The science behind using

Incentive Prepaid Cardsfor Employee Recognition

Accelerating Performance:

Objectives

• To present research on how prepaid cards have become the award of choice for corporations for employee reward and recognition programs.

• To understand why prepaid card rewards are more preferred and more effective than equivalent cash rewards.

• To correlate prepaid card use and popularity with motivational psychology.

• To share data on where open-loop prepaid card recipients spend their reward dollars.

• To present prepaid card award best practices to maximize effectiveness.

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• Any non-cash reward given to an employee for recognition of achievement.

• It does not include payroll, commissions, bonuses or any other type of cash compensation.

• Does include travel, merchandise, recognition symbols (pins, plaques) and gift cards.

Defining Employee Reward and Recognition Programs

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Source: 2012 Research by First Data

Employee Non-Cash Awards by Percentage of Spend

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Why Prepaid Cards?

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Rated Most Effective

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Recipients' Favorite Non-Cash Award

• Most businesses (73%) use a single type of card, but some use multiple types. Of those who use multiple types, the most common combination is open loop and closed loop.

• When firms are using multiple cards, they generally are splitting their budgets 50/50 between open and closed-loop cards.

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Types of Prepaid Cards Used*

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Recipients Prefer Open Loop Cards

Recipient preference given a choice betweena $50 open loop card and $50 in cash

Even though open loop cards are near-cash equivalents, recipients prefer the open loop card over cash nearly 5 to 1.

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Better Than Cash!

Why: could be explained in the behavior and psychology of recipients

Possible reasons…

• Recipients classify cards as discretionary or “fun” spending vs. cash they receive as rewards.

• Recipients more likely to add the value of award to monthly budget vs. incorporating value, as with cash.

• Recipients make more memorable purchases with prepaid cards than cash (Schweyer, 2012).

• Recipients associate the award with the corporate sponsor.

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Why Better Than Cash?

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Are Prepaid Cards Memorable to the Recipient?

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Motivational Award Theory

*Based on historical aggregate spend data of over 1 million open loop cards given as corporate employee awards

60% of open loop card spend is for non-essential items

Maslow's Pyramid Core Values Employee NeedsPercentage of

Spend Merchant Category

Self Realization (achieving full potential)

Self-Fulfillment Needs 38%hobbies, books,

specialty clothes, shoes, electronics

Personal Esteem (prestige and feeling of accomplishment)

Social Acceptance (relationship and friends) Psychological Needs 22%

restaurants, real estate, drug stores,

pharmacies Safety Needs (security and safety)

Psychological Needs (food, water, warmth)

Basic Needs 40% grocery, gas, fast food

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Spend Pattern Data*

• Personalize the card with recipient’s name

• Print personal note on the card and on the carrier (if applicable)

• Customize the card with corporation’s branding and/or program’s branding

• Combine award issuance with recognition event

• Consider “gifting” packaging15

Best Practices for Open Loop Prepaid Card Awards

• Prepaid cards are the favorite award choice for employee recognition, as measured both by program planners and recipients.

• Open loop prepaid cards are the most popular type of prepaid card.

• Recipients prefer open loop prepaid cards 5 to 1 over cash even though its a cash equivalent.

• Reasons include:

– Guilt free, memorable spending as compared to cash

– Association with giver/company/sponsor

– Fulfills all levels of Maslow’s hierarchy of needs

• Data confirms that 60% of open loop card spend is for non-essential items

• Open loop prepaid cards provide cash equivalency with non-cash award advantages

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Conclusions

• 2010 & 2011 Consumer Insights into the U.S. Gift Card Market, First Data; GiftCardRescue.com poll of 6,000 users – January to October, 2010; Incentive Mag 2011 Gift Card IQ Study

• Huff, C. 2006. So Plastic Gift Cards Are Most Popular Incentive. Retrieved from http://www.workforce.com/articles/so-plastic-gift-cards-are-most-popular-incentive

• Incentive Gift Card Council and Incentive Research Foundation. 2012. Research Shows Recipients Prefer the Control and Personalization Gift Cards Provide vs. Cash. Retrieved from http://c.ymcdn.com/sites/www.usegiftcards.org/resource/resmgr/Docs/ResearchShowsRecipientsPrefe.pdf

• Lipman, V. 2013. 3 Substantive Ways Companies Can Invest In Employee Engagement. Retrieved from http://www.forbes.com/sites/victorlipman/2013/11/07/3-substantive-ways-companies-can-invest-in-employee-engagement/

• 2005 Premium and Incentives Report, Promo Magazine

• Schweyer, A. 2012. An In-Depth Look at Prepaid Cards in Incentive, Rewards & Recognition Programs. Retrieved from http://theirf.org/Prepaid-Gift-Cards-in-Incentive-Reward-and-Recognition.6087263.html#8.

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References