Devised specifically for sales teams, sales incentive plans are designed to drive certain types of desirable behaviour. This design is crucial, as the wrong incentive plan can often lead to the wrong behaviours, as we will go on to cover in more detail. Incentive programs can be monetary or non-monetary, based on individual output as well as wider company performance.
What’s the objective?
The objective of any sales incentive plan is to create an environment where employees want to contribute directly to the company’s success by driving the desired behaviour.
If you encourage your sales teams to behave in the right way, this will drive excellent customer service. In turn, you will have more loyal customers who are likely to recommend you to others.
The key is to make sure that your sales incentive programs are simple and attainable, set up in a way that’s easy for everybody to understand. But there are variable factors to consider – not all salespeople are motivated the same way.
Sales compensation challenges
The trouble with sales incentive plans is that they are often designed and managed by the sales teams themselves, rather than HR. This can lead to things getting overcomplicated. The more you track, the harder it is to keep tabs on who is getting what commission, and why. A lot of incentive programs fail due to complexities in their recording and reporting systems.
If you’re looking to hire someone and they ask about commission, it should be easy to explain.
It all comes back to behaviour. Delivering payouts too quickly, for example, can drive transactional behaviour that leads to pushy sales tactics, instead of taking the time to build meaningful relationships with customers. There is a balance to be found.
Another common stumbling block is when you have multiple sales teams operating in various locations – each with their own sales manager who has devised their own set of incentives, leading to a lack of consistency in sales performance throughout the organisation.
So how do we simplify a sales incentive plan so it’s easy to understand, communicate and implement?
First we look at the objectives: what is the company trying to achieve? What behaviours are you looking to drive? If your sales incentive plan only rewards revenue targets, your sales people won’t care about customer service – they just want to get paid as much as possible.
Designing an effective plan means:
- Assessing the performance measures that each person can directly impact
- Clearly communicating the company’s strategic objectives and each employee’s role
- Looking at non-monetary rewards such as coaching, training, career progression and performance management
Not just what, but how
When it comes to sales incentive plans, we shouldn’t just be looking at what we ask our sales teams to do, we should be looking at how they are doing it.
Incentive plans that focus on revenue at any cost will teach salespeople to sell at any cost – even if it costs you that long-term customer relationship. But fostering customer loyalty is vital to your business: it costs five times as much to attract a new customer than to keep an existing one.
Encourage your sales teams to behave in the right way and you will create a culture that values customer service, which means higher customer retention and more revenue long-term. What’s not to like?