Creating a sales incentive plan that is both highly profitable and keeps the sales team motivated is critical. Sales Operations teams must be thoughtful in how they design incentives and should consider several factors. Here is a list of five things that cannot be overlooked:
Profit Margin-Based Incentives
Incentive plans should encourage sales reps to sell at high margins as well as high volumes. If a rep receives a higher commission on a high-margin sales transaction than on a sales transaction with low margins, the company can influence the sales team to pursue high-margin sales opportunities
Tailored Quotas for Different Roles
Which kind of sales role you employ is a separate issue, and a sales organisation might have a mix of reps focused on new business, account management or customer success. Critically, quotas need to reflect the different value that these roles bring to profitability – for example, a quota from a new business development rep could be to acquire profitable accounts, while an account manager’s target might be focused on upselling and retaining high-value customers.
Long-Term vs. Short-Term Focus
Most importantly, incentive plans need to balance short-term sales performance with long-term profit: Reward sales teams for multi-year contracts or ongoing subscriptions, not quick bills of goods with a single sales call.If there are bonuses or premiums based on contract term, offer more for longer term contracts and more for recurring revenue deals.
Balanced Reward Structures
Ideally, a good incentive plan is a mix of direct and indirect motivators – this could include financial incentives, but also recognition, career development and perks. If it’s important to retain your star performers, that can be factored into your incentive plan. You could offer an exclusive leadership development programme to top performers, for example.
Timely Feedback and Payout Cycles
Sales teams work most efficiently when you give them feedback and payouts on a timely basis. Rather than waiting for an annual review to look back, paying out quarterly or monthly puts sales reps on a steady footing all year. For example, a rep who receives a quarterly bonus for hitting profit metrics is more likely to be engaged than one who waits until the end of the year.
The five components described above can help produce an incentive plan that drives both profitability and sustainable motivation, and therefore better aligns the interests of the salesforce with the company’s financial health over the long haul.
