It’s often said in election years like this one that small businesses are the engine that drive the economy. A new survey shows that merchandise incentive programs are a significant engine that helps drive small businesses.
Leaders of small businesses believe that merchandise incentives, including apparel, food and beverage and electronics, improve morale (82 percent), are an effective motivator (80 percent) and are more memorable than cash rewards (61 percent).
The IMRA Small Business Merchandise Study, produced by the Incentive Manufacturers and Representatives Alliance (IMRA) through a grant to the Incentive Research Foundation (IRF), examined how the small business market used merchandise reward incentive programs for sales-people, employees, distributors and customers. Small businesses were defined as companies with between $1 million and $50 million in annual sales, which represented more than $16 billion in merchandise spend.
The findings come on the heels of a separate Incentive Federation study released earlier this year that estimated U.S. companies spent $90 billion in 2015 on consumer and workplace non-cash incentives (defined as award points programs, gift cards, trips and travel, and merchandise). That total is up from $76.9 billion spent in the Incentive Federation’s 2013 study.
In its total market spend research, which was conducted by Intellective Group of St. Louis, the Incentive Federation found an increase in use of non-cash incentives across all categories of awards, rising from 46 percent of all U.S. businesses reporting using non-cash reward in 2013 to 60 percent in 2015. IRF President Melissa Van Dyke says the economic upturn accounts for some of that, but the trend is also a sign that businesses are becoming increasingly aware of the effectiveness of non-cash incentives.
“I was a bit surprised, but very encouraged by how much the incidence went up,” Van Dyke says. “Where we can know these programs are used and make sure they are maintained, we are as ubiquitous as cash programs now.”
Here’s a closer look at statistical findings from the IMRA Small Business Merchandise study:
• The vast majority of small businesses reported using merchandise for reward/recognition of employees (89 percent), salespeople (87 percent), distributors (83 percent) and customers (80 percent)
• Small businesses provide top merchandise rewards for a variety of objectives, including customer gifts (60 percent), top performers (59 percent) and sales quotas (53 percent)
• Nearly half (47 percent) of small businesses using merchandise have budgets of $10,000 or more, and many report their budgets are increasing
• Many different types of merchandise are used, and the top types of merchandise used by small businesses are apparel (76 percent), food & beverage (70 percent), electronics (58 percent), writing instruments (57 percent) and sporting goods (53 percent)
• Personalization is key to small business rewards. In-person presentation of merchandise rewards (at company meetings/ functions, or on the spot) are most preferred (70 percent)
• Most small businesses often source the merchandise they use for rewards online (76 percent) and/or from retailers (61 percent)
• Small business owners are generally unfamiliar with the services and advantages a merchandise representative can provide, such as below MSRP pricing
“The research demonstrates that merchandise incentive programs are an effective business practice for small businesses,” says Van Dyke. “Both IRF and IMRA have a wealth of research, benchmarks and best practices that can help small businesses create new incentive programs or enhance existing programs.”
U.S. businesses spent more than $90 billion on non-cash incentives in 2015, up from $76.9 billion in 2013. Sales rewards captured the largest piece of that total.
