for eco-friendly travel or eco-friendly merchandise products are rare. Also, I don't see the recipients of those programs demanding it or really acknowledging it. I think our clients think, "Well, it's nice to have." Right now, we're waiting for the participants and client sponsors to catch up with what the incentive industry is offering.
STEVE MASELKO: You might want to use another example of a socially responsible program that I was part of not too long ago. It was a small incentive trip that I was on that recognized some of our best customers. As part of that, we spent an afternoon working on a Boys and Girls Club—renovating and doing rehab on the facility for people in a part of Las Vegas that is really poverty stricken. That event brought lots of our customers so close in that one particular experience—there's nothing that we could have done as a team-building event that could have accomplished that. We've seen how powerful and how potent that can be, on an emotional level, for people who are participants.
TH: I don't disagree that there is a tremendous amount of power in that, and it's very potent stuff when it happens. What I don't see is a sense of the demand from the participants. I see the client sponsors saying, "We believe we need to represent this."
Q. What effect is the recession having on the incentive business?
PAMELA VALDEZ: The banks are not traveling. You can direct them to destinations that are dependable, but they're not coming. That's on the international side. On the domestic side of things, insurance incentives are changing the experience. It used to be, "Bring your spouse and have this lavish day." Well, now it's become a long weekend with family. So, let's make the eighth floor a romper room because we travel so much you no longer have to leave your family.
GLORIA LANDOW: I, personally, haven't seen a major change in incentive travel. Travel programs haven't been eliminated; however, budgets for the program have been somewhat reduced. My clients still want upscale properties, but in order to keep the cost down, are cutting out some of the gifts and other amenities that are given to the participants on site.
BH: You still have to have incentives for your top performers, and the only area I've seen maybe a little fallout—other people may agree or disagree—is with their training meetings and stuff like that. But on the incentive side, if anything, it's just gotten stronger.
DB: I've watched the economy go up and down for the 30 years I've been doing this. In every case when the economy was down, it was a great opportunity for talking to companies about engaging, and increasing morale and recognizing employees. I really see the downward economy as an opportunity rather than a challenge.
Q. Non-sales programs and peer-to-peer recognition programs have been growing rapidly. Will this continue?
TH: Today versus five years ago, there's more being spent on individual recognition and employee programs. And, I would add, that it's making a difference. The best companies in our country have figured out how to maximize retention through improved employee recognition. However, in the past year, budgets have tightened. The economy is affecting this. With things tightening up, clients believe that employees aren't going to be so comfortable quitting if they're not getting the rewards they expect because jobs are not plentiful. So, clients really don't have to spend as much as they did in more progressive economic times to keep their employees loyal.
NJK: I think employees that have been in a company for a long time are not going anywhere, but Millennials …you've got to do what you need to do if you want to keep them. One of the nuances of Millennials is that they like instant gratification. So, companies may still need to put together incentive programs. Maybe not spend as much money on them, but still do something to motivate and reward and recognize them so that when this is over, they think it's a good company to stay with.
MK: Instant gratification is something that we're seeing in spot rewards, especially with gift cards. It's easier to maintain gift cards than [merchandise] inventory. The electronic codes play into that because they can be issued via e-mail.
DB: We're being asked more and more to do employee referral [programs]. They're looking to take unhappy high achievers from other companies and willing to put referral programs into place to do so.
Q. Is ROI more important in this economy?
DB: Where we're seeing most of the concern on ROI—and actually the fastest growing area of our business—is consumer promotions for customer loyalty and retention.
SM: Travel is a very ambiguous thing to value. The perceived value is always higher than what companies [pay for the gift certificates]. We've seen a lot more companies asking, "What is the perceived value?" We're getting a lot more of those requests. For example, we have one certificate for our Ritz-Carlton hotels with a price tag of $1,000. But when you start to look at where people are redeeming those certificates, you're looking at places like New York that are running $1,400 a night or Vail in Colorado, where it's $1,500 a night, $1,600 a night; Tokyo, at $1,400 a night. We ask, "How are you using this information?" [The answer is], "Oh, we have to convince our clients of the value of this program."
