Sales incentives succeed when they cater to a rep’s individual strengths and weaknesses, a sales team’s collaboration and a deal’s unique characteristics.
In this article, we’ll compare and contrast traditional sales incentive schemes with modern incentive programs, outline five types of incentive programs you can use today, explore sales incentive ideas and discuss how to apply the right sales incentives to your business.
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Traditional sales incentive schemes
Before the Internet took off, prospects relied almost entirely on salespeople’s expertise to make a final purchase decision.
At the start of the buying journey, reps had a considerable role to play in terms of educating prospects and building customer relationships. This structure made it possible to set broad-scale objectives based on metrics that were predictable and easy to measure.
For example, an incentive could have been based strictly on how many units of a certain product was sold in a month, quarter or year. There was less of a need to take other factors into account, such as the customer experience or how the competition was influencing the decision-making process.
The sales rep owned the relationship with the customer and had an easier time closing the deal. Based on this reality, it was more straightforward for companies to forecast outcomes and standardize KPIs. Reps were also over- or under-rewarded based on factors out of their control, like territory strength.
In the old model, the sales force was incentivized solely on quantifiable output rather than behavioral performance. This is no longer the case.
How have modern sales incentive programs changed?
Today, the customer persona varies and it’s difficult to pre-determine behavior as the buying journey and sales processes are more complex than ever before.
As customers are empowered to source information on their own, they rely on reps for supplementary information at later stages in the buying process. This is happening in both inside and outside sales tactics.
Because of this, reps no longer own the full buying process. They are competing against an influx of free information and an array of competitors in the same space.
Tactics like social selling are helping reps gain access to buyers at critical moments in the buying journey. Using social media to connect with prospects is just one of many ways to build meaningful relationships in this day and age.
But as selling and buying processes have expanded in nature, so has the role of the sales rep.
Today, customers want to interact with a rep who is trustworthy, understanding and has their best interests in mind.
Many prospects also want to talk to more than one person at a company before making a final decision. This can range from sales reps to sales managers to account managers and more. Customers care about the products they’re buying and the company they’re buying them from, so talking to multiple people in the organization helps them to establish trust.
Sales managers have to focus both on individual-based selling and team-based collaboration to determine the ideal ratio for success.
You must take into account the varying characteristics, strengths, weaknesses and specialties of each rep on your team and figure out how to incentivize them individually. Additionally, you need to incent your entire team to work together to close complex deals with many stakeholders involved.
How can you do that without overcomplicating your incentive scheme? How do you motivate reps to perform at a high level both individually and as a team?
The answer lies in aligning your incentive program with your chosen sales methodology, KPIs, targets and objectives. In multi-channel scenarios, it will be equally as important to reward your reps both individually and as a collective unit.
As not every team, rep or role is created equal, it’s important to gain a broad understanding of your options before deciding which sales incentives program to implement in your business.
Five types of sales incentive schemes
New sales incentive schemes are multifaceted. There are varying compensation options and several factors to consider.
Your sales incentive program should motivate reps to work together to make the company more competitive and profitable. The program should align with your company culture and promote a positive and productive work environment.
Ultimately, your incentive scheme should excite your reps and make them feel valued and motivated to work hard.
1. Role-specific incentives
The best way to do this is to incentivize reps based on their individual capabilities.
For example, you may have a sales superstar on your team who consistently outperforms the average rep. If you set a broad incentive goal, your sales superstar will most likely hit the target faster than the rest of your team.
If that’s the case, what motivates your top performers to continue working at top capacity after they’ve reached their sales goals? It’s human nature to take your foot off the gas once you’ve reached your destination.
Instead, you can set a tiered incentive scheme with a higher reward per subsequent milestone reached. This way, your sales leaders will be motivated to outperform themselves, and your average reps will still have an attainable target to hit.
2. Split incentives
Many products and services are highly complex and require sales specialists to assist front line sales reps with the sale.
For example, a SaaS company selling white-label applications may consistently add new features to their software developer kit (SDK). As these features are rolled out, the specialized product manager on the sales team may need to assist with in-depth explanations of the product’s new capabilities.
In this case, there are two main stakeholders involved with the sale: the sales rep and the sales specialist or product manager.
Alternatively, you may want to pair two or more reps on your team to work together to close a deal. The reps may work in different regions, for example, and both need to get their regional prospects on board in order to help close the deal.
If this is the case, a split incentive program may encourage your reps to work together and collaborate on their efforts. It’s also the fairest way to compensate all parties involved in the close.
You can either split the incentive down the middle or by a predetermined proportion. No matter what structure you choose, make sure you have clearly defined the rewards ahead of time in order to reduce tension and promote fairness.
3. Presales incentives
As alluded to above, today’s sales process is more complex than ever before. Customers are inundated with advertisements and outreach from companies that sell similar products and are trying to outperform one another.
