Seven nights on Richard Branson's Necker Island, where a team of 60 staff is on hand to cater to your every whim, is a significant corporate incentive. With a guide price of £17,100, however, it is an incentive that few companies would be willing to stretch to in these straitened times. According to Virgin Experience, which offers the Necker retreat as one of a range of 600 experience vouchers, it sold just four trips to the exotic island last year.
However, the recession does not necessarily equate to a complete reversal of fortunes for experience-based gift and incentives companies such as Red Letter Days and Virgin Experience.
'We actually picked up a lot more clients during the downturn,' says Chris Smith, marketing director at Acorne PLC, which owns Virgin Experience Days, Leisure Vouchers and Virgin Vouchers. 'Companies that used to whisk their entire team off on lavish trips abroad are now turning to us instead.' Crucially, these incentives are not seen as being as inappropriate as big-budget corporate entertaining.
While the leading players in the market report that 2009 was a terrible year, many believe that 2011 will continue the recovery that began in 2010. Bill Alexander, managing director of Red Letter Days, says its sales increased by 30% year on year in 2010, with improvement in both the consumer and corporate markets.
The tough economy means that, among some marketers, practical rewards such as shopping vouchers are seen to be the most appropriate incentive for staff, while others would argue that there is no substitute for cold hard cash. However, as Alexander says: 'When you go on an experience day, you will remember it years later. In contrast, if you are given a shop voucher, you will spend it on sandwiches, or your dinner, or paying a bill, and it is instantly forgotten.'
The gift of a once-in-a-lifetime experience or trip has particular saliency with the best-paid employees. Nigel Cooper, divisional managing director for the travel and events division of Motivcom, says top executives tend not to remember what they spent their last bonus on, but will not forget, say, a five-star holiday in India. 'For a brand wanting to engender loyalty or reward a long-term customer or employee, giving them £10,000, on which they will then have to pay significant tax, will not have as much meaning as a once-in-a-lifetime trip,' he adds.
Certainly many in the industry believe that the memories of an experience, whether it is a spa day or a £10,000 holiday, will last longer than a one-off voucher or cash incentive. Agencies point out that staff or suppliers rewarded with an experience are likely to talk to their colleagues about it. Indeed, Virgin Experience reports that some of its clients are now using social-media platforms or internal websites where employees can share images or memories of their experiences across the company.
Leisure focus
In line with this growth in experience-based rewards, Red Letter Days is poised to launch a business-facing product, the Red Letter Days Lifestyle voucher, in May. The corporate vouchers will encompass a wide range of leisure activities - from opera and cinema tickets and live events via Ticketmaster, to stay-at-home treats such as music, books or DVD rentals via LoveFilm. There is also a range of holiday partners including Opodo, as well as high-street retailers such as House of Fraser and spa and hairstyling brands.
The Red Letter Days Lifestyle vouchers will be available online. 'If you finish a project at 9pm, you can email the voucher to a colleague immediately, giving them an instant reward,' says Alexander.
Corporate rewards and voucher company Love2reward is also hoping to capitalise on the shift toward experience-based incentives with the launch of its Love2indulge vouchers later this year.
The vouchers, which will be available in the traditional paper format, will cover a range of commercial partners, including restaurants, theme parks, spa attractions and historic venues.
Paper's place
Although SMS and location-based voucher offerings are now top of marketers' agenda in the consumer retail market, paper and card vouchers, often in lavish presentation packs, remain the dominant format in the corporate market.
Martin Cooper, head of national accounts and marketing at Love2reward, says that not all its partner retailers and venues currently have the ability to process a gift card, let alone an SMS or email voucher. 'Mobile delivery via smartphones isn't a one-size-fits-all solution,' he warns. 'Paper vouchers are a very tangible gift and the (impact of the) physical act of handing them over should not be underestimated.'
For companies such as Harrods, which offer brands a bespoke corporate gifting service, the packaging is a vital part of their offering. Tracy Finn, head of corporate service at Harrods, says that, while the retailer is looking at the opportunities afforded by virtual gift cards, the majority of its clients request Harrods-branded packaging. 'It is a luxury brand and there is still a demand for a tangible gift - even with the trend toward experience gifts, the ritual of giving is still very important,' she says.
