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How Can Incentives Improve Employee Performance

How Can Incentives Improve Employee Performance

Any reward that motivates or encourages someone to complete a desired action is an incentive. According to good old Wikipedia, there are two types of incentives—intrinsic and extrinsic incentives.

Intrinsic incentives tend to be altruistic and do not involve an external reward. For example, when you find a way to set time aside each day to write a novel, simply knowing that one day you will have a finished book is considered an intrinsic incentive. This type of intrinsic incentive will motivate you to keep writing until you have completed the manuscript.

On the other hand, extrinsic incentives involve obtaining tangible rewards for completing certain actions or achieving specific goals.

Employee incentives are extrinsic. By offering your employees specific rewards they can receive as long as they complete certain tasks or reach concrete goals, you are essentially using extrinsic incentives to motivate them.

In this article, we will cover the benefits of using employee incentives and the types of incentives that your employees will appreciate most. Best of all, we will show you how your customer loyalty rewards program can incentivize your employees to do their best.


Even if your employees and sales staff are self-motivated, productive members of your team, you will still benefit from offering them incentives.

In fact, using employee incentives to improve the performance of your staff can ultimately benefit your entire team, as well as your company’s bottom line, in the following ways:

  • Incentives Motivate Employees
  • Incentives Build Employee Loyalty
  • Incentives Boost Overall Company Morale
  • Offering Incentives Demonstrates Your Appreciation
  • Offering Incentives Can Lead to Increased Revenue

Let’s take a look…

Motivates Employees

Earning a paycheck often provides enough motivation for an employee to show up on time, ready to do their best, especially if the employee experiences an intrinsic reward just by fulfilling the responsibilities of their position. That’s great! But you can encourage even your most productive employees to strive to improve their best by offering them incentives that they value.

Builds Employee Loyalty

As an employer, you might not want to acknowledge the fact that your wisest, most talented employees are probably keeping their eye on the job market and might even be in the habit of sending out their resumes from time to time to see if they’re eligible for higher paying positions at other companies. Employees that are rewarded for performing well on the job, however, are less likely to think the grass is greener. Meaning, incentives build employee loyalty.

Boosts Company Morale

Incentives have the power to infuse an average work environment with kinetic, impassioned enthusiasm. This benefit is magnified when employees are able to see how close their teammates are to obtaining incentive rewards. The friendly competition between employees can benefit the company’s bottom line, and when the entire team reaches a goal together, their collective morale skyrockets.

Shows Your Appreciation

Everyone appreciates being appreciated. When you acknowledge your hard working employees and show that you appreciate their contributions, the appreciation they feel as a result is a form of intrinsic reward, which can motivate them to keep up the good work. Remember, your staff won’t automatically know that you appreciate them unless you show them. They aren’t mind readers!

Increases Revenue

At the end of the day, the greatest benefit you will experience from offering your employees job performance and sales performance incentives is watching your business revenue increase. Incentivizing your sales staff will motivate them to generate more sales. Incentivizing your customer service department will help ensure they never lose their cool when dealing with difficult customers, which will positively impact customer retention. You get the idea. Incentives work, period.


If you’re still reading, then you’re probably convinced that using employee incentives will benefit your business, but you might not necessarily know where to start in terms of figuring out how and when to offer them. There are two important steps you’ll need to take. First, you must develop an incentive plan. Next, you must figure out what the incentives are going to be.

Let’s take a look at the first step…

Develop An Incentive Plan

  • Identify Areas that Need Improvement
  • Find Out What Motivates Your Team
  • Determine Incentive Eligibility Metrics
  • Communicate Business Goals to Your Team
  • Reward Successful Employees with Incentives

Once you’ve taken those steps, your entire team will understand the ultimate business goal they’re working towards and the reward they will receive for achieving the ultimate goal as a team as well as individualized rewards they will receive if they achieve milestones along the way.

But what are the actual incentives you can offer? There are five primary incentive categories you can use:

Types Of Incentives Your Employees Will Appreciate

  • Monetary Incentives
  • Recognition Incentives
  • Rewards Incentives
  • Experiential Incentives
  • Professional Development Incentives

In the next section, we’ll go over three examples of loyalty program incentive ideas that you can use to motivate your own employees as you see fit.


Bear in mind that an aspect of developing an incentive plan involves surveying your employees about the kinds of incentives they would appreciate, which we covered earlier. Try to incorporate your employees’ suggestions in a realistic manner and gain further inspiration from these tried-and-true incentive examples of how your customer loyalty rewards program can incentivize and motivate your employees just as much as your program members.

Referral Bonuses

A referral bonus is a type of incentive that motivates employees to recruit candidates to your company. These candidates can be clients, shoppers, subscribers, or other employees, depending on your goals. Offer your employees a fixed bonus every time they successfully sign up a shopper to your customer loyalty reward program.

Fun Swag

Does your loyalty rewards program include a swag shop? If so, you can incentivize employee performance by using swag items to reward employees for specific actions, tasks, and the completion of goals. Rewarding excellent work performances with your branded swag is inexpensive and thoughtful, and best of all, it will automatically turn your employees into walking billboards!

Teams Rewards

Rewards program “teams” are a relatively new concept within the world of customer loyalty rewards programs. Essentially, your current loyalty rewards members create their own rewards team or teams by providing their friends and family with a referral code to use upon sign up. Well, you can use “teams” reward points to motivate your employees to do the same thing! Using “teams rewards” is an easy way to motivate your employees to add people to their “teams” and build up their team—or teams!—quickly. Since there’s no limit to how many teams an employee can create using your loyalty program, the sky really is the limit in terms of the quantity of bonus points that your participating employees can earn.

For more employee incentive ideas, check out our article, Incentives to Motivate Your Employees.

Are you interested in launching a customer loyalty rewards program at your business? Loyal~n~Save provides businesses of all industries an exceptional rewards platform that shoppers love. Our loyalty program comes with a white-label app, making it easy for members to engage with the program from their smartphone. Your sales staff and employees can also get in on the rewards thanks to Loyal~n~Save’s “Teams” incentives that enable employees to reap rewards points just for signing up customers! Contact our loyalty specialists to learn more about this fun feature, and discover why shoppers, retailers, and sales personnel love Loyal~n~Save!

This article was written by Loyal-n-Save, an omni-channel customer loyalty solution for retailers looking to increase customer retention and new customer acquisition.


  • Employee Incentive Programs
  • incentive loyalty program

Posted on Sep 14, 2021


Danielle Dixon

Danielle is a content writer at Loyal-n-Save. She specializes in writing about implementing loyalty solutions proven to help a company grow.

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