This results in the customer taking a longer time to compare and contrast their choices. They may request demos from each company and spend time researching the benefits and drawbacks of each. Ultimately, the entire customer journey is elongated because of this extended evaluation period. A rep may be in contact with a prospect for a year or longer.
In extended sales scenarios, it may be worth rewarding your reps throughout the various sales stages in order to keep them motivated. This will encourage both short-term and long-term focus.
Ideally, you will assign a balanced portfolio to your reps comprising both short and long sales cycles. But in a situation where a deal turns into a long-scale pursuit, presales incentives can help keep your reps on the ball.
4. Omnichannel incentives
Digital channels and AI continue to develop and many customers are interacting with both humans and computers at various stages of the buying cycle.
However, regardless of how smart computers are, they can’t replace human emotion. Reps will always be needed as part of the consultative process to listen to prospects’ needs, identify pain points and nurture relationships.
When approached correctly, omnichannel incentives help reps to see digital channels as an asset rather than a competitor. Omnichannel incentives focus on rewarding reps for the part they play in the overall process.
For example, if a customer referenced an automated targeted email series as the reason for engaging with a rep, and then the rep went ahead and closed the deal, the rep could be recognized for their efforts post-lead qualification.
No matter how you set it up, take into consideration the role your rep plays when a digital channel is involved and compensate accordingly.
5. Advanced-analytics-based target setting
In many complex sales scenarios, it can be difficult to forecast customer demand and set reasonable targets, objectives and quotas.
In turn, this can make curating a fair and motivational incentive program difficult.
The best way to combat this issue is by using advanced big data analytics to help create more accurate sales projections. The system will evaluate past data sets based on several variables to come up with a predictive model for customer demand.
The more you leverage these systems, the smarter and more accurate they become over time. This can help you create a systematic incentive program that rewards reps on both metrics and value-driving behavior.
For example, by evaluating how a rep’s specific actions helped move a deal through the pipeline, you can replicate the results through activity-based selling. Activity-based selling places a higher value on the actions that a rep takes throughout the selling process than the actual outcome and results.
Rewarding reps for how they close a deal, rather than how many deals closed, can significantly enhance performance. Focusing on quality over quantity helps you standardize your sales process and create more meaningful incentive goals.
This strategy is significantly aided by advanced-analytics-based target setting, as data helps you understand what does and doesn’t work and allows you to adjust as needed.
Sales incentive ideas
There are two main ways to gift sales performance incentive funds (SPIF): cash incentives and non-cash rewards. Both can be effective when applied to the right scenario.
Regardless of which reward method you use, the key is figuring out what percentage of a reps paycheck should be salaried vs. bonused, and what incentives should be doled out individually vs. to the team as a whole.
Research shows that across the board, the happiest employees are the ones who feel appreciated, valued and heard. In fact, 58% of people say that they would feel more engaged if leaders gave recognition to the job they were doing.
An attainable and fair SPIF can make reps feel recognized and valued. Contrastingly, a scheme that feels out of reach can have the opposite effect and aggravate team members.
The most traditional way of rewarding a sales rep is with a cash commission structure. A rep is paid a base salary and rewarded monthly, quarterly or yearly on top of that.
The salary recognizes that a salesperson spends time not only on selling but also on administrative tasks. Maintaining an organized pipeline, updating customer information, prospecting, cold calling, lead-qualifying and more must all be compensated regardless of the results.
Depending on the commission scheme, reps will then get additional monies based on a specific set of predetermined sales goals.
For example, a commission-based program could entail paying reps X% of the revenue from a closed deal. Or, $X per all sales after reaching X in closed deals in X amount of time (a week, a month, a quarter, etc.)
Cash rewards are often paid via a rep’s paycheck. It is best practice to pay out commissions on a predetermined schedule regardless of whether or not a customer has fulfilled their invoice.
This way, reps are rewarded more immediately for their hard work and you avoid demotivating a rep by making them wait too long for their reward.
Pro-tip: Don’t cap commissions. Administering a goal-ceiling sends the message that once that quota is hit, the hard work is over and reps can relax. You want to motivate your reps to push above and beyond their previous achievements. Capping commissions guarantees that you won’t have to pay a larger amount in bonuses, but it also limits your potential revenues. If you take the time to accurately forecast your incentive goals, you shouldn’t run into an issue.
Non-cash rewards give you more freedom and flexibility in how you motivate your sales team. They allow you to get creative and have fun, something that can be incredibly motivating and help to reinforce company culture.
Non-cash rewards are gaining traction in a big way. In the 1990s, approximately 25% of US companies were using non-cash rewards compared to 80% in 2018.
While cash is often firmly viewed as compensation, non-cash rewards are more dynamic. Cash is a business transaction, non-cash is a true reward. They are fun, memorable, shareable conversation starters. It can be difficult and awkward to discuss cash rewards, but non-cash rewards create opportunities for team bonding.
Thus, they tend to have a positive impact on team pride and overall performance. The more connected reps feel to the company they work for, the harder they will work to do a good job. As stated earlier, recognition can be more powerful than anything else and non-cash rewards are a great way to show appreciation.
