A 7% uplift in motivation vouchers sales is fuelling lower entry costs for employers and leanings toward electronic offerings, says Jamin Robertson
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Like fast food and flexible benefits schemes, electronic motivation vouchers are a US import that appear to be here to stay. While paper vouchers are likely to remain a popular method of reward and recognition, many providers believe plastic gift cards are the way of the future. According to trade body the Voucher Association, the market is in good health. It is currently valued at over £1.44bn, a 7% increase on last year.
Part of that growth is attributed to the increase of workplace motivation schemes, helping to offset an ordinary retail trading period. With corporate business making up over 40% of the total spend on motivation vouchers, the product is continuing to evolve and plastic is now in vogue. Richard Lee, business development director at performance and motivation management company P&MM, says: "I’d say it will be the norm within five years. When cards were introduced in the States, within a year-and-a-half there was no paper left. Here it won’t be as quick, but gift cards will still grow." Proponents of electronic gift cards say they offer a number of advantages over the traditional paper voucher. "There’s no administration whatsoever. It’s an electronic purse, a constant reminder that sits in your wallet and is branded with the company name," says Lee.
Security is another attraction. Plastic gift cards can be registered, so that if the card is lost the reward is not, which also reduces the opportunity for theft. There are incentives for providers, too. Breakages, the industry term for unspent vouchers, are more prevalent with paper vouchers, with an employee spending £97 of a £100 reward likely to abandon the remainder. But critics of plastic gift cards say higher production costs and software needs will put employers off, and that the product appears too similar to credit cards, which may promote a negative image. Those issues have not deterred providers such as Harrod’s, which launched an plastic gift card in December last year. Katherine Francey, head of corporate service at the retailer, believes the UK market will follow the US lead: "It’s very popular in the US, the market there is huge. We’re giving customers a modern, beautifully-designed card, and I think it’s definitely the way of the future." Regardless of their format, however, motivation vouchers are intended to reward good performance and promote employee commitment and loyalty.
Richard Kirk, CEO of Projectlink Motivation, says to achieve those aims employers should use a combination of methods and base reward on a sound understanding of staff. "Vouchers are appropriate for a short-term campaign or small rewards, while plastic might be useful for rewards over £100, although the emphasis on reward currency can be too great. Web-based systems and SMS messaging can really help promote a campaign, but a handwritten letter from the manager saying ‘you’ve done a good job’ will be noticed far more than any technology," says Kirk. The last twelve months have seen all providers grappling for market share amid growth and heightened competition. New business appears to be driving much of that expansion.
Graham Povey, managing director of Capital Incentives and Motivation, says: "Many existing customers are ordering fewer vouchers. The good news is, new business has been strong." Voucher Association chair, Andrew Johnson, explains employers are doing more to align staff with organisational goals. "[Growth] is reflecting the fact there are a lot of motivation and incentive programmes around, with employers much more aligned to reward and recognition alongside salary." Andrew Sellers, corporate business manager at provider John Lewis Corporate, adds many are attracted by the success of established schemes elsewhere. "When you see call centres offering vouchers it shows how much the market has snowballed." Online platforms for voucher redemption have also continued to charge ahead.
John Lewis, for example, reports growth of 70% with its web-based system, partly due to the higher profile marketing of Waitrose as part of the voucher offering. Sellers says the online system is attractive to customers who no longer need to traipse to the nearest store to spend their reward. Aside from the well-established players, a number of new entrants have come looking for a slice of the action, including US reward giant OC Tanner. The company expects its online proposition to underpin its growth in the UK. And online providers are now courting small- and medium-sized employers previously put off by the perception that using technology equals a greater cost.
Jonathan Lee, managing director of online provider Incentive Direct, says: "It’s a low cost of entry now. To go online four or five years ago might have cost an employer £10,000. Now, from as low as £800, you can start it up in a few hours." However, employers need to be mindful of the value of recognising staff among their peers. "It’s the ‘wow’ factor as much as the reward itself that appeals. We always go to great lengths to make the voucher look like money, and we spend a lot on it, so it’s worth getting," says Povey. The challenge for online providers is to replicate that. John Lewis offers paper vouchers in conjunction with the online site, while Barry Doyle, sales director at OC Tanner, agrees providers need to add the sizzle to the sausage. "Rather than just have people interacting with the machine, we encourage companies to hold presentations for greater impact," he says.
Naturally, a myriad of products exist to suit every sector and grade of staff, with the largest providers covering all their bases. John Davies, managing director of Argos Business Solutions, says the company offers electronic, online and paper systems to promote its product lines and ensure it attracts the optimum number of employers. "There’s a move to multi-channel solutions, with the key being the profile of the end user. By understanding that, you can differentiate the offer to suit their interests," he adds. While retail motivation vouchers are selling well, travel providers are also moving forward. Corporate travel voucher provider Thomas Cook has aligned some of its offers with another provider, Leisure Vouchers’, products for a bigger slice of the market. It has been a more turbulent ride for the experience market, where the high-profile collapse and transfer of ownership of Red Letter Days highlights the battle for exposure alongside high street brands.
Single store providers such as Marks & Spencer and Harrod’s expect their well-established brands will continue to influence the corporate market, while Tracy Aslam, head of incentive business at Kingfisher Gift Voucher, says multi-store vouchers appeal to employers looking for additional flexibility in allowing firms to cater to many tastes. "You could buy a whole kitchen, while £5 goes a long way at Woolworths," she says. And with corporate sales growing over the past year by 10%, twice the rate of the individual market, the product has gone beyond simply rewarding target-driven staff. "They’re now being given to back office staff and operations people. You can’t always measure targets but you can reward them for good behaviour," says Povey.
What are motivation vouchers?
Motivation vouchers are paper or electronically-stored gift certificates that allow the recipient to choose their own reward from a wide range of products. Vouchers are commonly offered to staff as an incentive for good performance.
What are the origins of the product?
Vouchers first appeared over thirty years ago, replacing traditional catalogues from which staff chose their reward.
Where can employers get more information and advice?
The Voucher Association is the trade body representing the corporate incentive and consumer gift voucher market. Visit www.voucherassociation.co.uk or call 0870 2416445
What are the costs involved?
Employers will secure significant discounts on the face value of vouchers when buying in bulk. In the online market, off-the-shelf products start from under £1,000.
What are the legal implications?
There are no legal issues with motivation vouchers.
What are the tax issues?
As an employee benefit, vouchers are subject to tax and national insurance contributions.
What is the annual spend on the product?
The latest figures reveal a UK spend on vouchers of £1.44bn, a 7% rise on last year’s sales.
Which providers have the biggest market share?
Providers agree that industry stalwart Marks & Spencer is probably still the largest provider of motivation vouchers.
Which providers have increased their share the most over the past year?
John Lewis Corporate reports increased business of 70%. Kingfisher Gift Voucher and House of Fraser both report a 20% growth while Capital Incentives and Motivation made 9% increases.