Incentium…formerly VIP Gift, Closes its Doors

In our opinion it’s never a good thing when an incentive award company has to close its doors. It doesn’t help the clients that were using their services and were notified only after the doors were closed (up to the lawyers of course), it doesn’t help the incentive industry as it often forces clients to question the validity of any non-cash award solution, and it certainly doesn’t help the folks who are working for the company and find themselves out of a job. There’s nothing positive in any of these situations, unless you are a competitor who gets lucky enough to pick up the pieces.

While we don’t know the reasons for the demise of Incentium, we can only guess and offer an opinion that is based on many years of experience in the incentive industry. We do know from competitive experience with Incentium that they were the low priced company in the gift card and debit card award field. When it came to selling bank debit gift cards and merchant gift cards they sold them without a fee to the client. This was unheard of because these awards carried very little profit and without fees no one could make any money. What we didn’t realize at the time was that they actually rolled the fee over to the participant in the form of activation and usage fees. We don’t feel this is a very fair approach, that is to penalize the employee on redemption, but evidently their clients didn’t mind as long as they got the card at face value and nothing more.

So is there a problem when you have a price that’s too good to be true? You often hear that if it is too good to be true, it probably isn’t true. In the case of Incentium it was true as they started their company on that premise and evidently it was successful in the beginning. Then they started to grow.

For some reason, almost every new incentive company seems to think that they need to be a full serve incentive supplier. Instead of sticking to their roots and the things that got them there, they want to expand and sell everything. Theory is that the bigger the award mix to sell the more money you’ll make. Well maybe. What they didn’t count on was that regardless of the other higher margin awards that you add to your award mix, the participants still wanted and redeemed for the debit and gift cards. That happens in 90 -95% of the cases, sometimes more. So you add some heavy costs to your overhead to provide full award mix service, but in the end the participants order the least profitable award…the gift cards.

The incentive industry is a commodity business, virtually every one of the awards companies makes their money on selling awards, and most of them give away their intellectual property to get that business. Full service becomes just a cost that is not justified by the profit structure, but by the time they build it the company is stuck. Clients are reluctant to pay fees of up to 25% to 30% to get the same thing they got before for no fee.

This is a downward spiral that incentive companies can get into when they open their business with low or no fee pricing just to get into the business. They establish a pricing floor that is difficult to live up to, especially when they try to move into a more full service deliverable.

If you want the low cost provider for gift cards, you can still find them. They are the ones who maintain their low cost model and stick to what they do best, fulfill gift cards. There is always temptation to give the clients everything they want for fear of losing them. But be careful if you are one of those clients and remember that if the price looks too good to be true, you may wind up searching for a new award supplier to complete your incentive program.