NJK: On the merchandise side, we've been dealing with that for years. When you have the Wal-Marts and big boxes, it's very, very difficult to continue to show perceived value to the award winner who says, "I found [that award item] at Lowe's for less. It's brutal out there when it comes to perceived value.
DB: What we have started to do in a few cases is bundle the gift packages—say, a weekend certificate at a Marriott, a couple of beach towels, a couple pairs of Maui Jims—and make it far more difficult to do comparative pricing.
BRIAN MARTENIS: [One company running a channel program for U.S. dealers] decided that Europe was out of the question. I said to them, "We have customers that depend year after year on [that] European program." [We replaced it with an existing Caribbean program.] Bottom line is [they] lost a substantial amount of business when they decided that Europe was too expensive—which it wasn't. I did a little study and showed them exactly how much money they lost in business, because I can tell you there were certain customers—talk about loyalty—whose business completely disappeared. They were so not loyal to [the] company. They just wanted that trip to Rome, to London, to Paris.
TH: You just mentioned this ROI concept—this idea that we've followed up, we've done surveys, we've measured, we're trying to be very conscious and very thoughtful about what happens. I believe that all of us here at the table would benefit from looking at ROI from a perspective of what actually happens. What are the behaviors that actually get influenced? Brian [Martenis] was talking about this earlier: How do you show the business actually changed when a particular trip wasn't offered? … That's where ROI is. It's in the results, right? It's not about surveys, it's not about asking people what they think. … I dream about an industry that is much more focused on getting our clients to measure what it is that's actually happening with their people and with what's actually going on. I think that could have a very positive impact on what we all do. But Corporate America is not committed to measurement or, really, effectiveness. Corporate America is still very much preoccupied with, "As long as we're making our numbers, let's not worry. Everything else will be okay."
Q. Corporate social responsibility. How big is it?
GAIL FITZGERALD: There are corporations that have a huge mission statement for sustainability, so I think that when they're selecting hotels, they're telling us it's important. Whether it's really important to the people, we don't know, but they're asking us to write it into our contracts. I don't think anybody thinks of sustainability when they think of Las Vegas, so we have to prove to people that we have been conserving energy for years. It seems to be very important. Although we may not have recycling bins in some of our hotels, and although probably we never will, we recycle at the back end, at the docks. They've asked. They want to see the operation.
MK: I was thinking of comparing two equal programs. If one had more of a social responsibility aspect to it than the other, the one that has that social responsibility is going to play better.
Q. What destinations are hot, which are losing their luster?
GL: Croatia is becoming very popular. Costa Rica and the Dominican Republic are also choice destinations.
SM: I think the Middle East is just blossoming. Look at all the investment that hotel companies are doing. Not just [Marriott], many other companies are putting big dollars in the Middle East, in Southeast Asia.
Q. Do you think the Middle East might be hard to sell?
SM: Some of the places, like Dubai, are just absolutely dreams. What I see a lot are security issues. But once those get addressed, you get a lot more comfortable with it. I think people are getting a little bit more comfortable with the Middle East, not necessarily [people] from the United States, but certainly from Europe.
BH: We're starting to see a lot from Europe to Dubai, and Monaco and Barcelona are still very popular. Definitely Dubai, though. Dubai is by far the hottest. But Dubai doesn't even understand the incentive market—they don't have to yet because they have so much on the leisure side.
SM: We track every [Marriott travel] certificate that we issue and watch where it's redeemed. … [People are] trying to maximize the use of their certificates, they're going to the high-end locations. A lot more of the travel originating out of Europe is coming stateside. It's much more affordable. In the Asia-Pacific region, it still stays primarily within the Asia-Pacific Rim. Some of them come to Vegas.
Q. What are you seeing in Las Vegas, Gail?
GF: I think we're seeing a little bit of a softening because of the recession. Although a lot of people think Las Vegas is recession-proof, most of the [hotel] companies have gone away from the gaming as the primary source of revenue. It's leaning more towards the [food & beverage] and retail, and that suffers just like anything else. We took a beating for a number of years, because our occupancy was so high and the rates kept increasing and increasing. You could feel a push back a little bit from the customers, but it's all about the experience. People are still willing to pay for that. They want the fine dining, they want the shows, and they want to do all those types of things and business is still strong. [City Center] doesn't open until late 2009, and we're seeing tremendous demand for 2010.
