Last month, we discussed How to Execute an Incentive Program that Benefits Sales on our Incentive Solutions blog. In this week’s article, we will discuss some of the common pitfalls companies succumb to when they initiate a sales incentive program. An Incentive Research Foundation (IRF) study found that, although incentive programs have proven benefits, organizations often fail to take full advantage of them because they “lack the knowledge or will to create properly constructed programs that yield desired results” (Clark, R.E., Condly S.J. , Stolovitch). By being aware of these common mistakes, managers and team leaders can avoid them on the onset, before they become hindrances to promising new motivation strategies.
Mistake #1: Not properly diagnosing the problem
When developing a sales incentive program to help motivate sales teams, it is crucial to understand where your team’s problems originate. Understanding the source of the struggle is the best way to approach solving it. Effective sales incentives programs must involve two key elements in the planning stage: proper diagnosis and specific goal-setting (Deist, S., Emerson, M., Marks, M., 2012).
Whether by examining internal data or consulting an incentives company, there are options available to help you determine where your pain points are. Steve Damerow, CEO of Incentive Solutions, says, “All projects must have either a formal or informal evaluation as to R.O.I. We help you research, plan, implement, and measure in order to justify past and future expenditures.”
Mistake #2: Inconsistent incentive plan implementation and communication
Incentive plans must be consistent enough to be engaging. One of the benefits of a well-designed incentive plan is that it has the ability to be instantaneous and easy. Incentive Solutions, for example, has a Mobile App add-on that allows their incentive program to be accessed anywhere, at any time, with a smart phone. But imagine logging in to this incentive program, ready to conveniently input a sales claim from the field, only to find that administrators have changed which information is to be entered, or how. An unpredictable plan set-up defeats the purpose of on-the-go ease.
In The Complete Guide to Sales Force Incentive Compensation… , FedEx’s incentive plan is used as an example to illustrate this mistake. Because the plan had become needlessly complex and changed too often, salespeople complained to management that the plan no longer motivated them (Lorimer, S. E., Sinha, P., Zoltners, A.A., 2006).
Mistake #3: Inflexible plans
While incentive plans need consistency, they also need the flexibility to evolve with the changing needs of a sales team or business. The sales goals of two years ago may be too easily attainable now, or a new product may take precedent over an old one. Incentive plans need to be adaptable to new situations. Plans that were successful in one environment can fail in new contexts (Lorimer, S. E., Sinha, P., Zoltners, A.A., 2006).
Incentive companies like Incentive Solutions offer flexible plans with multiple optional module and configurable features. Program administrators have complete control over promotions, with the ability to change or create new goals at will. Steve Damerow explains, “We recognize the fact that incentives have a ramp-up period and need re-launching.”
Mistake #4: The same rewards and goals for every salesperson
It’s common knowledge among sales team leaders that there are three types of salespeople: low performers (about 25%), core performers (about 55%), and high performers (about 20%). Each type of salesperson is motivated in different ways. Salesforce released an infographic breaking down this arrangement: extra training and social pressure motivate low-performing salespeople, while high performers are inspired by multiple challenges and no-cap commission opportunities. Many incentive program administrators may be inclined to focus on rewarding their top performers. As a Prograde blog suggested, “Oftentimes, the greatest percent of program success comes from mid-level performers.”
It is essential to create different goals and offer a variety of rewards that match the capabilities of each sales performer.
Mistake #5: Instituting a plan without sales team input
While the goal of a sales incentives program is to push a sales team beyond their typical performance levels, salespeople know their own strengths and limitations. Prograde advised, “Don’t assume you know what will motivate your sales force.” Speak with your sales team to determine realistic individual and overarching goals. They may feel that your goals are too unrealistic, or not ambitious enough. Either way, the team will be much more responsive to incentive goals they had a hand in establishing.
Mistake #6: Rewarding with cash only
Non-cash rewards like merchandise and travel opportunities are crucial to incentive programs. Although salespeople say they prefer receiving cash awards, studies have shown that sales teams are more driven to earn non-cash rewards. People tend to assign a higher value to non-cash rewards than the actual retail value of the items, for multiple reasons:
- Cash rewards are linked to salary compensation in a salesperson’s mind. Merchandise, travel, and events are separate, unique rewards that create memories.
- It’s often hard for people to justify spending money—even extra, hard-earned money—on luxuries like travel and merchandise. When these items or opportunities are presented as gifts, there is no associated guilt over enjoying them.
- The “trophy value” of travel and merchandise is in the visibility of these rewards. They can be shared with peers and become conversation-starters. The visible and emotional connection to the company is always present. (Lorimer, S. E., Sinha, P., Zoltners, A.A., 2006)
Incentive Solutions is an example of a company who offers various types of rewards in their incentive programs. Their reward catalog includes millions of items, from merchandise like home goods and electronics to digital downloads and ticketed events.
Mistake #7: Promotions that last too long
While year-end rewards can be big pay-offs that many salespeople will look forward to, it’s best to keep sales teams energized throughout the year with shorter-term goals. Prograde mentioned this in their sales incentive blog: “sales people, by nature, don’t have the stamina to wait 12 months to achieve their reward. Keep them focused with routine program communication updates over a shorter period of time and they will stay engaged.”
The best incentive technology allows program administrators to begin and end promotions as needed. Whether through setting quarterly or monthly goals, salespeople can always have a prize on the horizon to look forward to.
An incentive program, with the proper approach and preparation, can light a fire under your sales team and boost revenue. Incentive programs are based around psychological factors like self-esteem and motivation, however, so they must be integrated with care. By paying attention to your particular team’s needs and avoiding these seven common mistakes, you and your sales team can share the benefits of a successful incentive program.
- Clark, R.E., Condly S.J. , Stolovitch, H.D. N.D. Incentives, motivation, and workplace performance: research and best practices. Retrieved from http://theirf.org/direct/user/file/pdf/Incentives–Motivation-and-Workplace-Performance-Whitepaper.pdf
- Deist, S., Emerson, M., Marks, M. (2012). Effective sales incentive design for distributors: what’s the right plan? National Association of Wholesaler-Distributers.
- Prograde. N.D. Retrieved from http://www.prograde.com/blog/?p=291
- Salesforce. N.D. Retrieved from http://image.slidesharecdn.com/how-to-motivate-salespeople-130916193948-phpapp01/95/how-to-motivate-sales-people-infographic-1-638.jpg?cb=1379572619
- Lorimer, S. E., Sinha, P., Zoltners, A.A. (2006). The complete guide to sales force incentive compensation: how to design and implement plans that work. New York, NY: AMACOM.