Point-based award systems are an incentive and recognition best practice. Yet, the approach of “just give them cash” prevails in many programs despite being less effective.
- The advantages of points are clear:
- Higher intrinsic motivation and engagement
- Ability to accrue points
- Flexibility
- Global relevance in awards and recognition
Incentive programs that use points come with advantages that cash programs don’t. Find out how to infuse points into your own incentive and engagement program and maximize results.
What Is a Point Award System?
Point-based award programs reward participants based on several set criteria:
- Sales goals
- Desired behavior
- Recognition
- Training
- And more
The goal is to incent or recognize select behaviors to achieve business objectives.
How to Calculate Loyalty Points
Points can be set to any amount. For example, one point could equal one U.S. dollar; however, there are advantages to setting lower point values, offering flexibility and providing a more engaging participant experience.
Setting a point value of $.001 (or 1/10 of a cent) gives program designers and owners the flexibility to reward on smaller behavior improvements without diminishing effort. For example, asking a participant to log in to see their sales goals for the month could earn them 1,500 points.
A smaller task and award generates a stronger participant impact when it’s not distilled down to a dollar amount (1.5 points or $1.50) and positions recipients to think about larger-picture point pooling.
Issuing a couple thousand points here and there to achieve the desired award engages participants more handing them few bucks at a time. When intermixing small cash earnings into everyday spending money, participants generally don’t feel rewarded and won’t remember where the cash went. Points earners perceive their awards as separate from compensation and more as “gifts of appreciation.”
How Much Should a Reward Point Be Worth?
Setting points at any value is possible, however half a cent is an industry best practice. The small value still offers weight without making any desired award feel astronomically out of reach.
4 Advantages of a Loyalty Points Program
1. Motivation
Even in larger amounts, direct cash-based awards won’t always leave a lasting impression. When a cash award goes toward family pizza nights, gas to get to work or a paper towel stop on the way home, success can somehow feel unrecognized.
On the other hand, points provide an ideal reward loop. A few thousand points here and there for jobs well done can create tangible takeaways recipients can show off to friends and family with pride at the end of the year and beyond. And, they offer a lasting memory tied directly to your brand.
2. Point Accrual
Point pooling engages participants more than handing them a few bucks at a time. Small cash-in-hand becomes everyday spending money they won’t remember a few days later while points can be saved up for big-ticket items.
Participants in your sales, service and referral promotions can accrue points and earn across multiple promotions and potentially even programs. Letting audiences pool points helps increase participant motivation and creates greater earning potential with your company.
3. Flexibility
By using points, you can run a promotion swiftly and send earners their awards as soon as they become eligible.
And, using points allows for more award options. Points can be converted or “spent” on anything available in a catalog or redemption screen. The power of choice lets earners choose merchandise, travel, cash, marketing opportunities, training, rebates, etc., that will be most meaningful to them.
4. Global Relevance
Each program participant might earn 100 points for an action, but the value of the points behind the scenes can scale to match country currency and parity values.
Participants can use points as soon as they’re banked (even if they relocate to a new country), which saves you time calculating promotions on the front end.
Transitioning to a Point-Based Award System
If you’re looking to build a point-based award program from the ground up, you’d be remiss to exclude points. If participants start to use cash-based programs as supplements to their income, a portion of them will come to expect that money as part of their employment package. Fresh audiences with no expectation for cash tend to perform even higher with a points program than if they were introduced to cash straight out of the gate.
Related: Learn how ITA Group designed an incentive program featuring multiple ways to earn to inject some much-needed enthusiasm and competition into the manufacturer’s independent dealer channel.
If you’re already running a cash-based program, it’s not too late! Follow three steps to capitalize on point-based program potential.
1. Target Top Performers First When Introducing Point-Based Awards
Often high performers aren’t as reliant on cash awards supplementing their income. Pooling points becomes a more memorable experience for them to save up and acquire a meaningful award from the company.
2. Leave Room for Earning Potential Adjustments as the Program Becomes More Widespread
Once participants get a taste of points and experience the reward loop, it becomes easier to shift away from cash in favor of points. The goal is to steer away from cash over time while making sure participants feel valued for their efforts. Play with minimum criteria and/or adjust earning thresholds.
3. Introduce a Point-Based Award Program During Downtime or After Scrapping an Existing Program
Downtime between programs (which could be any time from six to 12 months, depending on the program) helps draw a less direct comparison to the new program. But downtime also means business objectives aren’t being incented and organizations can expect a dip in partner performance.
Point-Based Award System Best Practices
Keep best practices top of mind as you set up (or transition to) a point-based award system.
- The impact of point-based awards on your program is too valuable to miss out on, whether a company is trying to improve motivation, increase award flexibility and/or “move the middle.”
- The program length determines award options available. A one-time, short-term promotion might utilize a hit-and-earn award while an annual promotion could feature a combination of travel, merchandise and points.
- The shift from cash to points should be gradual until you can have a blend of each. The combination will bolster your program and motivate participant engagement.
Motivate Your Audience Using a Point-Based Award System
Participants use their points to pick out awards they’re excited about. Awards with personal meaning tap straight into our intrinsic motivation, letting you offer powerful awards to each individual without having to do any guesswork.
Want to further motivate award program participants to go above and beyond? Find out how gamification combined with a points program motivates participants and changes behaviors.