Q. How about the travel part of travel? Is working with airlines, getting through security, getting seat assignments getting harder?
BM: It just keeps getting worse and more challenging, really. I talk about the presidential experience. That's like one of my big things with incentive travel. You hold [the participant's] hand, you make things happen. I used to be able to do all kinds of magical stuff that I just can't do anymore. We used to be able to really have the people arrive at the airport and then get on the plane, and then get off the plane and go to the hotel. Now, everything has to be walked through [security], and they're just like everybody else with their three ounces of liquid.
Q. We've been hearing about all-inclusive resorts. Are incentive groups starting to use those, becoming more willing to consider them?
GL: Many resorts are now offering the all-inclusive feature. They are most prevalent in Mexico and the Caribbean. Some of these all-inclusive properties offer fine dining and open bar throughout the day. If budgetary considerations are important, these resorts become more desirable.
BM: I just did a program in Mexico. The Barceló Maya Palace just opened in December. My group was there in January. We were the nailbiters, but with the gamble the payoff is phenomenal—I got this place so cheap you just would not believe it. It's just absolutely gorgeous. The quality of the food was phenomenal.
Q. Spas and golf. Are they still the big kahunas?
BM: I did St. Andrews in Scotland, and it was probably one of the best trips that we ever ran. Outrageous. Not cheap but well priced, if you go at the right time, like after November 1st, and the weather isn't bad, and golfers will golf in anything. Very, very successful for golf.
GL: I find that I have to select a hotel with a spa on the premises. If they don't have it on the premises, at least it's nearby. It's always available.
Q. For a couple of years people have been saying gift cards are going to reach a saturation point. Are they still a quickly growing segment of this market?
MK: I think what individuals and companies are looking for is to provide as much choice in the [award] selection as possible because, again, when they look at the return on their money, they're trying to figure out, "How can I provide the most value to my recipients?" So we continue to see the gift card [segment] growing pretty rapidly.
DB: Besides being an incentive company, since 1992, we have managed the gift card business for Foot Locker, and we also manage ESPN gift cards. The Sharper Image [bankruptcy and subsequent refusal to honor gift cards] that occurred earlier this year did get our phones ringing quite frequently. The choices they made regarding how they would treat cash—that they were very thankful for taking in—and then shutting it off for those that were going to redeem made it difficult for a lot of other specialty retailers like Foot Locker. Anyway, the Sharper Image thing did cause us a little problem. I know I've talked to other gift card suppliers, and they, too, were supplying stock [valuations], and information on the financials before people renewed to put gift cards into the program this year. However, I must say that three, four months into the year we're way up over last year, and we were way up last year over the year before, so if there's a decline at Foot Locker and ESPN, we're not seeing it.
MA: We actually had a client that has a small number of our gift cards in their program remove them. So, that was their reaction.
MK: That may be a reason why the stronger brands are probably doing well still, because they are a lot stronger, whether it's Amazon.com or any of the other brands out there. I think that's part of the importance of the gift card: understanding what the value of that brand can do to your program. If you're talking about ROI and driving behavior, those brands can drive behavior.
Q. What's the next big thing in the incentive merchandise market?
NJK: I think it's going to continue to be electronics—the greatest and the hottest thing in electronics.
MA: Taking a look at the consumer electronics market, during the past few years hot product categories like iPods and digital cameras were the "big thing." While these products are still strong redeemers, they are not as strong as before. The current new consumer electronics products such as GPS [global positioning systems] or Blu-Ray [high-definition DVD players] are not dominant enough to replace them as the new "big thing."
Q. Do people still want a new digital camera?
TH: I think Canon retires their models about every three months. So, yeah, it just doesn't take long until there's a new model coming out, and if you're in the market for a camera, then [you feel], "I better get the newest, because the market has trained me if I don't get the newest, I'm getting something that's old."
Q. Millennials: Anything particularly different in terms of what they want?
MK: Regardless of whether it's Millennials, or the boomers or [any other demographic], it's making sure that they have the choice to select what they want, whether it's the latest camera or the latest book or whatever it might be. There's such a diverse range of demographics that we're serving now in the employee market.
