- Without careful planning and consideration, sales incentive programs often end up having no effect on sales performance
- Sales incentive programs should be carefully designed to encourage, recognize and reward extra effort
- Here are eight keys to a successful incentive program
One of the first-known references to the term “spiff” occurred in an 1859 dictionary of British slang, which defined a spiff as a reward given by retailers to salespeople who successfully sold old-fashioned or undesirable products. This concept of an additional award for selling extra goods and services has evolved into our modern notion of spiffs and other sales incentives.
Sales incentive programs are usually an attempt to increase a certain sales activity (e.g. prospecting, appointment setting). They might also be used to promote a specific product, service or event; develop a vertical market; or acquire new accounts. However, without careful planning and consideration, sales incentive programs often end up having no effect on sales performance, over- or under-rewarding reps, or actually causing conflict with the desired sales behavior. Here are eight keys to a successful incentive program:
- Align rewards with business goals. An incentive program must complement the sales compensation plan and align with specific goals for individual, account, territory, team and segment performance.
- Make the program transparent and measurable. Reps must understand how to earn rewards, how progress is measured and what thresholds apply. Avoid discretionary awards or chance-based winnings.
- Engage sales leadership. Executive sponsorship and engagement – especially first-line sales managers – must be visible and explicit. Provide managers with tools (e.g. posters, T-shirts, travel brochures) to help build enthusiasm.
- Ensure objectives are reasonable. Objectives and thresholds should be aggressive but achievable. Rewards should be scaled to the level of accomplishment.
- Consider multiple prizes. Offering multiple levels of achievement can help extend the motivational effect. Rewards can also be tailored to reps’ interests with a catalog prize service.
- Use rewards sparingly. Incentive programs should be used in moderation to maximize impact and avoid creating the perception that they are part of the standard compensation structure.
- Consider legal, regulatory and tax implications. Organizations must take into account diverse regulations, cultures, tax liabilities and restrictions when designing program rules and rewards.
- Publicize programs, progress and results. Because public recognition is often the prime motivator for sales reps, be sure to broadcast success and show reps where they stand to drive engagement.
Sales incentive programs should be carefully designed to encourage, recognize and reward extra effort. They should not be used as a quick fix for bad processes, product deficiencies, gaps in the commission plan, or broad issues impacting sales performance (e.g. skill deficits, lack of training). Use the eight factors above to analyze and design an incentive program – before you start spending extra money on rewards that might have a negative effect.