Taico&Incentive&Services&Inc.&&&&&&&&&&&&&&&&&&&&845&228&4438 .

Taico Incentive Services Inc. 845 228 4438 www.taico.com Page 1

The Goodyear Story According to a recent report in Incentive, a U.S. trade magazine, Tom Gravalos, manager of special accounts marketing for the Akron-based Goodyear Tire & Rubber Co., was continually at loggerheads with senior management because they wanted him to use cash for their incentive programs. After years of defending his recommendations, he decided to settle the argument once and for all by running a program that rewarded half the participants with cash and half with non-cash awards. The program, which was designed to push sales of Goodyear Aquatred tires, was targeted at sales associates and managers at 900 company-owned stores and service centers, which were divided into two equal groups of nearly identical performance. For every 12 tires they sold, one group received cash rewards and the other received merchandise and travel awards of an equal perceived value, structured in plateau levels. The awards were not assigned a points value, and at each level the awards available varied in price sufficiently so as to make it difficult to establish what they were worth; invariably one of the first things that a participant does on receiving a points-based awards catalogue is value the merchandise. The program operated for six months during which time both groups received the same level of frequent promotional communications. At the end of the program the results were compared with the previous six months and the achievements of each group. The Results According to Gravalos the results were startling: “I fully expected the non-cash group to perform better in the program than the cash group, but I was startled by how great the margin of difference turned out to be.” The non-cash group out-performed the cash group by 46% The non-cash group produced a 37% greater increase in product mix sold vs. the previous six months while the cash group achieved only a modest increase The non-cash group generated a 31% return on investment vs. the cash group with a minus 20% ROI Goodyear has now become a firm advocate of non-cash incentive programs. Gravalos believes the same results would have been achieved even if the program had been targeted at non-sales employees or at consumers: “This isn’t a question of who you’re trying to motivate, it’s a question of human nature that transcends most differences that separate people,” he said in this article. With cash awards, the bottom line is always going to be “How much?” and there is usually never enough money in the budget to buy the level of performance required. Taico Incentive Services Inc. 845 228 4438 www.taico.com Page 2

On the other hand, non-cash awards appeal to the emotions that can provide a dramatic motivational force. Assuming you have structured your program so the objectives are specific, attainable, well timed, acceptable and measurable, and you’ve communicated with your participants on a frequent basis, then the question participants ask is, “What’s in it for me?” Providing your program offers the choice of awards that reflects the needs and desires of your participants, and quality brand names that have been purchased at the right price so as to offer a higher perceived value, then there is no reason why your next incentive program can not achieve results similar to the Goodyear experience. Diebold – Providers of ATM Machines switches its cash incentive program to Merchandise and Travel. Making the switch from cash incentives can be a leap of faith, but the move certainly paid off for Diebold, Inc, provider of ATM machines. Get this: Diebold replaced its traditional cash awards with merchandise and travel. The program, which targeted all employees, increased sales more than 16 million in the first year. Many companies are reducing their cash incentive budget and increasing results simply by creating a solid recognition program Gulf Oil Case Study Sales Sales No Incentive Traditional Non-Cash Program Region 1 (Control Group No-Incentive) Region 2 (Traditional Non-Cash [merchandise] Program) Region 3 (Non-Cash [merchandise] Awards-Double Value Region 2) Region 4 (Cash Awards-Equivalent to Region 2) Region 5 (Cash Awards-Less than in Region 2) Region 6a (Cash Awards-Twice value of Region 2) Region 6b (Cash Awards-Four Times value of Region 2) Region 6b (Cash Awards-Six Times value of Region 2) P R O G R A M P E R F O R M A N C E Gulf Oil concluded that it can take up to six times the amount of cash to do the same job as noncash incentives. Taico Incentive Services Inc. 845 228 4438 www.taico.com Page 3

Here's why. Once basic needs are met through adequate compensation (and it's very important to stress that employees must be adequately compensated before these programs can work), then employees are typically looking for something more. Humans are emotional beings and therefore motivating them by touching their emotions can be very effective. How do tangible awards such as merchandise and travel touch their emotions? In many ways: People can dream about the awards, envision themselves on that European vacation, or watching that state-of-the art television. There is an emotional connection. In addition, tangible rewards give recipients bragging rights. They're proud to show off what they've won, or talk about their trip. How many people run over to their neighbor's house and show their bonus check? It doesn't happen. Also each time that recipient uses that reward or remembers that trip, the positive memories are reinforced and that results in long-lasting positive feelings toward the company. One of the major problems with cash awards is that they are often lumped in with a paycheck and used to pay bills, or buy groceries. Because they are lumped in with a paycheck recipients of cash awards begin to view them as compensation. Eliminate a cash bonus program and in the eyes of that employee you have cut his salary. Programs with tangible rewards can be cut back if necessary without the same level of repercussions. Gulf Oil - Three Principal Findings: n Any incentives are likely to produce some results n Doubling the value of merchandise awards does not automatically double incremental performance n Cash does work.but it can take up to six times as much to do the job of non-cash incentives Wirthlin Worldwide The following are the results of a survey conducted by Wirthlin Worldwide (March 1999) of 1,010 people who were asked how they spent their last cash reward, cash incentive or cash bonus. Bills Do not remember Never received cash reward/bonus Gifts for family Household items Special personal treat Savings Vacation Something else 29% 18% 15 % 11 % 11 % 9% 11 % 5% 2% RESULTS: 62% of Cash award recipients either spent their reward on bills or didn’t remember where their reward money went to. Even worse, 15% didn’t even remember that they received an award!! - No lasting motivation to excel! Taico Incentive Services Inc. 845 228 4438 www.taico.com Page 4

A Note from the President: The companies in this report used a professional Incentive Services partner to help them plan, strategize, implement, and manage their programs. Before launching your own program, we recommend that you consult with an expert on the current options available. We would be honored if you choose us for a free consultation and analysis of your program and goals. For over 25 years Taico has provided fresh ideas combined with cutting edge technology. Our newest platform, IncentiWeb, has over 7500 hours of programming invested since it was introduced in 1998, making it worthy of being named Website of the Year by Incentive Magazine. Sincerely, Taico Incentive Services, Inc Adele Aguirre President Taico Incentive Services Inc. 845 228 4438 www.taico.com Page 5

The program, which was designed to push sales of Goodyear Aquatred tires, was targeted at sales associates and managers at 900 company-owned stores and service centers, which were divided into two equal groups of nearly identical performance. For every 12 tires they sold, one group received cash rewards and the other received