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How to Develop an Incentive Program

How to Develop an Incentive Program

Motivation Minute Blog

1. Establish Objectives

How to Develop an Incentive Program

Identify what goal/objective needs to be accomplished, for example: improved attendance, increased sales of a particular product, etc. The objectives must be simple, specific, and obtainable. Begin with a clear, briefly stated objective and communicate it to all participants.

2. Outline the Strategy

Build the foundation of the Incentive Program carefully, expanding on the methodology to be used. The structure of the program should detail exactly who is the target audience, and anyone else who will be influenced by the program. The size of the group is important to the budget of the program, as well as the ability to communicate clearly and measure the results accurately.  Other considerations are geographic boundaries or sales regions, legal considerations, family issues, the length of the program and timing, individual goals or team goals, and of course, the reward.

3. Measure Performance

Define both quantifiable and qualitative goals that can be measured, and keep it simple. It might be necessary to look at historical data and come up with an average in order to define a particular sales goal. The goal needs to be fair to all involved, and obtainable by everyone.

4. Establish the Budget:

Depending on whether the program involves sales or non-sales personnel, the budgeting will be different. In general, the three elements of budgeting include:

  • Number of participants
  • Length of program
  • Expected results

There are two types of award budgets: 1) closed-ended, and 2) open-ended. You would need to determine the maximum costs involved with a closed-ended program, and an estimate of costs involved for an open-ended program.
In a sales program, the traditional rules are:

  1. Anywhere from 5% to 10% of additional (incremental) gross sales during the incentive period can be applied to the total cost of the program, and
  2. The cost of the incentive awards should equal 5% of all compensation for the program period.

In a non-sales program, it is more difficult to put a monetary figure on the value of "improvement," but some measures are possible that involve increased productivity, improved attendance, and improved safety (fewer traffic tickets, for instance). The budget is then determined by the "value" the company will realize from the improvements made by the Incentive Program.  An enterprise-wide budget of 1%-3% of payroll for all your incentive and recognition programs is a good benchmark.  This would include years of service, safety, performance, immediate, cumulative (points), and milestone achievements.

5. Budget Elements:






Percent of Budget 





* For merchandise awards, this includes shipping (about 10% of the cost of the items) and taxes (about 6% of cost).
**The last 3 categories are fixed costs comprising 10-20% of incentive program costs.

6. Select the Perfect Awards:

It is important to select the correct award because if the individual is not emotionally vested in obtaining the incentive award, he or she will not pursue the goal. Spend some time speaking with the target group and create an award selection within the framework of the budget that will be important to the group. Don't forget awards with a social mission like our Helping Hands rewards, or that invaluable "lunch with the CEO."

7. Administer the Program

Administration is approximately 20% of the program budget (including communication/promotion), and a good 50% of the planner's time. The target group needs clear, consistent communication and timely feedback on measurement of their performance. McDowell Incentives, Inc. can provide you with tools and a turnkey strategy to maximize the impact of your solution.  Feel free to utilize our in-house creative and design team.

8. Celebrate the Success of the Program

The end of the program should be celebrated with the target group and performance measurement by individual or team should be provided at this point. Individuals should then receive their awards.

9. Analyze the Success of the Program

  • Did the Incentive Program achieve its objectives?
  • Were the participants motivated to change their behavior?

Remember, an Incentive Program provides a short-term gain, and follow-up is important. Start planning the next one today, and don't forget to ask us about our enterprise solutions that allow you to build on the fly.  Incentive Programs can be launched in as little as 30 minutes!

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