The world of sales incentives is complex. Whether you’re thinking about implementing a strategy, or are currently managing one, you probably are already aware that there are a lot of factors to consider: rules structure, overall design, communication and marketing, administration, demographics, awards, reporting and analytics, not to mention the behavioral side of sales incentives that ultimately influences all of these decisions.
Fortunately, we recently put out an eBook on this topic, titled The Essential Guide to Running Successful Sales Incentives. In this guide we highlight many of the key components that can help guide you to an effective sales incentive strategy, and if you’re interested in this sort of deep dive on the subject, we recommend that you download it. But for now, while it’s certainly important to look at these various components individually, if you’re interested in this topic, we think a good place to start is by asking 4 important questions:
1) How does a sales incentive work?
Sales incentives are not commissions. They are not cash bonuses. Sales incentives are motivational tools designed with specific objectives in mind. These key performance indicators or KPIs can be anything from growing market share to demonstrating product knowledge. Increasingly, more and more companies are tailoring their sales incentive strategy to fit their more specific KPIs, rather than a general “increase sales by x” goal.
Achieving these KPIs can be accomplished through a variety of incentive structures, be it segmented populations, tiered sales goals, or individualized targets. Nonetheless, despite these variations in structure and strategy, most effective programs will typically utilize a few common features:
- Challenging, yet achievable goals
- Robust reporting and data analysis
- The ability to measure program success
2) What types of sales incentives are there?
Based on the variety of possible factors involved, a sales incentive can take on handful of different forms. The most common types include:
- SPIFs (not really a sales incentive)
- President’s Clubs (aimed at motivating top performers)
- Middle 60% (targets the segment of a salesforce with the largest growth potential)
- Enablement (helps a channel operate more effectively)
- Mindshare (grows awareness among an indirect salesforce)
- Special promotions (helps with the sale of specific products)
- Team-based (often includes non-sales personnel who have contributed to a sale)
3) How do you measure the effectiveness of a sales incentive?
To figure out the ROI of a sales incentive strategy, typically one would take the sales increase generated as a result of the strategy and subtract the overall cost of administration. It sounds simple enough, but there are actually myriad factors that can affect the outcome of a of a program, such as delayed sales, increased advertising, market conditions, etc. These factors make extrapolating the true value of a program from a seemingly straightforward idea like “increase in sales” somewhat more challenging.
Potential solutions to this involve field testing, post-hoc measurement, outcome-based measures, and the utilization of formal ROI tools like the Phillips ROI Methodology Model. There are also qualitative assessments like participant surveys that enable companies to get a broader picture of how effective their incentives strategies are, not just in terms of KPI-achievement, but also as far as salesforce motivation is concerned.
4) Do sales incentives really work?
This is the most important question. The principal idea is that, yes, if sales incentives are done right, they can be extremely effective. Expectations of KPI-achievement and overall ROI are often determined by the type of strategy being implemented, as well as the industry in which it is operating. In our eBook, we cite figures from programs in a variety of different spaces, targeting a diverse group of KPIs.
The ROI of these programs ranged from 23% to more than 100%, with additional success indicators tied to the achievement of KPIs like the completion of eLearning and training modules, an increased customer base, and VAR market share. In general, we found that the effectiveness of a program becomes even more pronounced when business processes beyond pure sales impact are taken into account.
Conclusion
Although every business’ main goal is ostensibly to increase sales, a sales incentive can often achieve far more when structured the right way. As the challenges of a new decade begin to reveal themselves, having a sales tool that can strategically maneuver through these challenges should prove invaluable in the years to come.
Want more information about the how, the why, and the ROI of a sales incentive strategy? Download our exclusive Sales Incentive eBook and discover how you can get the most out of your salespeople!
