Micro rewards. Macro rewards. Mega returns.

Different kinds of rewards have different behavioural pros and cons. But, used in combination, they can produce outstanding results.

Almost all employee engagement, channel incentive and customer loyalty programs incorporate some form of tangible, extrinsic reward. And while there is, of course, a vast middle ground, in general there are two kinds of rewards – micro and macro.

Each have their own distinct advantages and pitfalls, good for some things, less good in other ways. However, the question to ask is not so much about which is better; rather, it is about how to use the two together to maximise the potential of rewards – both for your program participants and your business.

Marvellous micro

Micro rewards are, as the name suggests, small. They can be more frequent, are usually easier to obtain or earn, and can influence behaviour change through immediate gratification.

For example, when an employee has exhibited great values-aligned behaviour, that behaviour can be recognised and reinforced with a small cash reward, or a sleep-in day. Distribution channel partners can be given a small cash incentive for each sale. And customers can be given a discount for joining a loyalty program or for purchasing a product, or a freebie after their fifth purchase.

Micro rewards are great short-term motivators, and are very good at encouraging or enticing people to show immediate behaviours or make on-the-spot decisions.

On the other hand, they can offer diminishing returns over time, especially if overused, as they can become routine, expected, and unexciting. As the concept of “hedonic adaptation” suggests, positive experiences can quickly lose their novelty.

From a customer perspective, there’s also the risk of churn, as it’s easy for competitors to offer similar or more novel rewards. In these cases, any loyalty that the macro rewards have built up is shallow.

This suggests that micro rewards can play an important role in initiating engagement or loyalty, but are less successful sustaining it. At least on their own.

Magic macro

Macro rewards are bigger, more valuable rewards. Not only because they are more expensive, but because they are harder to obtain and are given less frequently.

As an example, I know someone who worked at a company that gave quarterly employee awards, one of which she won. It was a high-end Bluetooth speaker, which she still uses often, almost a decade later. And though she no longer works at the company, she still considers herself to be an advocate for them, and frequently recommends their products.

In the context of channel partners, perhaps the best example of a macro reward is incentive travel, which is awarded to top performers. Think motor car dealerships and salespeople incentivised with a trip to a Grand Prix. This is a once-in-a-lifetime opportunity for any motorhead, and would certainly encourage them to sell more (if sales is the reward criteria).

And if you’re a repeat customer at that dealership, you might be rewarded for your loyalty with invitations to exclusive events, car launches, or a week to trial a new model.

Macro rewards can be meaningful by virtue of their size, rarity or personalisation, and because of that they make a more emotional and lasting impression on the recipient. As the Incentive Research Foundation has observed: “emotionally compelling rewards hit the mind harder, are remembered longer, and influence the internal brand the most. Bland rewards, on the other hand, are labeled for deletion and sent to the brain’s ’shredder’.” ¹

What macro rewards are especially good at is motivating long-term goals. If you want that Bluetooth speaker, or the trip to Monaco, or to be the first to drive the new model, you know what you have to do: be an engaged employee, or high-performing channel partner, or loyal customer. And that means extremely high engagement, over time.

Of course, macro rewards are not without their own disadvantages. For example, a reward can actually feel too big, too far away, too difficult to obtain, to the extent that people don’t push themselves. In which case the macro reward has actually been demotivating – the opposite of what was intended.  Macro rewards can also be too narrow, or too unlikely – for example, when there is only one grand prize – so people don’t even try. It may be counter-intuitive, but sometimes too big a reward can attract fewer participants or entrants.

The best from both

The ideal, therefore, is to combine micro and micro rewards.

Micro rewards are great at initiating desired behaviours from employees, channel partners or customers. They get engagement going. They’re also useful in helping to sustain that engagement while people are working toward the bigger goal – the macro reward.

So, for example, employees could be incentivised with escalating monthly, quarterly and yearly rewards. Channel partners could be given small cash incentives after every ten sales, with the best-performing few given a holiday. Customers could be awarded points for purchases until they have enough to redeem for the Bluetooth speaker.

Micro rewards provide initiative and acknowledge consistency, while macro rewards mark milestones and special achievements.

In short, it’s not a question of either/or; it’s a question of how to incorporate both.