Special Report: Why the IRR Industry Is a Shadow of Its Former Self and What Can Be Done
By Bruce Bolger
From 1963 to Today--What Went Wrong
The IRR’s Story Focuses on What It Sells, Not on What Customers Need
What Can Be Done
When I first joined Incentive Marketing now Incentive magazine as editor as a very young man in 1989, I received a stern warning from the former editor George Meredith, who also authored the industry’s bible at the time, Incentives in Marketing and Motivation. In effect he said, “Our advertisers and the advertising sales team are going to push you all the time to write about products and travel, but don’t overlook the importance of program design, measurement, and case studies,” he cautioned me. “None of our readers actually buy merchandise or travel (there were no gift cards at the time). They buy ways to increase sales, loyalty, quality, productivity. If you don’t write about that, they won’t read the magazine.” That's why he entitled his book to focus on incentives in the context of broader marketing and motivation goals. Later, Larry Bell, the legendary publisher and founder of the industry's original association in the 1960s (now IMRA), gave me the same advice.
From 1963 to Today--What Went Wrong
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How could an industry estimated to have grown in size from $22.3 billion in 1963 to about $176 billion as of 2022, according to the latest study, have shrunk so much in size and impact? The number of brands active in the market has tumbled as the number of incentive representatives slowly declines. There is little growth in the number of incentive and recognition companies except for some technology companies. There is no sign that any of recognition technology companies backed by private equity or venture capital have reached expected results. End-user management used to actively participate in industry education; now, only a few participate in the Incentive Research Foundation.
Back in 1963, Premium Practice magazine, the precursor to what was renamed Incentive in 1989, had an average issue had over 200 pages, half of it advertising. In one edition in 1963, it estimated the market size at $22.3 billion. By the 1990s, there were four monthly magazines and two major shows each attracting thousands of buyers. Not only did many brands participate as exhibitors, but the marketing and human resources management of some of those companies and many others also attended, often leading the education programs on program design and market trends.
Today, only promotional products shows exist with about several dozen companies representing brands, with little education left except for that offered at the Incentive Research Foundation Invitational and the Incentive Marketing Association summit, neither of which attract many end-users with the exception of meeting planners. IMEX is largely focused on motivational travel and to some extent event gifting, and does attract meeting planners as well. The Incentive Marketing Association, the industry’s leading organization, has done a remarkable job of building an enthusiastic worldwide community of suppliers, many of them gift-card and related firms, but the brands, senior incentive company management, and end-users that were actively involved until the 2000s are mostly gone.
What happened? Do organizations no longer need to engage and motivate customers, employees, distribution and supply chain partners, or communities?
George Meredith’s prophetic words echo in my mind. The industry has never truly heeded his warning about the need to focus on program design and impact. Look at the difference between the way the advertising or customer relationship management industries sell versus the IRR business. Advertising agencies focus on helping clients achieve their branding and sales goals, and then develop the right strategy, tactics, and media best suited to do the job. They don’t sell ads. The CRM field sells customer relationship management, not technology. The stories of companies in these fields don't focus on what they sell, but on the problems they solve.
Consequently, by various estimates, there could be as many as 100,000 advertising agencies in the US and over 1,500 CRM implementers. On the other hand, there are at most 150 incentive and recognition firms, and perhaps at most 2,000 promotional distributors involved in selling gifts, incentive, or recognition firms. Logically, there should be at least as many solution providers helping to implement enterprise engagement as there are CRM implementers.
The IRR’s Story Focuses on What It Sells, Not on What Customers Need .png)
In the IRR industry, the story is reversed from how advertising agencies and CRM implementers tell their stories. In IRR, the story generally starts with how incentive, recognition, loyalty, and technology platforms can address organizational challenges. This immediately puts the IRR field at a disadvantage, because few businesspeople have reason to believe that incentives, rewards, and recognition, let alone merchandise, gift cards, and travel are critical to organizational success. In fact, what the industry sells only works as part of a program that addresses all the related areas of engagement. As long-ago demonstrated in total quality management, engagement is a holistic process encompassing purpose, communications, learning, recognition and appreciation, empathetic front-line leaders, etc., as well as a total rewards strategy.
In the world of capitalism, like nature, the law of survival of the fittest prevails. That which fails to create concrete value shrivels and dies over time. What does that say about what happened to the IRR field when the meetings and motivational events and promotional products industries have survived multiple headwinds? For whatever reason, meetings and promotional products have become established as an almost unquestioned practice. The IRR industry has not had as much success in establishing its legitimacy.
