How to Create a Great Sales Incentive Program
Every sales organization has room for improvement, even those at the pinnacle of their industry. The overall goal of all sales incentive programs should be to help all sales people rise to new levels of success and excellence.
By looking at the performance of the people on your team, you can develop an approach designed to bring out the best in each person. Because each person will likely respond to different things, it's good to include various elements in your program, such as inspiration, training, competition, and rewards that motivate the range of individuals—from those driven by primarily by short-term rewards to those motivated by larger long-term rewards. An intelligently designed program will consider the impact of the program on all of your sales team members.
How to get the most out of your sales incentive program
When designing your program, it can be helpful to take a very general look at the people whose performance you are looking to influence. Because the performance of every individual is the result of many influences, this is only the beginning of the process. We suggest that you think of your team as divided into three categories:
- Top Performers The top 5% or 10% of your sales performers will likely demonstrate a high level of motivation, skill and competence. You will want to handsomely reward and recognize these employees as models of excellence in a way that inspires your middle performers to emulate them. As your most valuable sales people, you will also want to find ways to help your top performing sales people to reach new levels of success and to build long-term satisfaction and company loyalty from this group.
- Middle Performers The middle 80%-90% of your sales team performers typically offer the largest opportunity for sales improvement. Your program should be designed to help members of this group to grow in sales performance. It is important that members of this group believe that they can grow, and important that success in the program is appreciated, recognized and celebrated—to help culture a habit of success and higher performance.
- Low Performers Your lowest performers may be identified by an excellent sales incentive program. If they can be motivated and trained to rise to a new level, an outstanding sales incentive program will likely show that. If not, the program may help clarify which sales people are not properly suited to their positions, and may need additional training or assistance.
Watch out for common incentive pitfalls
Ideas that seem ingenious may turn out to actually hurt sales. A sales incentive program should be carefully avoid common traps:
- The gold-silver-bronze trap You may decide to budget your sales incentive program based on a certain fixed amount of money. You may decide to split up the budget into a first, second and third prize. It sounds good because it's easy to budget and easy to get approval for. What's the problem with this approach? In many sales organizations, the greatest potential for sales growth is by improving the sales performance of the 80%-90% of your sales team in the middle of the performance range. But how will these middle range performers respond to the first-second-third place award program? They'll assume that your regular top performers will win the rewards. And they'll probably be right. The result? You may end up giving rewards for performance you may have achieved anyway, and thrown away an opportunity to build sales in the crucial middle-performer group. A better approach is one that levels the perceived playing field by giving points based on individual performance, not by giving awards relative to the performance of other sales people. In other words, award points based on sales, and let everyone earn points based on their sales. This creates a win-win-win-win-win program, where all excellence is rewarded. Then, during the program, use the performance of your top performers as an example of what can be achieved by everyone in the program. This program may be a little harder to get budget approval for because it's a little harder to get approval for an open-ended budget, but it's well worth the extra effort because you'll likely find the program a lot more successful because it is much more powerful. To get approval for the program, you'll find it easier to sell the program internally by designing it so that the incentive rewards cost will be paid for out of increased sales.
- The "everyone will love this" trap Management may get the idea that everyone will want to win a certain gift or a vacation to a certain destination. It may sound like a great idea, but it's important to keep in mind that everyone is motivated by different things. It's better to reward points and then select items from the reward collection as examples of what can be earned in the program.
- The "beat your quota" trap This idea is simple: take someone's sales from the past and ask them to beat it to earn rewards. It sounds great because your cost is theoretically paid for from increased sales. But this approach fails to reward repeat high performers, and can eliminate people who may have had an unusually high sales or period of sales. It can frustrate and annoy excellent sales people instead of motivating them. It often has the tendency of encouraging people to book their sales based on the incentive contest periods. A better solution may be to set a minimum level of sales to qualify for rewards and then let everyone earn awards based on actual sales.
- The "cash and gift card " trap Sales people work for money and want to earn money. Money can drive sales, and the promise of more money can drive increased sales. So why not offer cash or a gift card as the reward instead of reward merchandise and travel? It sounds so simple! It sounds so easy to administer! If it were this easy, the incentive industry might never have been invented, and would not be serving the world's largest sales organizations. As astute sales management discovered long ago, offering rewards other than money can be a much more powerful motivator than money itself. There are many, many reasons for this. Money is of course an important motivator, but many other factors affect individual motivation. That's where great incentive programs do their magic—by addressing the many less obvious—but very important— factors that drive individual motivation. If you ask participants what would motivate them most, almost 100% of them will tell you money. But if you look at the research, you'll see a different story. If someone suggests that you offer cash or a gift card as the reward for your next incentive program, ask if they've seen the research generated over the years comparing the results of cash-based incentives vs. merchandise and travel incentives. If someone in top management insists on using cash, ask if they're willing to see if the huge volume of research will show the same results in your organization, by dividing your sales force into two different groups, and see which method gets the most return per dollar!
10 important steps to creating your program
Chances are that you already have at least partially completed some of the steps below. We'll be happy to help you finish the process:
- Decide Your Goals Your goals may be increase overall sales, increase sales of certain products, stimulate sales of new products, improve cross-selling, up-selling or a wide variety of goals (see "What are Your Goals" on our Sales Incentives page). You may have multiple goals, or multiple groups, each with different goals.
- Decide How to Measure the Accomplishment of Your Goals You might use sales figures, customer satisfaction ratings, sales self-reports, etc.)
- Decide the Award Budget for the Accomplishment of Each Goal For example, $XXX per unit of sale over XXX.
- Decide the Type of Reward You may want to offer merchandise, travel, or customized items. We recommend that you avoid cash or cash equivalents such as gift cards so that the rewards become specific goals chosen by each sales person—such as a digital camera or Caribbean cruise.
- Decide how you will promote the program. How will you get people excited about the program before it starts, how will you kick off the program, and how will you keep people excited after it starts?
- Get budget approval. Make this easy by showing different scenarios of sales results and what your program costs and results will be at each level. If you can demonstrate that it's a win-win at different levels of performance, it will be a lot easier to get approval.
- Finalize Details Who's eligible, how sales people will select gifts, program rules, how to announce program to employees.
- Select Program Start Date
- Kick off the program with a fun, exciting splash! Get people on board and excited about the program by announcing it in a big way, or by getting people excited about a "major announcement" before you present the program, enhancing excitement in advance with announcements, posters, meetings, prizes, etc.
- Keep the momentum going! Promote, promote, promote! Find ways to promote the program, and keep promoting the program! This is where a lot of program directors drop the ball. Be sure to keep the attention on the program by heaping the praise on those who succeed. Again, use announcements, emails, newsletters, meetings, and every opportunity to cheer people on. If properly handled, everyone will want to be part of the success. Those who succeed will inspire the others.
An excellent sales incentive program works to build the motivation and skills that will propel a sales person to new levels of performance. Outstanding incentive programs are designed to significantly sharpen the focus on what's important, and to keep the focus there in a clear and positive way. By motivating and quickly rewarding each higher level of performance, great incentive programs are designed to help sales people culture new habits for higher and higher levels of performance.
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You may have questions about setting up your program. We're here to help whenever you need assistance.
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