Over the past 12 months, Harrods has significantly boosted its experience-based offering. Earlier this month, for example, the luxury retailer unveiled a new tasting room, complete with a selection of fine rare wines and gourmet food. A Harrods Gift Card has to be loaded with a minimum of £2500 to allow the recipient to indulge in the tasting. 'Companies are looking to make an impact with their gifts and incentives and they are increasingly asking for bespoke, one-of-a-kind products or experiences,' adds Finn.
While the economic downturn has led companies to shy away from being seen to splash out, the growth of the incentives market reflects the growing number of firms recognising the need to reward loyalty and give their overstretched staff and suppliers a well-earned boost.
FOCUS ON CORPORATE WELLBEING
While the lavish corporate spending seen at the height of the dotcom boom is now frowned upon, a growing number of companies are tying their incentive programmes into corporate wellbeing initiatives.
Kevin Turnbull, chief executive of SpaFinder Europe, points to government-funded research showing that ill-health costs British businesses £100bn a year, £26bn of which is due to stress.
'There is a lot of interest in preventative wellness programmes, and spaand treatment-based incentives are a way for corporations to show their employees that they care,' he adds.
The growing emphasis on corporate wellbeing programmes was underlined by Prime Minister David Cameron, who has instructed the Office for National Statistics to ask people to rate their own wellbeing for the first official 'happiness index', due in 2012.
Launching the consultation last November, he said the country would be 'better off if we thought about wellbeing as well as economic growth', and quoted the late US senator Robert Kennedy, who said GDP measured everything 'except that which makes life worthwhile'.
According to Turnbull, over the past 12 months, companies have embraced the idea of 'proactive' wellness campaigns based on preventing employees from experiencing stress or back pain in the first place, rather than dealing with the fallout when they do occur. In line with this, SpaFinder vouchers can be used not only to pay for spa treatments, but also by employees for a gym membership.
However, Red Letter Days' Alexander points to the 'classic internal research finding' that if you buy someone a spa day, you've given them a problem. They need to find someone else to come with them, or change the location - in fact, according to Red Letter Days, 85% of vouchers are changed in some way by the recipient. Nonetheless, it is fair to assume that rearranging a spa day is the kind of stress the average employee can cope with.
FOCUS ON THE CORPORATE OLYMPICS
Headlines berating Royal Bank of Scotland for investing in corporate hospitality at the taxpayers' expense reflect the continued sensitivity surrounding corporate entertaining.
The bank sparked a flurry of negative headlines in 2009 after reports that it had spent £300,000 on corporate entertaining at Wimbledon. RBS - which had been bailed out with £20bn of taxpayers' money - defended the activity as part of a 'long-standing agreement.'
Privately, travel and reward specialists report that blue-chip companies are still reluctant to be seen to be splashing out on corporate hospitality, but many in the industry believe next year's London Olympics will be a turning point for the industry. Although negative media coverage of the 'Corporate Olympics' is inevitable, several official sponsors will be rewarding key staff and clients with tickets to events.
Ironically, the corporate feeding frenzy at London 2012 may actually be bad news for the wider corporate gift and incentives market. Nigel Cooper, divisional managing director for the travel and events division of Motivcom, says Olympic hospitality will cost brands £5000 to £6000 a head - substantially more than big football events such as the FIFA World Cup Final. He warns that this may lead to companies putting the brakes on existing incentives programmes to cover the extra outlay.
Despite this potential challenge, many in the industry believe that the next 12 months will bring positive growth across the industry. Red Letter Days' managing director, Bill Alexander, says the corporate market is more buoyant than the consumer sector. 'Most companies have gone as far as they can when it comes to cuts and now they are focused on trying to better engage with their employees,' he adds.
Cooper is also predicting a sustained revival in the corporate incentives market. 'In the light of continued pay freezes and significantly downsized teams, morale is a big issue for many major corporations,' he says.
In line with this, rewarding staff on a tactical basis will be a key trend in the coming months.