sales team

How to Create an Effective Incentive Program for Your Sales Team

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How to Create an Effective Incentive Program for Your Sales Team

Every year, companies across the United States spend a cumulative total of $800 billion paying, managing, and motivating their sales teams. The cost is nearly three times what companies spend on advertising. Such a large expenditure leaves finance teams continually struggling with the best ways to compensate and motivate sales professionals.

Some offer flat rate commissions that increase and decrease with revenue. Still others place a cap on compensation as soon as salespeople hit their targets.

These are two of the most common ways to manage the expense of a sales team while offering enough financial incentive to keep them motivated. Since they don’t work for all salespeople, more companies are starting to come up with innovative solutions to this common problem.

For example, some employers treat the sales team as though the entire group were an investment portfolio that requires different types of attention at different times. It comes down to appreciating the fact that salespeople who perform at various levels feel motivated by different things.


Understand That Money Doesn’t Motivate Everyone

Monetary rewards such as bonuses and prizes such as a free vacation can motivate a lot of sales personnel to perform well. However, the motivation to earn more is not universal. In any sales organization, the rule of thumb is that 20 percent of the sales force closes 80 percent of the deals. The people in this category already feel motivated by reward. Therefore, offering the same financial incentives to everyone may backfire in the end.

Complexity Can Ruin a Good Rewards Program

Most sales and finance managers design incentive programs with the best of intentions. The problem often occurs when sales team members feel unsure about what they must do to win the prize. It’s human nature to feel frustrated when confused and to want to give up. That is exactly what happens with many incentive and compensation programs in sales.

Three Effective Categories of Sales Compensation

No one category of sales incentives is likely to work for all organizations. Fortunately, finance and sales managers can experiment with different types. Alternatively, they can offer all of them at the same time. It’s a matter of figuring out what works best for each individual.

Experiential Incentives

These rewards give top performing sales professionals an experience outside of work they otherwise wouldn’t have had. Sending the highest-ranking salesperson on vacation is one example of this type of incentive.

Companies can enjoy greater success with this strategy by creating an event for several top performers to attend together. For example, while I was working for a radio station early in my career, each winter, top sales reps would earn the chance to attend a VIP experience at the Pebble Beach Pro-Am Golf Tournament. This incentive not only motivated sellers but also provided a team bonding experience at the event itself.

Job-Related Incentives

A job-related incentive would be something like extra paid time off. It doesn’t cost the company anything in dollars, but it does cost in lost productivity when the employee cashes in on the earned incentive. It can also be something the salesperson can use on the job, such as a new smartphone.

Tangible Incentives

The last category, tangible incentives, includes highly valued items employees likely wouldn’t buy on their own. It’s important to consider the average age of the sales team when selecting a tangible type of incentive to avoid giving something they wouldn’t understand or care to use.

Galvanize Your Sales Team with Incentives

It can take some trial and error to get the right mix of incentive programs. The reward is a well compensated and motivated team who will continually outperform themselves.