30 JUN, 2017

Why Points-Based Recognition Programs Don’t Work

points-based recognition programs

Points-Based Recognition Programs

I’m sure you have seen that there are two major differences with employee recognition and rewards programs. Some programs use points to give awards and some use dollars. So what is the difference? And is one better than the other?

Points-based recognition programs are designed so users can disperse points instead of actual dollars. Other recognition programs (such as WorkStride) provide users with the ability to send dollar amounts directly to the recipient who can redeem them with gift cards. There tends to be a lot of comparison debates between the effectiveness off points-based recognition programs and monetary-based recognition programs. Today I want to break apart exactly why points are the slightly less effective option.

Unclear Conversion

In both points-based recognition and monetary rewards programs, employees are given a reward that can be redeemed. However, points-based recognition programs are less straightforward. You simply don’t know what your reward is worth when you receive it. This often makes your users confused about the value of their recognition award.

For example, if you received a recognition award with 100 points, you don’t automatically know what that means. You have to figure it out by looking at the prices of the rewards. Unless you are extremely familiar with the points conversion of your program, you don’t know what you got as an award.

On the other hand, with monetary-based recognition programs, you know that a $1 award equals $1 in gift cards. There is no obscured conversion. This makes your program significantly clearer to your employees. Whereas points don’t carry a set value, people understand exactly how much a dollar is worth, making them more likely to redeem their reward.

High Points, Low Reward

Oftentimes, the disparity between the amount of points given and value is not just confusing, but quite disheartening. Since points don’t inherently have a clear value, people will subconsciously attach the only meaning they can to it—dollar amounts. And when their expectations are not close to reality, their disappointment decreases the effectiveness of the reward. It may be a small moment, but it sets the stage for a more negative experience.

Imagine for a second you received a reward for 100 points. If you are not familiar with the conversion, you might get excited. 100 points seems like a lot! But you come to find out that 100 points is roughly equivalent to $5. Now your feeling of pride at receiving 100 points is diminished when you see the value.

Reward Options

Another fundamental difference between points-based recognition programs and monetary reward programs is that points programs tend to have physical items as rewards instead of gift card options. Some say that physical gifts mean more to people than money and that an employee has the freedom to choose the item they want to purchase from the catalog. However, catalogs are usually limited so the “freedom to choose” your reward is similar to having the freedom to choose between the chicken or fish options at a wedding.

Some solutions are run by a company whose primary business model is manufacturing goods and their recognition program is just a way to facilitate selling their products. With these companies, you tend to be even more limited in your award options. They sometimes even have fees for adding your company’s branded merchandise or travel experiences to the catalog.

With monetary gift cards, your employees have the option to choose exactly where they spend their money. Let’s say you wanted to redeem your reward points on a new camera. You wouldn’t be limited to the camera options available through the rewards provider. You could choose to use a gift card to buy your camera of choice from your favorite electronics retailer, vastly increasing your physical reward options.

Hidden Markups

One of the main parts of points-based recognition programs are that the items available for redemption are not at cost. Some programs mark up their merchandise by 40%!

For example, let’s say you have your eye on a new toaster and it costs 4,200 points. You can guess from other context clues that a dollar in your program is about 100 points. That means that toaster is worth about $42. But you’re smart and you look up the same toaster online, and you see it’s only $30 normally. Why would you waste your reward points on an overpriced toaster when you can buy it for cheaper? Points solutions regularly hide the profit markup in the item cost for your employees to deal pay.

With dollar-for-dollar programs like WorkStride, the profit is not hidden in item markups. A dollar reward equals a dollar in the rewards mall. This lets your employees get the most out of their reward. When they see a reward balance, they know they will know exactly their gift card value.

The Risk

Most points-based recognition programs have you pay when the points are redeemed. That is quite a risk. You never knew when they will be redeemed. You might have a month where very few people redeem their rewards, and another month where everyone decided to cash in. Or—someone might bank their points and redeem a high-ticket item that they had saved for years to purchase and you wouldn’t know they were saving those points. It makes it very difficult to predict how much your recognition program will cost each month.

Dollar reward programs tend to bill on issuance, so you never have to worry about a bad month. You can predict exactly how much you will be paying when you assign budgets to managers.

 

When you consider the differences between points-based recognition programs and dollar-rewards programs, you can see points have a lot of hidden issues. Now, exactly where dollar-rewards falls short is another blog post entirely—no one is saying either option is perfect. But at the end of the day, points cause you and your users confusion and frustration, and that simply does not make for an effective recognition program.

To learn more about WorkStride’s dollar-based rewards program, schedule a demo!


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