Skill Arbitrage Blog

This article will educate business owners on how they can motivate their team to work harder using sales incentive programs and how they can create one.

Introduction

If, at the start of my business journey, someone had told me there was a magic wand that could double my sales team’s efforts and push them to achieve targets faster, I would have fought for it.

Sadly, nobody did, and I wasted a few years in trial and error until one day, I accidentally landed upon it. So, without beating around the bush, let’s get straight to what it is – The Sales Incentive Program.

In layman’s terms, a sales incentive program is a system that is designed to offer extra benefits for those salespeople who work harder and better than others. A well-created sales incentive program is known to increase employee productivity by 44%.

Not only that, but businesses with incentives see a 79% higher success rate in meeting their sales targets.

The general perception is that these kinds of designs are just for big companies that have a ton of cash flow. Let me tell you that this couldn’t be farther from the truth.

Small businesses or startups with even just 5 to 6 people can also utilise the benefits of a sales incentive program if done correctly. As you move ahead in the article, you’ll have clarity on how to do this right.

But before that, let me tell you why a sales incentive is even important for you.

The benefits of a good sales incentive program

The most famous brands that you use on a daily basis like Amazon, Microsoft or Apple, all have their sales incentive programs. That’s because it pushes their salespeople to work harder and brings real growth to the business.

• If you have a well designed sales incentive program, it can boost your employees to perform better and work harder. Companies often see a 44% rise in performance after incorporating a sales incentive program.
• Not only that, but it will also boost motivation among your employees by 22% on average. This will make sure your employees never get lazy and instead are always excited to work.
• A good sales incentive program will make sure your top salespeople stay with you all the time as it reduces turnover rate by 27%. Not only that, but it will also attract the top employees of your competitors.
• A sales incentive program will make sure you see a 79% higher success rate in achieving sales targets. This means you will have consistent month-on-month growth.

Now that you are tempted to grow your business exponentially and have a good sales incentive program, let me tell you how to know if your business is suitable to have a sales incentive program or not.

Businesses suitable to have a sales incentive program.

If you are running a business, you need sales; if you need sales, you need a sales team. You may think that’s not the case but trust me it’s true in 99% of the cases.

Think from car dealerships to funeral homes, everywhere you will find a salesperson. Even a barber is himself a salesperson for his shop. He needs to sell his skills to a new customer so that he can trust him before taking his service.

So take the thought out of your mind that you don’t need a sales incentive program. If you satisfy any of these criteria, you should immediately start creating a sales incentive program because else you are losing a lot of money on the table:

• Is your business revenue heavily dependent on employees, agents or distributors? For example: The insurance industry
• Can you measure your sales metrics like units sold or new customers? For example: E-commerce business
• Does your industry require that your salespeople should be well-behaved and respectful so that customers prefer you over competitors? For example: Car dealerships
• Does your business have some peak seasons where sales are more than usual? For example: The jewellery business during Diwali
• If your business involves deals where customers need some human interaction to trust and talk to before purchasing. For example: The real estate industry

If your business falls in any of these categories, then get ready to build a good sales incentive program because currently, you might think of it as an added expense, but soon you won’t think that when they bring more profits than the incentives you pay.

The step-by-step method to build the perfect sales incentive program

A good sales incentive program attracts top sales talent, and if you don’t start before your competitors, the top talent will go to them.

If your competitors are using a sales incentive program and you are not, their sales team can put your sales team out of business anytime.

But if you’re ready to grow your business and build an unbreakable sales incentive program, I can show you the right way to do it and the exact steps that you need to take.

Step 1: Decide your goals for the sales incentive program

You cannot create a sales incentive program until you don’t have an idea of what you want to achieve with that program.

And I don’t mean having a generic goal like increasing sales. I mean being very specific like, how much growth in sales, how much increase in AOV, or how many more referrals…

You need to be very specific with your goals because then only you will know which metric you should keep an eye on to see if it’s improving with your new sales incentive program or not. Let me show you how you can plan your goals:

1. Recognize the goal

Think about which sales metric you lack, which, if improved, can bring exponential growth to your business. For example:

• Increase monthly revenue.
• Boost sales of a specific product.
• Generate new leads per month.
• Encourage cross-selling to increase average order value.