Here are some examples of non-cash reward ideas:
- Gift cards: Choose a medium that is meaningful and relevant to your employees. A gift card for a restaurant has a very different connotation than a gift card for gas, for example. Yet, depending on your industry and employee-type, both can be incredibly valuable.
- Travel: Most people love a free trip so a travel voucher is an incredibly popular option. People get enthused about travel plans and it’s usually the most sought after reward. Therefore, you may want to save it for the top performer or whatever you qualify as your highest value output.
- Tickets to a concert or sporting event: This is a great incentive for reps who love live entertainment or local sports teams. Naturally, if nobody on your team is interested in the local basketball team, get tickets for the football game instead. Survey your team before committing to the purchase.
- Tech gadgets: This is a winner for the tech-savvy reps in your group. Getting your hands on the latest iPhone, Android tablet or noise-canceling headphones can be a massive incentive for those who follow the latest trends.
- Learning and training: Offering the opportunity to upskill or level-up on the company dime is a great way to reinvest in your workforce. Showing employees that you care enough about their success to help them reinforce their craft shows a true commitment to the team.
How one sales manager incentivizes her team
We asked Graceanne Domino, Manager, Sales Development at Rocketrip for an example of how she incentivizes her team.
“So the first thing is to think about what you want to incentivize—is it meetings, opportunities, calls? If reps don’t see how their efforts directly correlate to the goal, they’ll lose interest and it won’t be effective.
“That said, I’ve had the most success with a tiered structure plus an all-out winner. For example, let’s say I want to incentivize new meetings this week; I would say anyone who books 3 new meetings this week gets $100, $200 for the next 3, and so on (likely capped at a certain amount). The more you book, the more you win—and whoever books the most outright gets an additional bonus.
“This is effective because it solves for the fact that every team likely has top performers who will take an early lead; which is amazing, but can sometimes lead the rest of the team to be disengaged if it’s a winner-take-all scheme and the likelihood of them catching your top performers is low.
“One really fun way to add a twist on this is instead of giving them the cash upfront, give them the option to spin a “prize wheel” per every 3 meetings, so they could take the $100 and walk, or risk it all to spin the wheel for more.
“In terms of what the goal itself should be, it needs to be something that’s doable, but a stretch from what reps would normally do in that given time frame. So I’d think about what a rep would need to do each week to hit their goal for the month, and then double that in the case of a 1-week spin.”
How to apply the right sales incentive program to your business
Whether you use one of the five aforementioned incentive schemes, cash or non-cash sales compensation, or a mix and match, your chosen incentive scheme must align with your sales organization’s goals.
Most importantly, your chosen plan needs to reward the behaviors that your company promotes.
For example, if you have a cross-team collaborative environment, your compensation program should include both individual and team-based incentives. This will help to promote teamwork and reduce friction.
If your reps work mostly alone, then a tiered incentive program will help drive them to outperform themselves and reach new heights.
Evaluate your company’s sales methodologies, processes and roles to ensure you have a clear understanding of the organizational structure. These processes should already be in line with the company culture to promote a harmonious work environment.
Make sure that your incentives don’t get in the way of your sales reps from performing to the best of their ability or distract from their day-to-day objectives. For example, if your incentives are based on how many deals your reps close, them they may neglect leads at earlier stages of the pipeline to focus on those prospects who seem about to close.
Jason Maratsos, Enterprise Regional Sales Manager at Sectigo, points out that achieving their goals and maintaining their own pipeline often acts as an incentive: “Top salespeople are self-motivated. Their ‘incentive’ is their need to keep and sustain what they have built.”
Analyze your team’s strengths and weaknesses and contrast those to your product offerings to determine what incentive programs play to their unique skill sets and characteristics.
For example, if you are in the business of SaaS-based products, you most likely have a cross-collaborative environment where multiple stakeholders are involved in various stages of the deal.
But if your company sells physical retail products, for example, it’s much easier for reps to work alone and establish unique relationships with buyers.
No matter what you decide, make sure the sales incentive program is constructed to drive the desired behaviors. Align them with organizational goals, tailor them to the individual and make sure they reward reps for conducting high-value, high-quality work.
The sales landscape has changed over the years and the sales incentive schemes have changed with it.
Modern sales processes are more complex than ever before, and reps need to be incentivized in new ways to keep them motivated. Most importantly, your sales team needs to feel appreciated and fairly compensated. A commission or rewards system should feel like a well-deserved bonus.
Sales incentives should encourage self-drive and discipline as well as teamwork and collaboration. Your incentive program should be transparent and implemented in a way that generates excitement.
Align your sales incentives program with your company goals and organizational structure. Use it to empower your team to perform at peak levels and have fun with your rewards choices.
Always keep the purpose for your scheme front of mind: to motivate and reward your reps for reaching both individual and team goals, which drive business success and promote team pride.