Annual sales of vouchers in the UK total £1.18bn. According to trade body the Voucher Association, £606m of this spend is generated by corporate sales, with consumers accounting for £579m.
In the year to June 2003, corporate sales of vouchers were up 10% on the previous 12 months. This healthy, inflation-busting uplift in the corporate voucher market, bouncing back from a contraction the previous year caused by corporate belt-tightening, indicates that vouchers are widely seen to be cost-effective and versatile tools for incentivising customers and staff in the UK.
Marketers considering developing incentive programmes that use vouchers are spoilt for choice. Hundreds of different vouchers are available in the UK, covering a wide array of retail, leisure and travel activities.
There are vouchers providing retail therapy and vouchers that act as a passports to exotic locations. Others offer a gateway to more unusual experiences, from learning to use a trapeze to preparing gourmet food, and from high-intensity survival weekends to sensual spa serenity.
From the corporate buyer's perspective, a main concern is to make sure the voucher offer really motivates the target audience. There is little point in devoting time and effort to establishing an incentive programme unless it is effective at galvanising and rewarding key people. So how do you go about identifying the right voucher product for your needs?
How do you match it to those you are targeting?
"We tend to find that marketing companies have already carried out extensive research to determine their target markets," says Red Letter Days corporate sales manager James McNeil. "They have often asked recipients directly which products they would prefer to receive. Marketers are always keen to qualify how successful the campaign was, and request a redemption report to track whether the customers are using the vouchers provided and whether sales targets have been hit.
"Other markets tend to neglect the communicative benefit of the scheme and the opportunity to receive feedback from recipients."
House of Fraser head of business incentives Andrea Born believes there are a number of steps marketers can take to ensure they are buying the right incentive vouchers for their business, and that these vouchers will be well received.
In order to ensure vouchers will be welcomed, marketers should first profile their target audience to determine age, gender, marital status and hobbies. Once a profile has been obtained, the choice of voucher supplier should be easier.
"There are about 200 different types of voucher, including retail, experience or adventure vouchers, and those providing holidays or short breaks," says Born. "Holidays can be motivational, of course, but will you be able to give sufficient vouchers to pay for the whole trip? And what about spending money? The incentive loses its allure if the recipient has to dip into his or her own pocket.
"There is also the question of time off with holidays - will the recipient be given extra holiday to cover the incentive? Can they take partners or not? It may not be easy for the partner to get time off work or they may not have any holiday left to take. This is where retail vouchers come into their own - they provide instant 'treat' value and there are no restrictions as to whether partners are allowed into a store or not."
Not surprisingly, Leisure Vouchers marketing executive Suzanne Hall takes a contrary view. She says people tend to remember going out to do "something special" far more vividly than spending a voucher in a shop. This, she says, makes the incentive more effective.
Hall also contends that the sheer variety of incentives offered by Leisure Vouchers means that there is something for everyone. "The major benefit of a Leisure Voucher is that there are 25 different brands to spend it on, covering all ages and tastes among target audiences. You can go out for a pizza, have wine delivered to your door or go on a holiday."
The key to a successful motivation scheme is to understand what drives and motivates staff. Marketing agency KLM has recently developed a number of staff incentive schemes for clients including BSkyB. It used a profiling and communication tool called Contextual Matching to design important elements of the scheme. The tool uses qualitative research to identify motivational profiles among the target group.
According to KLM director Jon Derry, Contextual Matching helps marketers understand the behaviour and motivation of staff members so both communications and incentives can be made more relevant and powerful. He adds that staff buy-in to the BSkyB scheme developed by KLM was more than 80%.
"By producing incentive programmes and communications that talk the same language as the staff, you can improve the effectiveness of an incentive scheme," says Derry. "Of key importance is that the staff decide how they spend their vouchers. Staff want choice and empowerment.
"This is of crucial importance and encapsulates the move away from the one size fits all approach, which can never satisfy everyone. When it comes to vouchers, people don't want to be dictated to. Matching the most relevant voucher offer to the target market depends on the individual."
As Derry points out, there has been something of a move away from the belief that a specific kind of incentive voucher - whether it be for use in a group of shops or for an adventure or travel experience - can have universal appeal. Different people have different interests and varying motivational triggers.
As a result, many leading voucher companies have sought to broaden their partner bases. A case in point is Leisure Vouchers, which began by offering vouchers redeemable at Whitbread outlets and has since built up a portfolio of partner brands to extend the appeal of its product.
Corporate buyers are partly responsible for these changes in the marketplace.
Some have developed incentive schemes that incorporate vouchers from several different suppliers in order to make sure they have the greatest appeal and take-up.
"It is important that you do not make assumptions, as the Great British public is full of surprises and has very diverse tastes," says head of Thomas Cook Prizes and Promotions Maggie Tindall.
"Out of any number of potential end users, only one might fancy an experience-based voucher, such as white-water rafting or jumping out of an aeroplane, whereas the majority will welcome a more flexible voucher reward that they can take when and where they like, and most often with whom they would like."
Tindall believes it is obvious that rewarding not only the employee, but also their partner, has enormous advantages. It is, after all, important to remember that support from their partner has often helped company employees to shine.
"From a travel point of view, rewarding the couple with an aspirational UK-based scheme can work wonders because it is both convenient and flexible compared with an overseas equivalent," she adds.
Having devised an incentive scheme, it is all too easy for marketers to rest on their laurels. But just as marketing campaigns can grow stale, so too can incentive programmes.
It is essential to keep a scheme fresh and relevant.