In the beginning, just start with one goal and give all your efforts to achieve that one goal. As time passes, you can start having multiple goals at once.

2. Align the goal with the business.

What I used to do was I’d always align my sales incentive program with the goals that will be most important for my business at the moment. For example:

• If I was launching a new product, I used to tie the sales incentive program with it so that the product gains traction from the launch itself.
• At one point, my business suffered from lack of customer satisfaction and retention, so I tied the sales incentive program to incentivize salespeople who retained customers for longer or improve the scores of customer feedback.

Now you must be worrying that if you follow this method, then you might need to change your sales incentive program every few months. Well, that’s completely normal because 90% of companies do the same, so don’t worry about it.

3. Quantify the goal

It is great to choose a goal that aligns with your overall business strategy and also improves your sales metrics at the same time, but the question arises: how much should you improve?

Tell me which will be better – I want to get more leads or I want to get 50 more leads every month. Of course, the second is better, right? Because it specifies how much you want to improve the metric. For example:

• Generate 50 new leads every month
• Encourage cross-selling to increase average order value by 15%
• Sell 500 units of a specific product by the end of the month

You need to quantify the metric else your sales team would get demotivated as they don’t know the finish line.

Also make sure you don’t set unachievable goals else your salespeople will think you are just trying to make them work hard while incentivizing as little as possible. Check your sales performance and set targets that are achievable.

If you are still facing a problem with which goals to decide, you can also use a goal setting framework that’s called as S.M.A.R.T.

• Here, S stands for being specific – Clearly define what you want to achieve.
• M stands for measurable – Make sure the goal can be measured
• A stands for Achievable – Don’t set unachievable goals
• R stands for relevant – The goal, if achieved, should benefit your business with broader aspects too
• T refers to time – Set a deadline for that goal to be achieved

In this way, you will have a goal that you want to achieve from your sales incentive program. Now the time is to make sure your sales team is motivated to help you achieve those goals.

Step 2: Understand your sales team and their needs

This is where most business owners mess up. They think simply offering money as an incentive will be enough but that is not the truth because every person has different motivations.

Yes, some people will get motivated by money, but some will actually get motivated by vacations, a better cabin or even respect. Not only that, but it will also make your team trust you more as they will feel the program was built keeping them in mind,

That’s why it is very important for you to understand the needs of each sales person before you plan your incentive program. So here’s how you can understand your team and their needs:

1. Segment the team

You already know that every person will have different motivations so the first step you should take is to divide every person into different groups based on their performance like top performers, mid-level performers, or underperformers.

After you have divided everyone into these two segments, the next step you have to take is to decide which of them will have how many targets before they get their incentives.

• Top performers & senior roles

Don’t offer a lower target to top-performers as that might demotivate them to perform. Also, the mid-level performers won’t be excited enough to become top performers as the difference in incentives might not be drastic.

So what should you do? Offer the highest tier of incentives and targets for the top-performers as it will help your business achieve new all time high target records. Make sure it’s not more than 15% of the current targets else it could look unachievable.

For example, If your top salesman does 30 sales a week, then don’t keep their target as 40 or 50. That will look like a big jump which is unachievable. The best jump is 15% as it sounds fair so keep the target at just 34.

• Mid-level performers & middle roles

The goal is to make them motivated to become top-performers so that they can get higher incentives with higher targets.

So offer them an achievable incentive but keep the targets as the minimum or average of what top performers used to achieve consistently previously.

For example, As the average of top performers previously was 30 sales a week, keep the targets for mid-level performers at 30 sales a week.

• Underperformers & Junior roles

These people need training and resources more than incentives. So, find out what problems they face and offer them the help as an incentive. You cannot give them a target as they might just feel helpless due to lack of skills.

