Hinda President Weighs in on State of Incentives, Rewards and Recognition

RRN periodically checks in with IRR (incentive, rewards, and recognition) company CEOs on the state of their businesses and the industry. RRN will publish a comprehensive market report on the industry later this year based on interviews with other industry CEOs.

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Continued but more gradual growth of employee recognition; more focus on sales and channel programs; greater emphasis on communications and measurement; continued price pressures; consolidation in the gifting arena are among the trends eyed by Mike Donnelly, CEO of Hinda Incentives in Chicago.

RNN. What is your view about the state of market growth—fast, slow, none at all?

Donnelly. Overall, we expect the incentive, loyalty and recognition markets to experience incremental growth. But this growth may vary considerably depending on the market segment.

Sales and channel incentives saw a precipitous decline from early 2020 throughout 2021 and even into 2022. Broken supply chains and limited production were major contributors, along with fears of travel at the time. The last two years, however, have seen a surge in travel incentives for top performers. That’s because sponsors were desperately trying to retain these valuable human assets. At this point, supply chains have normalized and the skyrocketing inflation in the early pandemic period is easing. However, inflation has caused consumers to be more cautious in spending. This combination of ready supply and somewhat weakened demand will encourage program sponsors once more to target gaining market share from competitors. So, we are anticipating more interest in sales and channel programs. We are also expecting to see sponsors rewarding their organizations deeper to drive greater sales. Look for sales and channel programs to grow much faster than they have at any time in recent years.

Employee engagement and recognition grew substantially in the past three years as employers were challenged to recruit and retain people immediately post-pandemic. We saw considerable growth in the number of new clients looking for recognition. We also saw an interest in reviewing existing milestone awards programs to recognize those with as little as three-months tenure. Our experience shows the job market is stabilizing, with medium and large businesses finding it less difficult to fill positions than in the past two years. This will likely reduce the sense of urgency for employers to implement new recognition programs. This leads us to believe there will be continued growth in employee recognition, but much less dramatic compared to recent years.

Consumer loyalty programs are evolving. For several years loyalty programs experienced explosive growth as more and more organizations launched new programs. But today these programs are stabilizing and looking at enhancing technologies, adding new co-sponsor partnerships and offering a wider array of award options. This will shift the business mix for suppliers in the future. For example, we expect to see considerable growth in experiential awards. This growth will be realized as consumers shift their redemption from more traditional catalog merchandise and gift cards. We anticipate steady and moderate growth for these programs moving forward.

RRN: What are key trends in terms of what clients are looking for in solutions, pricing, demand for expertise or return on investment measurement, or any other observations you’d like to share about the market.

Donnelly. Clients are always seeking more in these programs: More innovative solutions, more integrated technologies, more streamlined pricing, and more support for ROI measurements. As competitors up the ante for improved technologies and efficiencies, suppliers may see downward pricing pressure on what will be viewed as standard program support technologies. The market continues to become more dependent on digital communications like the program websites, emails and text messaging to reach participants. This will likely make communications automation standard operating procedure as part of the technology solution pressuring suppliers to reduce communications invoicing.

This continual downward pricing pressure combined with an elevated demand for greater technology features is likely to result in more supplier consolidation. We have already seen that in the gift card business. Expect this trend to continue throughout the industry.

Clients today and especially their marketers recognize the importance of accurately segmenting customers and then targeting communications, offers, and rewards for them. They know this enhances their relevance, drives sales, and fosters loyalty. Loyalty clients are on the leading edge of what we’ll call the “personalization trend.” Personalization demonstrates you know and care for your customers. Loyalty program sponsors are already demanding their suppliers personalize offers and communications for their participants. And let’s remember, executives who make decisions on sales incentive and employee recognition programs participate in credit card loyalty programs. When they see how personalized messages come to them in those programs, it won’t be long before they demand the same from their suppliers. And that personalization isn’t just good for clients, think of how it can benefit the supplier with greater participation and redemptions.

AI is revolutionary change for everyone. Clients are in the very early stages of integrating AI-based technologies into their own organizations. As they see AI delivering predictive analytics, chatbots and more personalized experiences for their customers, they will undoubtedly be asking their incentive, loyalty and recognition partners to deliver solutions that leverage the benefits AI can deliver. Everyone in our industry should be looking at how AI can benefit their customers, their programs and their own business model. The question we all should be asking is, “Do we want to move ahead with AI, or do we want to be left behind?”

RNN. Do you see more recognition companies moving into incentives?

Donnelly. There has been an increase in the number of competitors in the recognition space to meet increased client demand. Many provided technologies to engage those working remotely and highlighted their employe onboarding support to prevent ghosting. In 2022 and 2023, when there were far too many openings compared to available workers, many employers hired people who simply didn’t show up on day one because they had gotten a better job in the meantime. This became known as ghosting. If the demand for employee recognition slows, many of these niche providers may be seeking new opportunities. This could include moving into incentives.

RNN. What is your organization’s key focus for the coming year...or anything else you’d like to add.

Donnelly. We have several initiatives in the coming year to enhance our technology for specific marketplaces. Specific technology tools required are for each of our markets. For example, while recognition e-cards are ubiquitous in employee engagement programs, they are rarely used in channel incentive programs. Our technology initiatives look at providing the right tools for the market while always looking to improve our core award portfolio technologies. Our upcoming initiatives will look at focusing on the needs of each different segment.

We are also looking at expanding our award offerings to meet marketplace demand. We typically see loyalty programs on the forefront of many new offerings. We may be looking at moving some of these innovative offerings into sales and employee programs soon.

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