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 in 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 were 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 generally owned the customer relationship-building process and was usually responsible for closing the deal. This made it more straightforward for companies to forecast outcomes and standardize KPIs based on business objectives.
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 have become more complex. In fact, a Gartner study found that 77% of B2B buyers noted their most recent purchase was complex.
As customers are empowered to source information on their own, they rely on reps for supplementary information at later stages in the buying process. Because of this, reps no longer own the full buying process. They’re now 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, so has the role of the sales rep.
Today, customers want to interact with a rep who they feel 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 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 a sale incentive with the team or company’s 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.
New sales incentive schemes are multifaceted. There are varying compensation options and several factors to consider.
An effective sales incentive program should motivate reps to work together to make the company more competitive and profitable. The program should also 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
Just as there are various sales methodologies that help reps navigate your sales process, your incentive program should empower reps to play to their strengths.
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 monetary 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 frontline sales reps with the sale.
For example, a SaaS company selling white-label applications may consistently add new features to their software developer kit. 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, the two main stakeholders involved with the sale are 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 promote fairness and prevent conflict.
3. Presales incentives
As mentioned, today’s sales process is more complex than ever before. Customers are inundated with advertisements and outreach efforts 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 can 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 high value on the actions that a rep takes throughout the selling process, rather than focusing solely on the actual outcome and results.
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
The two main ways to implement sales performance incentive funds (SPIF) are by 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 rep’s paycheck should be salaried and bonused, as well asand what incentives should be doled out individually and 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 helps improve employee engagement by making reps feel recognized and valued. In contrast, a scheme that feels out of reach or unrealistic can have the opposite effect and demotivate team members.
The traditional way of rewarding a sales rep is with a cash commission structure. A rep is paid a base salary and given monetary rewards 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 as part of the compensation plan. 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 sales 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 cash bonuses, but it also limits your potential revenues. If you take the time to accurately forecast your incentive goals, you shouldn’t run into this issue.
Non-cash rewards give you more freedom and flexibility in how you motivate your sales team. With this type of sale incentive, you can get creative and have fun, which 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 89% in 2020.
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 and 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 non-cash reward ideas:
Gift cards. Choose a gift card type that is meaningful and relevant to your employees. A gift card for a fine-dining 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 very useful and valuable.
Travel. Most people love a free trip so a travel voucher is a 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 performers or those who achieve the highest value output on your leaderboard.
Tickets to a concert or sporting event. This is a great incentive for reps who love live entertainment or sports. Survey your team’s interests before purchasing tickets so you’re sure the reward will excite them.
Tech gadgets. This is a winner for the tech-savvy reps in your group. Getting your hands on the newest iPhone, Android tablet, smartwatch or noise-canceling headphones can be a great 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 through sales training, seminars or online courses shows a true commitment to the team’s professional development.
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 sales incentive ideas – cash, non-cash sales compensation or a combination – your chosen sales incentive plan must align with your sales organization’s goals.
Most importantly, your chosen plan needs to reward the behaviors that your company promotes.
Evaluate your company’s sales methodologies, processes and roles to get a clear understanding of the organizational structure. These processes should already be in line with the company culture to promote a harmonious work environment.
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 reach higher levels of performance.
Make sure that your incentives actually help with sales productivity and don’t distract your reps from their day-to-day objectives. For example, if your incentives are based on how many deals your reps close, then 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, however, it’s much easier for reps to work alone and establish unique relationships with buyers.
No matter what scheme you decide, make sure the sales incentive program is constructed to drive the desired behaviors. Align them with organizational goals and tailor them to fit performance measures to make sure they reward reps for conducting high-value, high-quality work.
Modern sales processes have become more complex than ever before, and sales incentive plans need to adapt along with them. Most importantly, motivating your sales team means making them feel appreciated and fairly compensated. This also helps improve employee retention.
When creating a sales incentive plan, remember to align your sales incentives program with your company goals and organizational structure. Sales incentives should also encourage self-drive and discipline as well as teamwork and collaboration.
Your incentive program should be transparent and implemented in a way that generates fun and excitement, like many of the sales incentive ideas in this article. Use it to empower your team to perform beyond benchmarks and sales targets.
Always keep the purpose front of mind: To motivate and reward your reps for reaching both individual and team goals that drive business success, improve the bottom line and promote team pride.