So, simply don’t give them an incentive but keep a minimum target, which if they achieve, they can get into the mid-level performers and start getting incentives as well.

This will push underperformers to thrive while also scaring mid-level performers that if they don’t work well, they might join underperformers and not even receive any incentives.

For example, If your underperformers do 8 sales a week, give them a minimum target of 10. Once they start to achieve 10 consistently, you can start offering them incentives for every tier like 12, 14, 16…

2. Find their desires & club them.

But not everyone will get motivated with an incentive of money, so it is important to understand what will motivate your specific team.

Once you know that, you can plan a program with a set of multiple incentives where the needs of everyone are met.

An example of an incentive program: Suppose there are 4 people in your team (A, B, C, and D) and 2 segmented groups (underperformers and overperformers) where A & C are underperformers while B & D are overperformers.

You came to know that A loves vacations, B is always complaining about his office cabin, while C & D thinks their salary is low. Now this information is going to act as a goldmine for you.

I know you are thinking that you’ll just offer different incentives to each person but that will look unfair and may also increase team cohesion. So, don’t do it.

Instead, create an incentive plan where underperformers will receive vacation + money if they meet their targets, and overperformers will receive new office cabin + money.

This way, the needs of everyone will get met and everyone will feel it to be fair, hence getting motivated to push harder and exceed all targets.

You cannot offer different incentives to different members of the team due to difficulties like being unfair or team cohesion, so you will have to create a plan where the specific needs of each person get met without being different for everybody.

Now you know how to club the incentives but the main question still persists that how would you know what your team wants? Here’s how:

• Take an anonymous survey which will make sure that your employees are not afraid of judgment and share their honest opinions.
• Inside the survey, ask them with a checkbox that which mode of incentive would they be happy with the most, like
• After the survey, conduct a simple one-on-one interview with those who are interested to know more, and also know what problems they face during their work.

Once you understand what they want, you can club their choices to create an incentive program that works for everybody.

3. Help solve problems

But these are not enough. You should solve the problems that underperformers face so that they also feel you care about them and want them to perform better. And if they perform better, the growth will come to your business itself.

So here are few ways through which you can find out what problem your salespeople are facing:

• Communicate

Contact your team and ask them individually what they think is the reason due to which they are not able to achieve their sales targets. They might say, for example:

• The quality of leads is not good
• We did not receive sufficient training
• We don’t have deeper knowledge about products which is why we fail to answer the questions of customers.

Not only with sales, but these problems could also reflect some fundamental problems in your business which you could fix. So it’s a win-win situation for you in every way.

• Fix

Once you know the problems, Go ahead and fix them all. If there are some problems with the salespeople themselves, help them with training or resources that they might need. Consider this as an investment instead of an expense as it will give you fruits later on.

Here is what your sales team could ask for:

• Please give us a better CRM software
• Please allow us to view the lead databases
• We don’t have enough training so please help us with more training

Now you just need to provide them what they want and see if they perform better. According to my experience, some of them will improve, while some will not. Those who don’t improve can be let go from the team.

Step 3: Build the incentive structure

What you learned till now was just the basic knowledge of how to plan. You need to learn how to present it for maximum growth. Here is how you can create an incentive structure that is unmatched & unbeatable:

1. Monetary & Non-monetary

Based on the data you got from step 2, plan an incentive structure that consists of both monetary (cash bonuses, commissions) and non-monetary (gift cards, trips, office) incentives.

This will make sure that the needs of all employees are met and you don’t force an incentive on somebody.

2. Tiered incentives

The biggest mistake I made in my early days was that I kept fixed incentives, because of which, once a salesperson used to achieve their targets before the deadline, they’d just become complacent.

So I started keeping it tiered which made sure they have infinite motivation to work. Here’s an example so that you understand it better:

• Tier 1: Rs 5000 bonus for achieving 100% of the target
• Tier 2: Rs 5000 bonus + vacation for achieving 125% of the target
• Tier 3: Rs 10,000 bonus + new office cabin for achieving 150% of the target

But a vacation will normally last 4-5 days, so will it be suitable to give vacations to your salespeople every month?

