Upending the Incentive Industry Business Model

Revenue Stream

Application for Incentives/Rewards

Unit sales: Sell a product or service to customers

In a roundabout way this is the way it works now.  Selling merchandise and travel awards using points as the currency.  Exchange rates can vary but in effect customers are buying “stuff.”

Advertising fees: Sell others the opportunities to distribute their message on your space.

While not obvious – there is special pricing that merchandise suppliers offer up to be included in merchandise catalogs for incentive companies. 

However, I’ve not seen anyone monetize an incentive website/catalog with advertising. 

If I were to try it I’d:

• Find partners the client would like to do business with and see if they’d like an audience (think employee programs and maybe local businesses?)
• What about distributor programs? Selling ads back to their suppliers?

Franchise fees: Sell the right for someone else to invest in, grow, and manage a version of your business.

There are a few companies that sell software this way – either via license or letting you buy the code directly.  Not really a “franchise” – since it’s all white-labeled – but it’s similar enough IMHO to count. 

But the question I have is if you have an incentive application design that is kick-ass – could you brand it and franchise it?  Would you?  Would clients buy a “franchisable” idea? 

Utility fees: Sell goods and services on a per-use or as-consumed basis.

In the incentive world this could best be equated to paying for actual behavior change.  Find a way to measure and report actual behavior change and then assign a value to the behavior.  Could be a flat amount or sliding scale based on the “importance” of the behavior. 

Fill out expense reports correctly = $5.00

Follow new sales training model exactly = $200

No markup on anything else.  Too complicated? I think so – but it does stretch the mind a bit.

Subscription fees: Charge a fixed price for access to services for a set period of time.

License fees are now becoming more common – especially in the SaaS model. 

Clients who can’t drive enough volume on the points (merchandise) have to pay a fee per user to assure the provider a margin. 

What if the incentive company just passed through awards?  That would be disruptive. 

Awards at cost – software per seat.

Transaction fees: Charge a fee for referring, enabling, or executing a transaction between parties.

What about a simple 2% transaction fee anytime someone redeems? 

Some programs that use outside/third party vendors for fulfillment mark up the value of the awards a specific amount (5-15%) I guess that could be considered a transaction fee. 

But what if you charged a flat $2.00 per order on the redemption site with no other markup?  Could that work?

Professional fees: Provide professional services on a time-and-materials contract.

This has been tried a lot (see our own model) but the reality is it is a tough sell. 

Mostly, IMHO, because the margin is still in the stuff and no client wants to pay for professional services AND the margin on the merchandise.

Not only that – how much objectivity is there in the recommendations an incentive company would have when they still make a ton on the deliverable? 

Don’t think you’ll see too many incentive companies recommend they cancel a program (we do by the way)

License fees: Sell the rights to use intellectual property.

Not sure how this would work for a specific incentive company unless they could allocate resources for independent research and associations with universities.

The only place I could see this happening is with the Incentive Research Foundation or the Incentive Marketing Association – but they are funded by incentive companies who want to sell merchandise and travel.

The real value would be unbiased information on how to run “BEHAVIOR CHANGE” programs – not incentive programs so I don’t see them changing their model any time soon.

But – once you remove the margin on the “stuff” this becomes a real idea for some companies IMHO.