Do This! Get That.

To All Presenters:

Allegedly, business runs on incentives. Incentives to consumers to induce purchase behavior. Incentives to employees to increase productivity. Incentives to managers to boost the bottom line.

The idea that incentives are effective is reinforced by the popularity of the concept. Nearly every form of media streams attractive offers to we, the target audience, on a 24-hour cycle. If you're awake chances are someone is trying to sell you something. Retailers keep offering coupons, businesses keep handing out bonuses and everyone presumes the incentives are successful since, in the short term - and in the most obvious ways - they are.

Do incentives really work? If you want to build a business, will coupons drive sales? Yes. They will. But there is no buy-one-get-one-free offer in the world that will build brand loyalty. Great Clips is a national hair salon franchise who supports deep discounting as part of their grand opening strategy for new locations - often prices are as low as $2.99 a haircut.

During the grand opening these salons do a lot of haircuts. The problem is they have to hire a lot of staff to service customers who only value the product at the discounted price. Shortly after the grand opening these salons see same store sales drop precipitously, as customers move on to the next cheapest shop in town -with layoffs at the salon soon to follow.

Similarly, businesses who offer performance incentives will find they are successful in driving a specific behavior. The problem is employees stop taking risks. They stop thinking creatively and start doing exactly, and only, what is required in order to earn the incentive. Nothing more. The incentive may achieve a short-term objective, but in the long-term it caps personal initiative and business development.

Alfie Kohn writes a great article articulating the findings of several dozen studies which support the idea that incentives do more harm than good.

THE POINT: Monitor the horizon, will your strategy get you where you really want to be?