Turn an expense into revenue: Adding incentives to your 2023 budget
More than 70% of working adults are likely to remain with a company if they feel properly recognized for their efforts.
We all need motivation. Getting back to work on a Monday morning. Cleaning out the garage. Starting a new fitness program. We want the results. But that doesn’t mean we’re motivated to start.
That’s one reason insurance companies have incentive programs. Yes, people who become insurance agents want to help people. But just like navigating all the information about healthy eating, it can be complicated to find the right product for each customer. A little motivation can provide that spark to plunge into policies.
What if you don’t have an incentive program? One10’s Marketing team recently surveyed insurance companies without incentive programs. Results showed that their top priorities are no different than insurance companies with incentive programs — to increase sales, acquire talent and retain talent.
In the same survey, companies were asked why they didn’t have an incentive program. Answers ranged from it’s too difficult to implement, to not having staff to administer, to not having the budget.
We know incentives work, not just in insurance but in life. If the barrier to an incentive program is difficult to budget, then the key is to make the incentive program itself fit into your budget with ease.
Benefits of formal incentive & recognition programs
- Useful data: One part of a formal incentive program is the time and effort to run it. Some companies (across all industries) think a way to save money is to use a homegrown tool to manage rewards and recognition. But managing spreadsheets can be more work than a purpose-built tool. Not only will an actual program save you time, but it will also give you useful data about behavior that you can link to results.
- Retention: One10 surveyed 3,000 working adults on the strength of relationships between employees, companies, and managers. More than 70 % were likely to remain with a company when they felt they were being properly recognized. That feeling of being valued is also linked to reducing turnover and absenteeism — a prime example of spending money to save money.
Increasing the ROI
Many insurance companies look at formal programs as a pure expense. That could be true if rewards aren’t linked to desired behaviors, or if the program is run loosely and people get rewards based on actions that don’t lead to results.
Recognition programs are the better tool to make each employee feel valued for their specific contribution. Incentive programs should reward reaching goals, either in steps along the way or the ultimate goal itself.
Budgets for recognition programs are straightforward, typically based on a percentage of payroll (1.5% to 2%). Budgets for incentive programs have more variables, but in all cases, the revenue they generate should exceed the budget.
Budgets for incentive programs
There are a few factors to consider when it comes to budget. One is the amount: closed (not to exceed a certain amount) or open (based on performance).
With closed, while you set a “not to exceed” amount, you evaluate results quarterly or annually to see if the behavior you’re incenting is increasing revenue. If it is, then you have your ROI. If it isn’t, you need to look at the behaviors you’re motivating versus actual behavior.
An open budget might sound tricky — how do you plan for that? — but it’s designed to have an obvious ROI. Why? Because you’re paying only for incremental sales and performance that exceeds the goals. So yes, you may pay more, but you’re doing it from a larger revenue base that the incentives helped create. That’s a very provable ROI.
As you look at budgets, think about results. You have to spend money to make money, as the saying goes. So what should you be spending, and how, to generate the results you need?
Ready to go? Here’s a step-by-step guide to building an awesome incentive program.
Robin Williams, strategic marketing manager, leads the marketing team at One10. She has more than 25 years of experience in various marketing roles with a focus on the financial services market. Throughout her career, Williams has helped some of the largest financial brands grow revenue, acquire clients, and improve efficiencies. She is an active member of the Incentive Marketing Association.
Opinions expressed here are the author’s own.
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