Energized by exclusivity, Lock in on luxury – Canon DC22 User Manual

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“They aren’t working at Barneys for the money. They’re

working there for discounts and the access to stuff,” Houlihan

says. He knew instantly that the incentive program would be

successful. Participants earned points for selling specific brands

and could redeem those points for high-end merchandise.

“It had nothing to do with money. They didn’t need more

money,” he says.

It’s a good bet that high-earning sales reps on your team

are in a similar situation. Many companies assume that

salespeople making six-figure salaries are driven by money

and will respond best to cash incentives. Houlihan respectfully

disagrees.

“I don’t doubt that more cash will get more performance, but

how much more? The really big changes in performance come

when you offer something other than money,” he says.

Lock in on luxury

Why does a $2,000 gas grill motivate a top-performing

salesperson more than a $2,000 bonus? Two words: hedonic

luxuries.

As reported in our cover story last fall (“Why Cash

Incentives Fail” is available on our Web site), people are hesitant

to spend money on non-essentials even if they earn a substantial

income. Behavioral economists have long known that consumers

often experience an immediate “pain of paying,” which can

weaken the pleasure derived from consumption or discourage

purchases altogether.

BI creates incentive programs for companies worldwide.

Less than 1 percent of participants earn $5,000 or more in

AwardperQs points, but the overarching concept of motivating

with luxuries works across the board.

“We’re all hardwired the same,” says Houlihan. “No matter

how much you make, there’s something that everybody wants

that they won’t buy for themselves.”

Incentive pay earned for hitting a predetermined quota

typically is lumped in with overall salary and used to pay bills

or stuffed into savings accounts. There’s little “halo value” to the

award, which explains why, in Houlihan’s words, cash can

only buy a certain amount of extra effort.

Indeed, research by Ran Kivetz, a professor of marketing at

Columbia University Graduate School of Business, shows that

a significant number of people (as much as 39 percent) will

“precommit” to indulgence by selecting a luxury item as a reward

over a cash amount of equal or greater value. It makes sense,

many incentive experts argue, to lock your program participants

into the luxury category and not provide a cash option.

“People are willing to work harder for hedonic luxuries,”

Kivetz says. “When they start thinking about dollars, they

become more rational, more economical and less willing

to work for it.”

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Energized by

Exclusivity

Some sales managers settle for cash incentives because they

figure they can’t select what will motivate their high earners.

Tim Houlihan says they’ve got it half right. You can’t predict

what energizes each salesperson, but it’s unlikely to be more

money.

“If you’re a mortgage banker on Wall Street, I’m not going

to be able to pick an item for you that you’re necessarily

going to want. But I can show you a whole basket of luxuries

and something is bound to spark your interest,” he says.

Initially, clients are concerned that their high-salaried

salespeople won’t find that basket of awards motivating.

Oftentimes, Houlihan counters, it’s not the dollar value

of incentives offered through programs, but rather their

exclusivity. One company took its top-gun salespeople to fly

MiGs over Moscow; others have provided award-winners

private audiences with celebrities or behind-the-scenes tours

they couldn’t experience on their own.

MiGs over Moscow

and other exclusive awards