Sales commission is what gets you invited to the dance. The chance at a bonus might get you a turn on the dance floor. But it is sales incentives that will keep you partying all night long.
Whether you employ a direct sales team or sell through a channel, a sales incentive strategy is part of a holistic approach to creating long-term sales motivation.
Sales incentive compensation
It’s common to think of commission as a type of sales incentive. Sales people perceive commission as part of their salary. Even though it is variable compensation, it essentially acts as part of their regular pay. Once you make that cash commitment, it’s hard to remove or revise the structure because you’re changing their standard of living.
Using an STI bonus is a little different. Since the award is paid out at the end of the year, these typically appeal to a smaller segment of sales people. Announced towards the beginning of the year, many people start out optimistic but lose momentum as the year progresses – especially if some portion of the bonus is based on performance outside of their individual effort.
For channel programs, a top performer award works much like an STI. A small portion of people earn the highest recognition at the end of the year. While it’s exciting at launch, many sales people become disengaged once their results show that they won’t win a top spot.
Sales incentives that work
While commission and/or STIs are important components of sales compensation models, there is a middle-ground that can go further to motivate your sales team. Think of it this way: commission is paid frequently with 100% of the sales team eligible to earn; STI/top performer bonuses are annual with 10-20% eligible to earn; so, there’s room for a sales incentive scheme that motivates 60-80% of the sales force on a quarterly or half-yearly basis.
These incentive structures are short-term – running 30, 45, 60 or 90 days. Keeping them short allows people to stay focused and earn incentive rewards soon after achieving the sales targets you’ve set. It also helps manage your budget: short incentives have smaller budgets and can easily be capped.
Incentive rewards are also highly visual, “promotable” and social – the best practices are to use merchandise, travel or award points. The most important factors for effective awards are the availability of participant choice and that they are non-cash. You want achievers to promote what they’ve earned to their colleagues and re-consume those items for months to come.
Sales motivation is also highly contingent upon communication. You should include a communication campaign when creating your budget. Best practices include an incentive name, teaser communication, launch communication, weekly/monthly progress updates (depending on your data) and achiever announcement.
Finally, your sales incentive structure should be designed to push individuals or teams to deliver incremental activity above their status quo. Stay away from structures that simply stack rank all the participants and award the top X%.
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