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What Is Incentive Motivation?

By Justin Riche
Updated May 17, 2024
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Incentive motivation is a psychological concept that is based on the premise that people respond to incentives. That is, individuals are normally compelled to act in a given manner if there is a perceived benefit for them. The field of marketing, for instance, employs the incentive motivation concept in campaigns in order to attract and retain customers. One way many companies achieve this is by implementing incentive programs to create a loyal customer base. For example, they may reward loyalty points per purchase, thereby encouraging regular purchases so the points can accumulate up to a certain level, and then the customer would receive a given amount of discount.

Essentially, incentive motivation may create a mutually beneficial relationship between a business and its clientele. The customers may benefit from regular discounts, which may further translate into savings. On the other hand, businesses may receive a steady and regular income from loyal customers. Moreover, through incentive programs, businesses may be able to gauge customer behavior and pinpoint areas on which to focus and practices to abandon. This could also be pivotal in the effort of brand building and reinforcement.

Studies have shown that purchasing motivation is underpinned by certain incentives. For instance, a customer may see a marketing piece which promises two pairs of shoes for the price of one for a limited time only. In this instance, the amount of discount and the limit placed on time can be attractive and prompt a rapid response. Accordingly, this could boost sales in a relatively short period.

Unfortunately, in some cases, incentives to buy particular products could come with a downside. For example, the effects could prove adverse to individuals who are impulsive shoppers. This is especially true if they are responsive to sales and all kinds of discounts, which may be detrimental to their financial health if they are compelled to spend unwisely and unnecessarily. Therefore, not all incentive motivation efforts are beneficial.

The concept of incentive motivation is not restricted to any field. Firms use this concept in their many internal programs to attract and maintain talented individuals who are vital to the achievement of their goals. One of the ways through which firms attain this objective is the use of remuneration policies. These outline the employee pay structure, the type of performance that warrants bonuses, trips to exotic places, and other perquisites.

For example, an employee may work extra hard in order to earn a bonus. A salesman or woman may pull out all the stops so he or she can substantially increase sales. Thus, he or she increases the chances of earning a trip abroad paid for by the company. Here, both the firm and employee benefit, generally, as profits are increased, and the employee enjoys the bonus or any other type of perquisite.

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