Despite the work of the Incentive Research Foundation and other associations, the IRR industry apparently did not heed George Meredith’s advice because it has essentially focused on what the industry wishes to sell rather than what the customer seeks to buy. Even the industry’s most important research organization, the IRF, publishes research on incentives, rewards, and recognition, not usually on their interaction with other efforts to engage people more holistically. It takes little more than a review of Linkedin feeds to see that the industry focuses on selling merchandise, gift cards, travel, and technology to solve business problems, when it would be difficult to find one senior executive at any company outside of the industry who considers rewards and recognition a major pain point or priority.
Clearly, the industry’s story focusing on incentives, rewards, recognition, merchandise, travel, and gift cards has not advanced the industry’s respect or access to the C-suite..
In the early 2000s, I was Co-Founder and head of the Forum for People Performance Management and Measurement at Northwestern University Medill School of Journalism and Integrated Marketing Communications, which had the active support of the top 10 incentive companies. It was created to conduct empirical research on the specific impact of having highly engaged customers and employees. Based on the compelling findings, I recommended to the board of the Recognition Professionals International that it should change its name to focus on performance, not recognition. With RPI at the height of its influence at the time, the board of directors did not embrace my contention that the focus should not be on recognition but on what it can do. Since then, RPI has experienced headwinds similar to other parts of the IRR industry.
To this day, the incentive and recognition field remain largely sidelined from the C-suite. Most clients don’t even give incentive and recognition companies all the data necessary to know if what they did accomplished anything concrete. Incentive, recognition, and even loyalty programs often do not have access to financial and other turnover, referral, productivity, human capital ROI or value add data that would enable them to make a case that the program accomplished anything.
What Can Be Done
When the Enterprise Engagement Alliance was officially founded in 2009, the name was based on a meeting held with several dozen industry leaders the year before on how to address the industry's branding issue. Those present almost universally approved the use of the term "engagement" in our name on the basis that this focuses on a desired outcome, and not what the industry is selling. Since then, the term engagement caught on, but it has not essentially elevated the field. This may be because it quickly became another buzzword because few companies have actually measured the financial or other tangible impact of having highly engaged employees.
Moreover, changing the mindset and perceptions of millions of businesspeople takes money, effort and time. Thankfully, for most IRR companies, it doesn’t require additional spending, but rather a change in the story and capabilities of solution providers to focus more on program design, systematic implementation, impact analysis and return-on-investment metrics. Suggestions for consideration include:
- Support of efforts to share with the C-suite and investors the concrete value created by a strategic focus on people, rather than only general studies produced by the incentive industry. Of course, many in management view with some skepticism industry research from the industry's association.
- Engage end-users by inviting them to participate in efforts to help with the development of concrete metrics and effective practices based on science with concrete performance measures in place.
- Go beyond macro-research based on surveys to provide actual analysis of program results. Click here for some examples.
- Add to industry award criteria the requirement to provide concrete impact metrics. What in fact did the program accomplish in meaningful terms for which it received the award?
- Fund research to demonstrate results at specific companies. Give incentive and recognition companies an incentive to invite clients to participate.
- Rewards suppliers can partner with their incentive, recognition, and loyalty customers to support independent analysis of program results for case studies. If independently audited, the company names do not have to be disclosed if competitive issues are of concern.
- Develop an education program that incentive, recognition, and loyalty companies can bring to business organizations and business schools to educate them on the benefits of program design, implementation, and impact measurement.
- Stop making vague, unsubstantiated claims in marketing. Focus on concrete results and case studies using company names.
Enterprise Engagement Alliance Services
Celebrating our 15th year, the Enterprise Engagement Alliance helps organizations enhance performance through:
1. Information and marketing opportunities on stakeholder management and total rewards:
ESM Weekly on stakeholder management since 2009; click here for a media kit.
RRN Weekly on total rewards since 1996; click here for a EEA YouTube channel on enterprise engagement, human capital, and total rewards insights and how-to information since 2020.
2. Learning: Purpose Leadership and Stakeholder
Management Academy to enhance future equity value and performance for your organization.3. Books on implementation: Enterprise Engagement for CEOs and Enterprise Engagement: The Roadmap.
4. Advisory services and research: Strategic guidance, learning and certification on stakeholder management, measurement, metrics, and corporate sustainability reporting.
5. Permission-based targeted business development to identify and build relationships with the people most likely to buy.
6. Public speaking and meeting facilitation on stakeholder management. The world’s leading speakers on all aspects of stakeholder management across the enterprise.
