Companies often use incentive programs, such as cash, points, and gift cards, to provide nominal recognition to employees for good performance, although determining the most efficient method of recognition can be challenging. A French study examined differences in cash, point, and gift card recipient behaviors and found recipients of points and cash based rewards were more satisfied with their reward, while recipients of points and gift cards were more likely to tell others about their rewards.
Key Topics: Incentive programs; Cash rewards; Points rewards; Gift cards; Reward satisfaction
Title of Reviewed Article: Employee Incentive Programs: Recipient Behaviors in Points, Cash, and Gift Card Programs
Researchers: Patricia A. Norberg (Quinnipiac University).
Publication: Performance Improvement Quarterly, 2017, Vol. 29 No. 4, p.p. 375–388.
Setting the Scene
In rewarding employees, companies are faced with a wide range of potential mechanisms to employ. When it comes to nominal recognition, cash, points, and gift cards are among the most commonly used tools. Cash and gift card rewards typically transfer a clear monetary reward directly to employees when performance targets are met; while with points based systems, points are accrued based on performance, and these points can then be used to make purchases.
Both cash and non-cash rewards have been shown to effect employee satisfaction and performance (e.g. Burgess & Ratto, 2003; Jeffrey & Adomdza, 2011). Although some research has indicated that those receiving non-cash rewards outperform those receiving cash rewards (e.g. Alonzo, 1996), while other research has indicated the opposite to be the case (Condly, Clark, & Stolovitch, 2003). There is also some debate in relation to the extent to which different reward types (‘currencies’) effect reward usage, which is the focus of the current study.
Research in consumer behavior suggests there is a relationship between payment form, purchase perceptions, and behavior (e.g. Kamleitner & Erki, 2013), and furthermore, studies have found a direct relationship between the value people place on something and the source of money used to buy that item (Loewenstein & Issacharoff, 1994), which can also influence the type of products purchased (Khan, Belk, & Craig-Lees, 2015).
Research suggests that non-cash rewards leave a longer lasting impression on employees due to their ‘trophy’ status, with employees also talking more about these rewards (Kube et al., 2010). Furthermore, employees may be more likely to spend cash rewards in the same way as other compensation, while they are more likely to ‘treat’ themselves if awarded non-cash rewards (Jeffrey & Adomdza, 2011; Lazear, 2000).
The current study examines the effect of different reward currencies (i.e. cash, points, gift cards) on planning for reward, discussing reward use with others (word-of-mouth), reward satisfaction, and recall of reward usage. All of these factors have been previously shown to be important factors in the success of reward tools (Jeffrey & Adomdza, 2011; Jeffrey & Shaffer, 2007).
The following hypotheses were put forward for examination:
Hypothesis 1 – “Planning for reward use by point recipients will be significantly greater than for cash and gift card recipients.”
Hypothesis 2 – “Word-of-mouth about rewards by point recipients will be significantly greater than for cash and gift card recipients.”
Hypothesis 3 – “Satisfaction with reward and use for point recipients will be significantly greater than for cash and gift card recipients.”
Hypothesis 4 – “Recall of reward use will be significantly greater for point recipients than for cash and gift card recipients.”
How the research was conducted
Data was collected via an online survey on workplace incentive programs.
In total, 747 individuals participated in the survey, from various companies and industries in France. All participants were either currently incentive program eligible with their employer, or had been eligible in the past 2-years.
Through the survey, participants provided information in relation to recent cash, point-based, or gift card rewards; information on the use of those rewards; their reward satisfaction; and information on the extent to which they communicated their reward to others.
Key Research Findings
Reward planning behavior was found to be different across all reward types. Furthermore, those receiving points based rewards were found to plan how to use their reward significantly more than those receiving other reward types. These results provide support for Hypothesis 1.
Word of mouth behavior was also found to differ across reward types. While there was no difference in word of mouth behavior between points recipients and gift card recipients, recipients of both of these reward types talked more with others about their rewards than recipients of cash rewards. These results partially support Hypothesis 2.
