When dealing with new prospective clients, one of the most common questions encountered is, “What will an employee recognition program cost?” For new customers, the first thing we highlight is that programs should not be treated as a cost, but an investment in your people, your culture & your organisation. When you invest in employee engagement, it’s an investment strategy that will drive performance & culture within your organisation.
We measure our success by the outcome of our customers’ satisfaction. We help our customers drive engagement & build culture. Rewards are just the cherry on the cake. A key part of the cost of ownership is Billing! So, let’s talk about billing.
Billing!
The Issuance Billing Model:
The issuance billing model is when the points get paid upfront when those points are awarded when an employee receives recognition. We know not all points issued will be spent. The customer is effectively pre-financing points of which a portion will never be spent. It’s effectively like breakage on a gift card.
Example: $1 million worth of points are awarded to employees during January & every month during Year 1. The customer is immediately invoiced at the end of January for $1million & every month after that, totalling $12million in Year #1. It will generally take 3 months for a programme to ramp & If the average redemption rate is 65% in year 1, beginning in month #3, $5.85million will be redeemed whilst the customer has pre-funded $12million. The redemption rate will increase in Year 2, but this means that customer is paying millions of dollars in excess for no reason TOTAL COST Year 1 $12million
The Redemption Billing Model: (The Motisha Model)
The customer pays for the points as they are redeemed. In this model, the customer only gets invoiced for points once they are spent on rewards. This model helps ensure a higher return on investment because even in the most engaging programs, not all points will get spent. This is generally managed by a float which ensure maximum efficiency, zero pre-funding, zero risk & significant savings for customers.
Example: Take the same $1millon of points awarded in January. It again will take 3 months for a programme to ramp. Take the same redemption rate of 65% which would again begin in month 3. This means the customer would be invoiced $650k per month for 9 months. TOTAL COST Year 1 $5.85million, cost saving of $6.15million in Year 1 alone
Conclusion: When setting up a program, there are a wide variety of things to consider that may feel overwhelming. At Motisha, we practice what we preach. Our values are based on Respect, Trust & Transparency in everything we do. Reach out to us today, at Motisha.com
