Do sales incentives really work?
Sales incentives are a motivation mechanic to reward employees and non-direct employees, usually in a sales role, to increase their performance or change behaviours. These sales incentives can be in the form of group travel trips, gifts, ‘must-have-items’, or e-codes and shopping vouchers designed to encourage the achievement of sales targets.
In this week’s blog we discuss what makes a good sales incentive, what makes a bad sales incentive, and how to put together incentives that work and deliver success.
What makes a good sales incentive programme?
A good sales incentive combines key elements that motivate and drive performance, all of which align with business objectives and goals. These key elements include attainability, relevance, fairness, timeliness, and ongoing evaluation.
Clear and Attainable Goals: The objectives of an incentive should be specific, measurable, and realistic, ensuring that the audience (salespeople) understand what they need to do and believe it is achievable.
Relevance and Appeal: Incentives should be desirable to the sales team, whether direct or non-direct employees. Understanding what motivates your employees and partners – be it group travel, gifts, or recognition is crucial.
Fairness and Transparency: Any sales incentive programme must be perceived as fair. Therefore, it is important that rules be clearly communicated, with a transparent measurement of performance, and a fair distribution of rewards.
Ongoing Evaluation: Regularly assess the effectiveness of the sales incentive programme and be willing to make adjustments based on feedback from participants and changing circumstances, such as new price points, more prizes etc.
Timely Rewards: Incentives should be awarded promptly after the achievement of goals to reinforce the connection between performance and reward. The exception is group travel rewards which may take place a few months later due to coordination, but winners should still receive prompt communication confirming their place.
Any sales incentives should align with business goals. Ensure that the incentive supports the broader objectives of the company, such as increasing revenue, improving customer satisfaction, or entering new markets.
We have explored the key elements and characteristics of a sales incentive, but this is not a one size fits all approach. Different businesses may choose to adopt different types of sales incentives. For example, salespeople selling high value products may not be motivated by a lower-level gift voucher; in this scenario a travel incentive may be more motivational, considering which countries participants may have travelled to on previous sales incentive trips to keep it appealing,
However, if you are seeking to motivate your back office and administrative employees, perhaps to adopt new processes or for sales support, a one-off high street gift voucher may be more relevant to their role and me be a well-received reward.
Here are nine common sales incentive types:
Cash Bonuses: Direct financial rewards for achieving specific sales targets or milestones. This is one of the most straightforward and universally appealing incentives.
Commissions: A percentage of sales revenue paid to salespeople, aligning their income with their sales performance. This ongoing incentive can drive sustained effort and results.
Prizes and Gifts: Tangible rewards such as electronics, gift cards, or luxury items. These can be particularly effective for short-term sales contests.
Travel Incentives: All-expenses-paid trips for top performers. These can be highly motivating due to their experiential value and the opportunity for personal relaxation and enjoyment.
Recognition Programs: Public acknowledgment of achievements through awards and certificates. Recognition can be given at company meetings, through internal communications, or on social media.
Professional Development Opportunities: Offering training, certifications, or attendance at industry conferences as rewards can be particularly appealing to employees focused on career growth.
Extra Paid Time Off: Additional annual leave days or personal time as a reward for high performance. This incentive can enhance work-life balance and overall job satisfaction.
Tiered Incentives: A structured programme where salespeople earn different rewards as they hit progressively higher targets. This can motivate continuous improvement and higher performance levels.
Team-based Incentives: Rewards based on the performance of a group or team, fostering collaboration and collective effort towards shared goals.
By mixing and matching these types of incentives, businesses can create a comprehensive and dynamic program that motivates a wide range of employees and aligns with their broader business objectives.
What can make a sales incentive programme suboptimal?
Essentially, by not addressing the key elements above you are likely to end up with a sales incentive that doesn’t achieve your goals and is perceived as unsuccessful by stakeholders. This will not only impact short term business performance but could mean budget allocation is reduced or removed for future incentive planning.
A sales incentive programme can have suboptimal performance if it suffers from the following issues:
Unclear Objectives: If goals are not specific, measurable, or well-communicated, salespeople may be confused about what they need to achieve and disengage.
Unrealistic Targets: Setting goals that are too difficult to reach will demotivate employees and partners, making them feel that dedicating any effort is futile.
Lack of Relevance: Incentives that do not resonate with the sales team or are not desirable can fail to motivate. Understanding what drives your team, and your partners’ teams, is crucial.
Perceived Unfairness: If the programme mechanic is seen as biased or favouring certain individuals or groups, it can lead to resentment and decreased morale.
Poor Communication: Not effectively communicating the details of the incentive programme or creating ambiguity on how performance is tracked, and how rewards are distributed, can lead to misunderstandings and mistrust.
Delayed Rewards: Long delays between achieving goals and receiving rewards can weaken the motivation link. Immediate or timely rewards are more effective.
Lack of Transparency: Without clear criteria and visibility into how performance is measured, employees and non-direct employees might feel that the programme is arbitrary.
Inflexibility: A rigid sales incentive programme that does not adapt to changing business conditions or participant feedback can become outdated and ineffective. If your programme is running year on year, ensure it’s progressive.
Insufficient Budget: Underfunding the incentive programme can lead to rewards that are not enticing enough to motivate higher performance.
At FMI Agency we support clients in not only the delivery of sales incentives but in the planning and design stage to ensure it is highly effective. Not tailoring incentives to different partners, roles, levels of experience, or personal preferences can reduce the programme’s effectiveness. Avoiding these pitfalls is essential for designing a robust and effective sales incentive programme that drives desired behaviours and outcomes.
Sales incentives that work
In answer to the question ‘Do sales incentives really work?’ the short answer is, YES! The longer answer is also YES, if you ensure all key elements are considered and addressed in the design and delivery of a sales incentive. This will require an investment both in terms of time and resource – and it’s in this scenario that FMI Agency are typically brought in by clients to help provide additional support, resource and guidance.
We are sales incentive experts, having designed, delivered and implemented UK and Global incentive programmes for brands like Sony, LG, LV= and Huawei. Such programmes have seen sales performance increase, sometimes in the region of over 200%.
The FMI guide to creating sales incentive programmes provides further insight to achieving this level of success through following our 5 stages of incentive planning; Discover, Define, Execute, Engage and Assess.
Sales incentives from FMI
We are an innovative, agile and technology-led agency when it comes to delivering compelling and successful sales incentive programmes for some of the world’s biggest brands. Our success is dependent on your success, so we focus on creating engaging sales incentive programmes that drive genuine results that are tailored specifically to your business needs.
Our incentive experts provide end-to-end incentive management including sales incentive ideas, mechanic and metric planning, rewards and gamification and data analytics.
We’ve got many client case studies showing the positive impact strong sales incentives programmes can have. In telecoms, we’ve helped both manufacturers and networks incentivise employees and non-direct employees to drive performance of smartphone sales. In the electronics sector, we’ve worked with retail brands such as LG, Logitech and Jabra to gamify the sales process and incentivise sales to support new product launches.
We pride ourselves on designing an incentive solution that is right for your brand. We can activate tactical sales incentive campaigns, with short lead times, or implement longer-term programmes that are embedded into your business for increased sales performance.
Contact us below to design a sales incentive programme that really works.
