Incentive - July/August 2016

Without measurement, incentive programs could be especially vul- nerable during challenging economic times. Organizations talk about this fact, but data shows they might not be doing much to prepare for such eventualities.

Measuring the effectiveness of incentive
travel programs in terms of sales and profits is
not new, but the recent Society for Incentive
Travel Excellence (SITE) Index discovered
that the practice is still surprisingly limited:
It begs the question: Why are 47 percent
of both users and suppliers not making ROI
measurement a part of every incentive trav-
el program? Like any sound business invest-
ment, the use of incentive programs to
engage employees and partners to achieve
business objectives must offer proven value
to the organization. But where does one
begin to determine this value?

Return on Investment (ROI) is a recog-
nized approach for evaluating the feasibility
of any business proposal and is measured to
determine if there is a good business reason
for spending funds on any venture. Is it a
feasible use of a company’s money? Will it
add to bottom-line profit?

As applied to incentive travel, measuring ROI determines the contribution to profit attributable to an incentive travel program, less the total cost of that program. Spending for an incentive program is justified if the ROI is positive.

There are numerous methods of measuring ROI for incentive travel programs. They vary from the very simple to some rather complex approaches. But they are all based on the simple formula: Increased revenue (generated by the incentive program) minus all costs associated with the program (the travel itself, promotion and administrative costs) equals the ROI. A positive ROI is an addition to profit.

It is important to note that most objectives for which incentive programs are planned — increased sales, reduced turnover, greater market share — can all be reduced to numerical (and hence, measurable) factors.

But certain objectives, particularly those associated with events, do not lend themselves so easily to measurement.

A Different Way to Measure

Return on Objectives (ROO) is a model based on understanding what an event must accomplish. Obviously, objectives must be identified before any project is launched so it can be designed to accomplish those aims. Moreover, they are essential if there is to be any kind of measurement. They also need to be stated in a way that can be measured.

This is where the major difference between ROI and ROO comes in. ROI objectives are primarily numerical, while ROO objectives may not be reducible to numeric valuations.

Frequently, pre- and post-event surveys are used to measure ROO. While this can be a very simplistic approach, it is the basis for most ROO measurement — a comparison of the situation before the event to the situation after the event.

Measuring the success of incentive programs — whether ROI or ROO — estab-lishes an environment of accountability, and is the first step toward demonstrating why future investment is warranted. Travel Insights By Tina Weede, CRP

How and why to measure ROI and ROO

Tina Weede, CRP, president of USMotivation, has designed, implemented, and managed incentive programs of all sizes, providing wisdom through measurable results.