Also, how long can you upgrade the office? After a point, upgrading the office might also not be possible. This is the same problem that I also faced and let me tell you how I solved it.

3. Divide the incentives

Start dividing what your team wants as an incentive into long-term and short-term incentives.

• Short-term incentives will be those incentives that you will offer for fixed periods of every week, month, or quarter. For example: Cash bonuses or commissions as per the number of sales made.
• Long-term incentives will be the incentives that you will offer every 6 months or 1 year. If someone consistently achieves the smaller targets, then only they will receive the long-term incentive. For example: Vacation for a week, office upgrades, etc.

This way your sales team will be happy as they receive regular incentives, and they will sustain their performance for a longer period to also get the long-term incentives.

These steps will help you build an incentive plan that is unbeatable and it will definitely give a boost to the motivation of your employees, hence also boosting your business growth.

However, I don’t think the job gets completed after you build your sales incentive program. You need to start implementing it and start taking steps to improve it.

Step 4: The final aspects to take care of

Just creating your sales incentive program and sending an email explaining it won’t work. You need to make this an event. You need to announce it in a way so that everybody is excited to join in.

1. Announcement

As I said already, simply sending an email won’t work and you need to create it as an event. So, simply present a well made presentation about it and show them that in an event so that everybody’s excited and takes it seriously.

Once the event is over, most of them could forget what the targets or incentives are, so simply offer them a booklet which has all the information. If needed, do a small Q&A session to make sure everything is clear.

This will make sure everybody is excited to work on achieving the targets and getting their incentives; meanwhile, they are all on the same page without any misunderstandings.

2. Urgency

Once everyone understands their incentive program and starts to work hard to achieve their targets, the very next thing that you might notice is some of them procrastinate, thinking they still have time before the month ends.

So go on and create a public leaderboard where you show the real-time performance of all team members against their targets.

This will help them know about their performance and where they stand among others, hence creating a competitive urgency among everyone.

3. Optimization

We all know nothing ever stays permanent and the same is with sales incentive programs. You need to constantly optimise so that it consistently improves. To improve, create a report every 3 months with the following metrics:

• Were targets achieved? – If they were achieved then raise them a little in the coming quarter and if not, then lower it a little so that it becomes achievable.
• Which group achieved their targets and how early – If a team achieves more than 7 days before the deadline then it means that was easy for them so raise the targets else keep it constant or decrease.
• Did everyone participate? – If at least 60% of your team members did not participate then it means the incentives were not as attractive to them. So take surveys again with more questions to find what they want.

This is how you can optimise the sales incentive program that you have made and use it for the advantage of your business.

Conclusion

The steps I have shown you, are the same steps that me and other prominent business owners have used to create their sales incentive programs and unlock exponential growth for their businesses.

No matter whether you have a small business or a large conglomerate, implement a sales incentive program with these steps then let me know how good of a growth you got. I will be happy to hear your success stories.

Frequently asked questions (FAQs)

1. How much budget should I keep while creating a sales incentive program?

There is no specific number as the budget will depend on your business and team size but on average, keep aside 5% of sales for short term incentives and 3% of sales for long term incentives.

2. What if my sales team works on a commission-based pay structure? Should I still have a sales incentive program?

Yes, because incentives will not replace but instead complement the commission pay structure. It will motivate them with non–monetary benefits and help them not feel neglected during slow periods.

3. How do I decide the right balance between monetary and non–monetary benefits?

This will entirely depend on your team’s needs and will be different for different businesses. You can prepare the incentive program in the beginning according to step 2, then adjust it later according to the feedback you get.

4. Can I use a point-based incentive program?

Yes you can prepare a point based incentive system where team members can collect points by achieving targets and later redeem them for rewards that they want.

5. Can I use gamification to make the program more engaging?

Yes you can include gamification using badges, levels, and leaderboards as this will make the program engaging as well as it will evoke a sense of competition among everyone.