The performance of your sales team is the core of your company. It is the lifeblood of your enterprise, especially where competitiveness among sales teams inside your organisation is fierce. Top-performing sales teams not only achieve their goals, they grow your company, they transform leads into loyal customers, they motivate and they engage. A key component in ensuring that the highest priority outcomes are attained is the effective sales incentive strategy.
Understanding Sales Incentive Strategies
The goal of sales incentive strategies is to stir up sales teams to do their best efforts and reward them when they meet or exceed the goals set for them. An effective incentive plan enables the company to articulate clearly its goals, thus encouraging each member of the sales force to strive to achieve them. Sales incentive motivation technique is really helpful for sales management wherein they can figure out how best to enhance performance, be competitive and have an edge over competitors, and enhance productivity.
Key Components of an Effective Sales Incentive Strategy
An effective sales incentive strategy includes several critical components:
- Specific objectives: Set a tangible target. For example, you could say that you want to increase revenue, the number of new customers or customer retention.
- Target Setting: Ensure that the set targets are realistic but challenging. this ensures that the sales team will stay positively motivated.
- Incentive Symmetry: Symmetry of your incentive so that your salesperson derives equal psychological benefit from making $100,000 or $1 million. Incentive Payment Frequency: Frequency of incentive payments, such as weekly versus bi-weekly. Incentive Against Competition: Your agreement with your salesperson’s competitors that bribes or payment will not be offered to disrupt your sales.
- Incentive Credibility: Credibility of your incentive, so your competitor’s salespeople don’t believe your offer is too good to be true and doubt they’ll actually make the money. Incentive Against
- Unethical Behaviors: Agreement with your salesperson that they will abstain from certain unethical behaviours to maintain trust in your company. Incentive Against Misrepresentation: Agreement with your salesperson that they will abstain from undermining other companies’ reputations in order to stand out.
- Performance Metrics: Set out your performance metrics. For example, if you have something you want to sell, you might want to measure things by sales volume, number of new customers, customer satisfaction scores, etc.
Feed the team often. Be constant in giving feedback on sales performance to each of your sales people to ensure they keep on track and improving.
Crafting the Right Incentive Plan: A Step-by-Step Guide
1.Define Your Goals
Before you can fashion an incentive plan, you need to know where you are trying to go. Your goals must be grounded in higher-level business objectives: For example:
Increase Revenue: Structure incentives around achieving higher sales volumes.
Customer Retention: Tie incentives to customer satisfaction and repeat business.
Market Expansion: Set targets for acquiring new customers or increasing market share.
2. Understand Your Sales Team
You have a diverse team in sales, with different needs and preferences. As a result, you need to do some homework. You might want to do a survey or have some sit-down interviews. Which of your salespeople like financial rewards? Which ones like recognition? Which ones like to move up the career ladder?
3. Set Achievable Targets
Targets must be both ambitious and achievable. If targets are too ambitious, they can demotivate your team. If they are too low, they will not encourage people to put in much effort. Use historical data and market analysis to set targets that are realistic.
4. Choose the Right Incentives
Incentives can be broadly categorized into monetary and non-monetary rewards:
Monetary Incentives: Bonuses, commissions and profit-sharing plans (eg, salespeople earn a percentage of the sales they generate) are examples.
Non-Monetary Incentives: These can be equally forceful. Examples include badges of honour (eg, ‘Salesperson of the Month’), career development opportunities, extra holiday, or a gadget or travel vouchers.
5. Communicate the Plan
After establishing an incentive plan, make sure it is communicated to the sales team in detail: what are the targets they will be measured on and how, what do they stand to gain or lose depending on their performance. It is critical to maintain transparency.
6. Monitor and Adjust
Keep revisiting your incentive plan. Is it working? Are your sales people increasing their sales? Are there adjustments that need to be made because of feedback to the plan and performance data?
Real-World Examples of Successful Incentive Strategies
Example 1: Tiered Incentive Structure
The sales and marketing software leader apportioned incentives based on tiers with double-downed rewards: reach 90 per cent of your goal and land a base bonus; dislodge all comers and 100 per cent or more and double or triple the bonus. This ensured that you knew exactly where the bar was set and the requirement to clear it, encouraging overachievement.
Example 2: Recognition Programs
One Enterprise software company, for example, has used award programmes such as ‘Top Performer of the Year’ and other serious accolades as part of its incentive strategy. The company also offers coveted trinkets such as vacation packages and public fawning at company events, all of which tend to motivate employees to perform better. This tactic is doubly effective: it recognises the company elite and helps spread pride in achievement across the organisation.
Five Frequently Asked Questions About Sales Incentive Strategies
1. What are the most effective types of sales incentives?
The broadest lesson is, identify what motivates your sales force, then educate yourself about the types of sales incentives that play to those motivations. Those that help teams are varied and include monetary approaches (such as bonuses and commissions), and non-monetary approach (such as recognition programmes, career-pathing opportunities, and experiential rewards like trips or special events). But the best sellers are those that offer a wide range of options that appeal to your sales teams’ disparate tastes.
2. How often should sales targets and incentives be reviewed and updated?
At the least, sales targets and rewards need to be scrutinised frequently, ideally quarterly. Such scheduled scrutiny allows for changes in market circumstances and business focus. The presence of this type of opportunity reduces ‘surprises’ that come down the track, and it also ensures that business and sales team targets work together to produce the results your business needs. It should ensure that targets are hard yet achievable and that rewards are pushing what’s getting done in the right direction.
3. How can I ensure my sales incentive plan is fair and unbiased?
Use objective performance metrics – incentives that earn money or points that can be traded for some non-cash reward, either outright or at an auction – standardised across sub-groups and tracks. Make the rules and metrics as clear as possible, and spell out exactly which performance outcomes are eligible for the various forms of incentives. Be apparent about how disputes will be resolved. (Consider an auditing system that requires your sales people to check a box that attests to the validity of an awards qualification in their file before turning it in.) And, on a regular basis – especially when incentives change – check in with your sales team to ask if there’s a feeling that participants are not playing by the same rules.
4. What are some common pitfalls to avoid when designing a sales incentive plan?
Common pitfalls include having overly aggressive targets, choosing incentives that aren’t meaningful to the sales team, and not articulating the sentiment very clearly. Incentive plans can quickly become overly complex, leading to ‘incentive scarcity’, in which people lose sight of why they should be trying to hit targets – they just focus on the plan and try to figure out how to ‘game’ it. Keep plans simple, make sure you’re incentivising for the things that are motivating for your sales team, and communicate it.
5. How can I measure the effectiveness of my sales incentive strategy?
Monitor the strategy by identifying key performance indicators, including sales growth, attainment of target rates, turnover, and observations from the salesforce. Look at these on an ongoing basis, and adjust the strategy to encourage the desired behaviour as needed.
When executed with sound design principles, sales incentive programmes are the most effective way to boost your sales team’s performance. Start by focusing on what’s important – such as objective setting, understanding your people, ensuring incentives are achievable, and making sure you choose the right incentive and timeframe, and reviewing and revising the plan. Keep the big picture in mind, and implement an incentive programme that delivers on the organisation’s objectives while also making your sales team happy. In the end, everyone wins.
As a conclusion it can be said that sales team is the most important and helpful source of any organisation to sale its products. A proper strategy for sales incentive and reward can make a huge change in real world.
