Think “treat” value and “trophy” value.
When you choose the right incentive merchandise, (special items that a person wouldn’t normally “treat” themselves to), you increase the perceived value of the reward. Cash oftentimes is used for basic necessities in life, and the psychological value of the reward is therefore squandered in daily drudgery.
There’s also “trophy” value – a non-cash award can be proudly used, worn or displayed, showing colleagues and coworkers that a significant achievement has been reached. This is not the case with dollars, which simply go into a bank accounts or wallet and can be quickly forgotten or confused with regular compensation.