Research Materials

The Science of Successful Sales Incentive Programs? Change.

Aug 19, 2015

Written by: Tim Houlihan
(View Author Bio)

Learn which elements to change in your incentive programs to easily refocus and re-energize your sales force.

Sales incentives and behavioral economics.

Overview

For the most part, incentives work. Many sales people max out their comp plans when being paid a commission, but some don't. When given the opportunity to make more money, why don't they?

The solution lies in what behavioral economists call the hedonic treadmill. If you continuously run the same contests with the same rules on the same products with the same rewards, your sales people will become complacent.

The hedonic treadmill is similar to being on a real treadmill. At first you feel fine. After a while, you begin to feel fatigued. After several hours, the steps become normal and you almost forget about the constant motion of one foot in front of the other.

The same is true with contests. If you run the same contest with the same rules on the same products with the same rewards month after month, your sales people will stop paying attention.

Changing things up helps re-energize and refocus our efforts. Here are three things you can do to improve the effectiveness of your sales incentives:

1. Change the rules.

Stack ranking is great occasionally but after awhile, the folks on the south side of the winner’s circle will stop paying attention to your “Top Ten Go To Hawaii” contest. By using a stack ranking one quarter and individual objectives the next quarter, your sales people will think about their business in light of the new rules. That consideration is a tiny act of engagement that could lead them to working harder and delivering greater results for you.

2. Change the rewards.

Many sales managers believe that sales reps are coin operated so they begin incentive conversations with cash, cash and more cash. But if more cash were the answer, why wouldn’t your commissioned sales people already be working harder to earn more? Mix it up by using different rewards: dinner with the SVP of Sales, a weeklong getaway at the company’s condo on the Big Island or points that can be redeemed for a 70” OLED curved-screen television, a Calloway XR Pro or a smart watch.

Sure, they could afford to buy those things with their own money but they won’t. You’ll give them bragging rights when they pull the new driver out of their bag and their golf partners wonder where they got it.

“My company gave it to me for being a top performer.” The sales rep gets the glory and you get the incremental performance required to earn it.

3. Change the focus.

The problem with focus is that it’s difficult to maintain for long periods of time. Asking your reps to sell more of the new, high-margin widget month after month is fatiguing. Rather than a monthly contest that rewards reps for selling Product A, consider changing the emphasis every so often.

You could switch the contest to reward them for selling other

important products or for increasing margin or for selling partner products to keep things fresh. The reps will give you more effort in part because you’re changing things up2. This allows them to naturally adjust their focus and you will benefit from re-energized reps with each new contest.

BI WORLDWIDE’s new incentive application can help you efficiently manage all three of these elements. Self-Serve Incentives, powered by the G5 incentive system, allows you to choose from five simple pre-packaged rule structures and launch a contest in just a few minutes.

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Tim Houlihan

Vice President
Reward Systems Group

For more than 25 years, Tim Houlihan has indulged his curiosities of human behavior in the workplace. He passionately pursues answers to questions such as “Why do some people work harder than others?” and “Why do some people set and achieve goals?” and acknowledges that behavioral economics holds excellent explanations for some of these mysteries. As the Vice President of Reward Systems at BIW, Tim is responsible for leading the development of innovative reward systems. He partners with academic colleagues from leading universities around the world and he is actively engaged with leaders in Fortune 1000 companies to develop solutions for the human side of business problems.