Hypothesis 3 was also partially supported. Points and cash reward recipients indicated similar levels of reward satisfaction, both of which showed significantly greater satisfaction levels compared to gift card recipients.
Compared to those receiving cash rewards, those receiving points and gift cards had greater recall of how they used their rewards, which partially supports Hypothesis 4.
The results of this study indicate that reward currency influences how employees plan for, communicate about, and choose to use their rewards, as well as influencing their satisfaction levels with their rewards.
Interestingly, those receiving cash rewards had lower recall of what they did with their reward and lower word of mouth behavior than those receiving other reward types. Receiving cash rewards facilitated recipients using it for routine payments and purchases, such as bills, suggesting that cash rewards are more likely to be used on things that need to be paid, rather than things that the recipient will feel good or excited about. On the other hand, the other reward types encourage recipients to use the reward on more of a ‘treat’ type purchase, which is likely to be more memorable and worth talking about.
Similarly, those receiving non-cash rewards typically planned more for the use of their reward, indicating that these types of reward encouraged more engagement in thinking about and planning for their use.
Reward satisfaction was found to be lowest for gift cards, compared to other reward types. A high proportion of gift card recipients indicated that they used their own money, in addition to the gift card, to make purchases, and as such the gift card may have been perceived more as a discount than a gift, and thereby reducing satisfaction.
Organizational and Reward Implications
This study provides evidence that how rewards are used can lead to varying levels of engagement and satisfaction with those rewards. For many companies, the default incentive tool for nominal rewards is often cash, whereas this study indicates that there is value in other reward types. Cash may not create the positive emotions in employees that companies would wish, as such reward types are often not used by employees to treat themselves, while points based rewards are particularly likely to elicit positive emotions.
Companies are encouraged to consider the behaviors they wish to encourage through their incentive plans, such as the generation of word of mouth promotion of the plans or greater reward satisfaction, and bear these factors in mind when determining a reward payout mechanism.
This study provides valuable insight into the use of different nominal reward types and how reward behavior and satisfaction can be impacted. This study focused on relative small rewards and it would be interesting for future studies to examine rewards of higher monetary value as well as the role of timing of those rewards.
Source Article: Norberg, P. A. (2017). Employee Incentive Programs: Recipient Behaviors in Points, Cash, and Gift Card Programs. Performance Improvement Quarterly, 29(4), 375–388.
Published by: John Wiley & Sons, Inc.
For further details and access to the full journal article Click Here (subscription or payment may be required).
Alonzo, V. (1996). The trouble with money. Incentive, 170(2), 26–31.
Burgess, S., & Ratto, M. (2003). The role of incentives in the public sector: Issues and evidence. Oxford Review of Economic Policy, 19(2), 285–300.
Condly, S., Clark, R. E., & Stolovitch, H. D. (2003). The effects of incentives on workplace performance: A meta-analytic review of research studies. Performance Improvement Quarterly, 16(3), 46–63.
Jeffrey, S. A., & Adomdza, G. K. (2011). Incentive salience and improved performance. Human Performance, 24(1), 47–59.
Jeffrey, S. A., & Shaffer, V. (2007). The motivational properties of tangible incentives. Compensation and Benefits Review, 39(3), 44–50.
Kamleitner, B., & Erki, B. (2013). Payment method and perceptions of ownership. Marketing Letters, 23(1), 57–69.
Khan, J., Belk, R. W., & Craig-Lees, M. (2015). Measuring consumer perceptions of payment mode. Journal of Economic Psychology, 47(1), 34–49.
Kube, S., Maréchal, M. A., & Puppe, C. (2010). The currency of reciprocity—Gift-exchange in the workplace. Working paper, Institute for Empirical Research in Economics, University of Zurich, ISSN 1424–0459.
Lazear, E. P. (2000). Performance pay and productivity. The American Economic Review, 90(5), 1346–1361.
Loewenstein, G. F., & Issacharoff, S. (1994). Source dependence in the valuation of objects. Journal of Behavioral Decision Making, 7(3), 157–168.
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