"In deciding on rewards, it is vital first to understand the audience," says Capital Incentives & Motivation managing director Graham Povey. "Too many companies think they know what would excite their staff into producing their best efforts or believe that last year's popular idea will work again. Research frequently shows that the tried and tested reward does not actually work the second time around."
Capital is one of the leading players in the industry, selling £40m of its Capital Bonds vouchers a year. Povey argues that carrying out target audience research is vital if an incentive programme is to thrive. Ascertain how they feel about the programme and what other rewards they would like to see included at an early stage, he advises.
In addition to its vouchers, Capital also offers a Visa-backed 'stored value' incentive award card to which monetary credits can be added. It is the only Visa card in the UK that can be used to make incentive, bonus and commission payments to staff or third parties.
Capital's Incentive Award Card acts like a debit card - so, unlike other types of incentive award, it can be spent instantly at any of the 18 million outlets that accept Visa throughout the world.
From a small base, Povey says, Capital's card business grew 60% last year. Recipients may use these cards in many outlets and for the company they are an opportunity for long-term brand visibility in the winners' pockets.
The Incentive Award Card can be personalised to show a complete corporate identity, thereby providing a constant reminder to the cardholder of how they earned their rewards, which can help build loyalty.
Limitations include the need for administration and 'set-up' for small schemes. In addition, the holder must remember how much credit is left on the card.
Even a scheme in which the vouchers awarded are well-suited to the recipients' desires can underperform if it is not well-communicated and executed with a degree of panache.
The whole point is to make people feel valued. "The delivery is also important," says Andrew Johnson, sales and marketing director of Virgin Incentives and Virgin Experience. "There is no point just popping vouchers in the post. Making a big deal of the people being awarded vouchers is just as important. It is good to have a roll of honour and put up posters."
The scheme or promotion should be launched in an effective and eye-catching way - perhaps at a conference - and should be promoted with highly visible material that spells out just what the selected voucher can buy, contends House of Fraser's Born. She, too, feels that good communication of the scheme is important, as is the need to allocate 65% to 80% of the total budget to the reward element.
Born recommends that any incentive programme is tested first with a selected audience, then opened up to the full audience once results are known.
She advises that a company checks out how the chosen vouchers are received by staff or clients through a follow-up questionnaire that is completed by staff. Companies should also ask the voucher supplier to provide redemption details in terms of stores visited and products purchased.
"When selecting the voucher supplier, it is wise to use one that provides ancillary services such as help with design and copywriting, assistance with promotional concepts, and also to use a voucher that will achieve symmetry with the product being promoted," says Born. "Look for a voucher supplier that has the ability to react to any emerging trends in the marketplace - for example, an online ordering facility might be welcomed by many companies."
IKEA USES VIRGIN EXPERIENCE TO GIVE STAFF A MERRY CHRISTMAS
Flying lessons, white-water rafting, quad biking, clay pigeon shooting and cosmetics hampers were just some of the surprise treats on offer to IKEA's 7292 UK staff last Christmas.
As early as June 2002, IKEA commissioned Virgin Experience to create bespoke gifts to be offered alongside a selection of existing experiences from the current portfolio, in order to offer the best possible choice and ensure there was something appealing for all employees.
Secrecy had to be assured. The Virgin team attended client meetings with all materials packed in plain plastic bags so as not to give the game away.
"The Christmas present is kept strictly confidential from all co-workers until the last working Friday before Christmas, when it is distributed across the country," says Emily Hughes, purchasing co-ordinator at IKEA.
"We have to ensure nothing is given away up to that date, which can prove challenging, but Virgin was able to meet all our demands." On December 19, each IKEA location across the UK held a staff Christmas breakfast, at which every employee received a package containing a colour leaflet, plus a gift certificate, which revealed their choice of gifts and explained how to redeem them. Employees were given 12 months, until December 20 2003, to redeem their gift. "The diverse range means that everyone at Ikea has had the opportunity to try something new this year," says Hughes.
Virgin Experience has set up a dedicated IKEA Christmas gift line to handle queries, redemptions and bookings. To date, the most popular choice has been cosmetics hampers.
TEN TIPS ON MATCHING VOUCHERS TO YOUR TARGET AUDIENCE
PHILIP SHELLEY, gift voucher manager, Dixons Group Business Services, and vice-chairman, Voucher Association
1. People genuinely aspire to do better, earn more, enjoy more, so ensure the voucher product fits well with these aspirations and is truly motivational.
2. Don't begin the incentive programme until you are clear as to exactly what it is you are trying to achieve, and ensure participants understand this too.
3. Carry out research within your target audience to gain an understanding of which vouchers have the greatest appeal - and do this before announcing the programme.
4. If the demographics of the target audience are wide, select a product or products that have broad appeal and sufficient flexibility to enthuse as many people as possible. If the demographics are narrow, you should still try to match the voucher to the audience, but the very nature of the market should make this an easier task.
5. People like to be treated as individuals, not just as consumers or numbers - giving them a choice gives them this feeling.
6. Most of us enjoy trying something new and different. Beware the trap of 'been there, done that'.
7. If one voucher supplier can't give everything that is needed for an incentive scheme, incorporate vouchers from several different suppliers.
8. Keep a close eye on programme performance. Continue to check that targets are realistic and that the vouchers being offered turn out to be popular at redemption.
9. Be prepared to admit errors in choice of vouchers, targets and so on - adjust, don't wait.
10. Carry out opinion research and evaluation after the programme ends. Has the incentive scheme delivered against its objectives? What was successful?