On completion of this chapter students should:
- understand the main terms
- recognize main types of incentives
- distinguish buyers and suppliers
- learn special terms
In economics, an incentive is any factor (financial or non-financial) that provides a motive for a particular course of action, or counts as a reason for preferring one choice to the alternatives. Since human beings are purposeful creatures, the study of incentive structures is central to the study of all economic activity (both in terms of individual decision-making and in terms of co-operation and competition within a larger institutional structure). Economic analysis, then, of the differences between societies (and between different organizations within a society) largely amounts to characterizing the differences in incentive structures faced by individuals involved in these collective efforts. Eventually, incentives' aim is providing value for money and contributing to organisational success.
Incentives can be classified according to the different ways in which they motivate agents to take a particular course of action. One common and useful taxonomy divides incentives into three broad classes:
Remunerative incentives
Remunerative incentives (or financial incentives) are said to exist where an agent can expect some form of material reward — especially money — in exchange for acting in a particular way.
Moral incentives
Moral incentives are said to exist where a particular choice is widely regarded as the right thing to do, or as particularly admirable, or where the failure to act in a certain way is condemned as indecent. A person acting on a moral incentive can expect a sense of self-esteem, and approval or even admiration from his community; a person acting against a moral incentive can expect a sense of guilt, and condemnation or even ostracism from the community.
Coercive incentives
Coercive incentives are said to exist where a person can expect that the failure to act in a particular way will result in physical force being used against them (or their loved ones) by others in the community — for example, by inflicting pain in punishment, or by imprisonment, or by confiscating or destroying their possessions.
Forms of incentives
personal incentives —which motivate an individual person through his/her tastes, desires, sense of duty, pride, personal drives to artistic creation or to achieve remarkable feats, and so on.
group incentives —which motivate a group of people through their tastes, desires, sense of duty, pride, personal drives to artistic creation or to achieve remarkable feats, and so on.
Incentive travel
Incentive travel, then, is basically composed of memorable and enjoyable trips paid for by the traveller's employer, with the explicit aim of encouraging employees to meet challenging business objectives through reaching or exceeding individual and/or group targets. These targets may occasionally involve non-sales aspects of the company, such as reducing staff turnover; but overwhelmingly incentive travel is used with the basic objective of increasing sales.
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With its strong emphasis on lavish fun, entertainment and indulgence, incentive travel is the form of business tourism that most resembles the type of leisure travel normally undertaken by individuals in their own time, unconnected with the workplace. Nevertheless, despite their superficial similarity to holidays and short breaks, incentive trips represent a distinctive travel product, which, due to its definite work-related purpose, belongs firmly in the category of travel for business.
General definitions describe this form of business-related travel in terms of its usage, one of the most commonly quoted being that used by the Society of Incentive & Travel Executives (SITE): 'A global management tool that uses an exceptional travel experience to motivate and/or recognise participants for increased levels of performance in support of organisational goals.'
Contests play an important role in incentive programmes, as they are often used to determine who within the company or sales team will be rewarded with the travel prizes on offer. For this reason, those on incentive trips are often referred to as 'incentive travel winners' or 'award winners'. This type of reward often takes the form of group travel - participants travel with other award winners, and often with their own spouses or partners.
Incentive programmes typically involve special entertainment, food and beverage functions, and either spectator or participative events, such as visits to a theatre or rafting or shooting. They may also include an actual work element, such as a conference or seminar, or simply a visit from a member of the company's senior management team who gives the participants a congratulatory pep talk.
Although most of these elements characterise the vast majority of incentive trips, there are differences of detail between national markets. In some developing markets (e.g. India), the incentive travel award may be a simple, off-the-shelf package or even an airline ticket, possibly with some accommodation thrown in. A not insignificant proportion of the US incentive travel business is in the form of individual incentives (e.g. for couples or foursomes), using an incentive travel package in much the same wa^ as a catalogue or merchandise item (BTF & BTAC, 1999). However, the more triaitional form taken by most incentive travel awards is that of group travel and a made-to-measure programme of activities and entertainment.