If you want your sales team to overachieve their targets, you need to value their efforts and motivate them to give their best. While offering bonuses and commissions to sales reps can help boost sales, the psychology behind sales incentives is a bit complicated. In this article, we will cover different types of sales incentives and key features of a sales incentive program.
What is Sales Incentive Compensation?
Sales incentive compensation is variable pay that sales reps receive apart from their base salary. It is basically a payment that is given as a reward to the employees for achieving certain goals and objectives. Incentives are usually based on the employees’ performance and help motivate your sales reps to work efficiently and achieve better results. For instance, an SEO company could reward its sales team based on increased organic traffic and conversion rates.
Well-designed incentive compensation programs not only improve sales team performance but also increase retention rate. Compensation can be provided in many forms, including bonuses, profit sharing, tiered reward systems, and commission-based pay structures.
Key Features of an Effective Sales Incentives Program
Here are some key features of an effective sales incentive program:
- Balance of Motivation
Sales reps, whether in-house or part of a sales outsourcing strategy, go through different phases while selling your product or service. Overburdened with work, employees might end up losing the motivation required to achieve their goals. An effective compensation plan should provide extrinsic as well as intrinsic motivation to the sales team. A balance of motivational strategies encourages your employees to work for their own sake, not only for financial rewards.
- Non-Monetary Incentives
Non-monetary incentives are non-financial rewards such as development opportunities or recognition. Such incentives serve the purpose of building long-term motivation and job satisfaction among employees.
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- Smaller and Frequent Rewards
Instead of offering large bonuses, a standard incentive compensation program incorporates smaller and more frequent rewards. It builds a positive association between rewards and good performance.
- Focus on Behavior
Offering incentives not only enables you to drive results but also the behaviors and activities that lead to those results. They help reinforce good habits among employees and let you create a positive and constructive work environment where everybody gives their best to improve sales.
- Timely Recognition
Promptly recognizing achievements boosts your employees’ morale to put in their best effort. Provide rewards and recognition for achievements as soon as possible as a part of your sales incentive program. It will help you reinforce positive behavior and motivation among your team members.
- Peer Recognition
Apart from recognizing and rewarding yourself, encourage employees to recognize their fellow employees’ contributions. Incorporating peer recognition fosters a culture of appreciation, productivity, and engagement.
- Variability
Include an element of surprise or variability in your incentive program. It will help you maintain employees’ interest and excitement and prevent your incentive program from getting monotonous.
How to Design an Incentive-Based Compensation Plan
There is no proper way to set up an incentive-based compensation program. However, proper planning and execution can work wonders. Here is a step-by-step guide to help you develop a successful sales incentives plan:
- Understand How to Motivate Your Employees
Take time to understand the individual interests, preferences, and career aspirations of your team members. Assessing their needs and requirements will help you design an effective plan that guarantees better sales and improved performance. Collecting feedback on your previous incentive-based compensation program can be very useful in this regard.
- Set Achievable Goals
The members of your sales team should become eligible for incentives only after achieving certain goals. Identify specific and measurable goals that align with your company’s strategy. Set realistic and attainable long-term and short-term sales goals to create a balanced plan. This will motivate the employees to strive to achieve their goals. An unreasonably high sales quota will make the employees feel overburdened and demotivated.
- Consider Your Budget
While designing incentive compensation, make sure to allocate a budget for the sales compensation plan. Having a budget provides a structured approach for streamlining the reward and recognition processes based on employee performance.
- Automate Incentive Compensation
Automation allows you to quantify the performance of your sales team and efficiently calculate incentive compensation. Employing digital tools and software allows you to track progress and makes the incentive compensation program transparent. For example, using payroll software can help automate and track employee performance and accurately calculate incentive-based payments.
- Ask for Feedback
To analyze the efficacy of your salesforce incentive compensation program, consistently ask for feedback from your employees. It will help you implement the right sales concept and establish a dynamic and adaptable work performance.
Different Types of Sales Incentives
Sales incentives can be monetary or non-monetary. Here is the difference between these two types of incentives.
- Monetary Incentives
Monetary or cash-based incentives are the most effective rewards you can offer to your sales team. Monetary incentives can help companies increase their profits by up to 50%. Some forms of monetary incentives are as follows:
- Bonuses:
When the employee completes an assigned task in a given period of time, they are awarded for achieving the goal in the form of a bonus.
- Sales Commission Structures:
A sales commission structure outlines how a company compensates its sales team for their performance. This compensation can be “straight:” structured in a simplified manner based on the percentage of revenue generated by every single deal closed by the employee. The sales commission structure can also be “tiered,” which compensates the employees based on sales performance tiers.
- Sales Performance Incentive Fund Formula(SPIFF):
SPIFFs are one-time rewards offered to sales reps for specific short-term actions, such as selling a product or service. SPIFFs are often used in addition to sales commission structures to encourage employees to focus on the most important product releases.
- Non-monetary Incentives
Non-monetary incentives are budget-friendly and more effective than monetary ones. Some sales representatives prefer recognition over rewards.
Boost Your Company’s Performance with Incentive-Based Compensation!
Do you want your sales team to boost your sales and marketing productivity? Consider offering incentive-based compensation to your employees. Rewards and incentives fuel motivation and reinforce productivity and positive work ethics among your sales reps. A standard sales incentives program includes monetary and non-monetary incentives, timely recognition, and smaller, more frequent rewards. You can design an excellent incentive-based compensation plan by understanding your employees’ needs and preferences, getting feedback about the previous plan, and setting achievable goals.
