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What Inspires Retailers: Cash or Non- Cash Rewards?

Dec 30, 2022

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Money, as it turns out, is very often the most expensive way to motivate people,” – as quoted in Dan Ariely’s book – Predictably Irrational

Well, offering cash rewards to retailers or channel partners for meeting incremental sales goals is a very common engagement strategy applied by many brands and businesses. Though behavioural science has proven that cash doesn’t matter much when it comes to engagement, motivation and building loyalty.

By the virtue of human psychology, all reward type drives change in behaviour but varies in the ability to produce a desired result, and that relates of effectiveness of rewards. Certain rewards are more effective in producing incremental results and engagement, others just satisfy an immediate need – they are functional and transactional in nature – like cash or cash equivalents. Many brands across industries have benefited by applying non-cash rewards into their overall engagement programs – studies have shown automotive dealers have experienced 8.2% sales lift as compared to 1.2% sales lift from cash rewards, in another study tyre manufacturer dealer reps experience 32% sales increase as compared to only 22% with cash rewards. It clearly proves – money talks, but non-cash motivates.

Rewards Efficacy Continuum: Effectiveness of Rewards

Cash rewards only take motivation to a certain extent, it is non-cash rewards and incentives that inspire and engage retailers or channel partners to the highest level of performance. Business and trade sales leaders are dealing with changing consumer behaviour owing to external market environment and recent pandemic forcing them to rethink and realign their retailer and channel partner engagement strategies. This is where rewards efficacy framework, based on the research done by BI WORLDWIDE, becomes critical to structuring rewards mix for retailers and channel partners reward programs. Rewards Efficacy framework states all reward type produce results, however non-cash rewards are more effective at producing desired results – incremental sales, engagement, and loyalty.

Sociability comes along with non-cash experiential rewards which drives a greater behavioural impact that goes beyond the retailers into their family members also getting involved with the overall rewards experience – short vacation, getting a new car, sponsoring a child education or even health care rewards. Cash is purely transactional and limited to only retailers with no re-consumption factor.

BI WORLDWIDE’s Rewards Efficacy Framework


Cash, Non-Cash, or Both: Weighing the effectiveness

The general belief that cash reigns supreme might seem like an obvious choice but isn’t necessarily the universal case when it comes to designing a rewards program. For example, the cash end of the continuum is more quantitative and financial in nature. It puts people into a calculative mode and the reward begs the question, “Is this a good deal?”  Because of this, cash is less effective at getting results. Whereas travel or tickets to a show or luxury merchandise are more emotional in nature and the question becomes, “Do I want it?” The farther away from the cash or cash equivalent, the more effective the rewards become at changing behaviour and driving results. Non-cash rewards function better in terms of ROI, cost-effectiveness, and overall results, and are linked to attaining a goal or selling a product. To maximize the results of your program, leverage the rewards on higher end of the efficacy scale.

A survey conducted in 2021 revealed that implementing non-cash reward and recognition programs for channel partners can lead to an annual revenue increase of as much as 9.6% as compared to an average of 3% with cash rewards. In fact, research also shows that the emotions associated with non-cash rewards can overshadow the utility of cash rewards significantly. This goes on to show that retailers and channel partners respond better to aspiring rewards, just like employees or other stakeholders. Not to forget, non-cash rewards – other than being appealing and motivating, also allow brands and companies to pay less and yet obtain a higher ROI.

Read on as we explore below why brands must transition from cash rewards to non-cash rewards to make the desired impact on their retailers and channel partners’ behaviour:

  1. Delving into the human psyche

Behavioural Economics suggests that 77% of human behaviour is driven by emotions and 23% by rational thoughts. Though cash rewards might seem like a rational pick, non-monetary rewards strike an emotional connection with channel partners. The latter, if done right, will not only motivate them to attain targets but can be leveraged to align their behaviour with business outcomes and KPIs.

  1. Being relevant and compassionate

Who doesn’t like cash, after all, a buck is a buck. But it’s not something that can be used to create a profound bond with the retailers or with distribution network partners. To a music fan, an opportunity to gain access to a concert and witness the performance of their favorite band will hold much more value than being given a cash reward in the form of a festive bonus. The fact that a brand holds compassion for its channel partners and is willing to compensate by means of a desirable reward makes the non-cash option resemble a higher value than cash in the recipient’s mind.

  1. Understanding and narrowing the say-do gap

Often, there is a say-do gap between what retailers and channel partners say they would do versus their actual actions. As enticing as cash or its equivalents such as vouchers may seem to persuade retailers to deliver better outcomes, non-cash rewards like merchandise or real-life experiences have shown to make a better impact. Not only that, BI WORLDWIDE research on rewards efficacy also observed that the recipients preferred hedonic or utilitarian non-cash rewards like incentivised learning, infrastructure support, child education sponsorship, etc.

  1. A long-term factor of motivation

Science and research with proven data and results have shown that non-cash rewards go beyond just a temporary spike in motivation levels, like in the case of cash rewards which dies in just couple of days or at length over a week. Non-cash rewards continue to have an impact over months and years to drive retailers and channel partners towards better performance. This is something known as residual motivation. Non-cash rewards support re-consumption – while cash rewards are likely to be forgotten in a few days or weeks’ time, non-cash rewards bring a renewed sense of accomplishment, other than loyalty towards the brand for recognising efforts. Moreover, non-cash rewards rake in points for the sociability element they offer; they enable channel partners to brag rights, unlike cash rewards. Logically, why would someone go around their social circle like friends and family members talking about the thousands they received as a bonus when compared to an experiential reward like a sponsored vacation?

  1. The possibility of backfire

Cash rewards like vouchers hold the risk of backfiring, simply because they seem transactional, as though they were a purchase and not a reward. This is where mental accounting principle comes in, which defines how we, as humans, tend to assign subjective value to money, usually in ways that violate basic economics. Retailers may weigh the value of the voucher against the targets achieved, causing their enthusiasm to take a hit. Imagine one of the many channel partners was given a cash reward to purchase something for surpassing the monthly sales target versus another who was offered a fine-dining experience by a company, the latter would instantly give a “feel-good” factor for having been treated exclusively by their organization.

To sum it up

Having a balanced mix of cash and non-cash rewards when designing a retailer or channel partner reward program can enable you to create memorable, unique, and engaging experiences, and solidify your long-term partnerships. By recognizing and appreciating your most valued channel partners with relevant and high-efficacy rewards, you can establish the kind of emotional connections that build loyalty, drive results, and are difficult for your competitors to replicate.     

This article is written by Sukesh Jain, CEO BI WORLWIDE India and is also available on IndianRetailer

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