Q. Is global fulfillment still a hot topic?
MA: We got into global fulfillment through partnerships five, six, seven years ago now, and it's basically been an investment for a market that we felt was coming. Our customer base was global, and they were talking about servicing their employees or dealers or sales groups. I think in the last couple of years we're starting to see revenue from this area—both from our partners utilizing us and us utilizing our partners. It's starting to occur. It's not the dominant trend, but I think those of us that do it realize that this is something that is building and will continue to build.
Q. There was a lot of buzz and concern [last year] in the industry when Amazon entered the incentive merchandise fulfillment market. What's going on now?
MK: Everybody's looking at me. [laughter]
MA: There has been a lot of, and there still is a lot of talk in the industry. The talk has probably died down somewhat from the original interest. They have done some business, and we'll see. From our perspective, it pointed out some of the weaknesses that we had in the lower-priced rewards and we've addressed that now. So, it will help us become better in what we do by having someone compete with us.
MK: I am in a different division [from Amazon.com's incentive merchandise fulfillment], but from what I see, this helps the entire industry. I think any time someone enters a market that changes the game a little bit, it helps everybody elevate their game, and it's made things better for the entire industry.
Q. One of the major electronics makers' reps recently told us that the overall value of redemptions has been stable, but the participants were buying smaller products with their points. Have you seen anything like that?
NJK: Yes, we definitely are shipping more packages, and they're a smaller dollar value each. Particularly at the end of the year, we usually say it's because people have leftover points, and they want to get them spent before they run out. But it's happening more than just the end of the year. One of the things I discovered when I was doing a little research on the Millennials is that they're not into buying so many of the big products. They don't want to spend all their money on one thing or in one place. Whether what we're seeing is a lot of Millennials involved in these programs using that philosophy to redeem products, well, I don't know. But it's probably been that way for a couple of years.
MA: What we're seeing is that by offering lower awards, we get somebody engaged in the program by having them redeem. You can get the participant to engage in the program, and that's the goal. However, your average order size is going down [because of] the increase in low-end redemption, but the total redemption dollars grow.
BH: Isn't it because they're starting to do their incentive programs not just for the top performers, they're trying to get down to that customer services or the technician or whatever? So, maybe the value in the program is that they can only get some of those smaller items.
Send comments to feedback@incentivemag.com
Sidebar: Cash vs. Non-Cash
INCENTIVE: Damon, what are you seeing with the programs you run?
DAMON RIDDLE: I run mostly debit-card programs. Talking about the recession, we've noticed, obviously, that sales in the automobile industry have started to fall off a little bit. We have to focus in a new direction. Do we focus it more on ideas? Do we focus it more on consumers? Do we focus it more on salespeople? What's going to drive the business for us? We're still kind of playing with those models.
We chose debit cards because a few years ago we took a look at merchandise and tried to figure out what was going to be the best incentive for our dealer base, specifically our salespeople within those dealers. And it was instant gratification. It was the cash now. We had done it…for quite a few years before through checks, and we were trying to evolve the program. Turns out that they became dependent on that money, and obviously cutting them off from that cash would have been detrimental to us. So, we had to stick with it.
MICHAEL ARKES: So, you had a cash program that changed cash to a debit card?
DR: Yes.
MA: There's research to compare the effectiveness of cash versus non-cash, and they find often that the participant preferred cash, [but those programs are often forerunners of more successful non-cash programs].
DR: I actually followed up on some of those, and we've done extensive surveys with our audience. The hard part for us is making the transition. I would love to get it [away] from cash, but it's the evil we created, and I have to stick with it now, unfortunately. We're looking at ways to pepper the program with a little bit of merchandise—quarterly incentive programs. But right now, especially now with the recession, cash is the big seller.
DENNIS BORST: I've been involved with converting a number of companies away from cash to gift cards and merchandise, and the key thing if you survey the employees, they'll always say they want cash, but the reality is they don't work for cash. If you create a mix of other gift cards and merchandise that fits the demographic of the audience whose behavior you're looking to drive, in every instance, after the initial complaining of, "You cut my pay by $60 a month," they started converting. After a while participation is up, performance is up. Like you said, you get in trouble with entitlement. But the reality is if you bite the bullet and change, you'll find that your program will be more successful without the cash.
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