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Everyone asks: “What is better: cash or non-cash awards?” The mob of sales reps clamor, “Give me cash, not prizes.”

Before launching a spiff program, Human Resources wisdom advises that existing compensation structures must first satisfy basic monetary needs.  Conclusion: Cash is king for base pay and commissions – but non-cash spiffs add extra motivation.

The all-time classic research paper on the pro/con of cash vs. non-cash is “The Benefits of Tangible Non-Monetary Incentives” by Scott Jeffrey, assistant professor in the Department of Management Sciences at the University of Waterloo, Ontario.  The research identified 4 key reasons for using non-cash awards in incentive or recognition programs, and I will add 2 new reasons.  Plus, as a bonus, to simplify the multisyllabic words researchers like Dr. Jeffrey use, I’m adding a research-for-dummies translation for regular folks like us.

Here are the six reasons to consider merchandise or gift cards for the next sales contest:

1.  Evaluability – “Daydream Value”

When properly presented, non-cash awards ignite the imagination in a way that enhances their perceived value.  The participant’s reaction to the prize substitutes for its actual value.

Think back on all the times you have received cash as a gift.  Do you remember the amount, or your accomplishment?  Alternatively, do you remember any trips, merchandise, or gift cards you won?  Chances are there are a handful of more memorable prizes (and fondly remembered) than their quickly-forgotten cash equivalent.

2.  Separability – “Not Compensation”

Non-cash awards deliver more motivation and recognition because they don’t get mixed with compensation.  Cash invariably turns the extra reward into expected compensation.  Cash creates entitlement — you can give it, but you cannot take it away.

Non-cash spiffs can be turned on and off without entitlement problems.  For a quarterly sales contest, a trip or merchandise prize will not be expected in the next quarter.  It’s clearly “separate.”

3.  Justifiability – “Guilt-Free Splurge”

Participants receive particular satisfaction from non-cash awards because there’s no guilt associated with spending them.  If a male participant has 50,000 points, he can guiltlessly redeem for the 80″ HD TV for football season.  But if the reward had been $2,500 in cash, he and his wife might debate if they should pay off a credit card or start a college fund.

Which award do you think gets excitement at the next sale meeting?

4.  Social Reinforcement – “Trophy Value”

People feel free to talk about non-cash rewards in a way that would be inappropriate for cash compensation.  It’s socially unacceptable to brag about your bonus or commissions, but others are intrigued about your incentive trip to Maui.  Non-cash prizes provide a tangible symbol of achievement that all can recognize.

5.  Memorable – “Halo Effect”

Surveys show that merchandise and travel rewards are remembered longer than cash, with a longer-lasting boost in performance.  They provide a lasting reminder of success and reinforce a positive association with the sponsoring company.  For example, try to remember a fantastic employee reward, trip, or merchandise you won.  Got it?  Now, do you remember the amount of your bonus that year?

6. Promotable – “Buzz Factor”

Cash is difficult to promote – unless you keep increasing the amount.  A trip to Monaco, a new HD TV, the latest i-anything from Apple, or shiny diamonds – create a visual interest that engages participants’ brains.  In essence, they see the reward, want it, and consider how they can improve their performance to earn it.  It doesn’t hurt that this creates a buzz factor around the office when employees discuss what prizes they’re going after.

There is more to it than just not using cash. Choosing the right types of awards for your audience and knowing how long to keep a program running are necessary to motivate your team correctly. You can find all the details in our eBook called 5 Keys to Selecting Motivational Rewards. Click the link below!

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Mike May

Author Mike May

Mike is a wearer of many hats. President of Brightspot, author of 12.5 Steps to a Perfect Incentive Program, past Chairman of the Incentive Research Foundation (IRF), and recognized as one of the Top 25 Most Influential People in the Incentive Industry. His expertise includes bucket-list incentive trips, motivational incentive program design, matching event goals with the perfect destination & hotel, cost savings strategies, global channel reward programs, and targeted communications. Mike maintains his certifications in many specialties including Certified Meeting Professional (CMP), Certified Incentive Travel Professional (CITP), and Incentive Professional (IP).

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