Aren’t all rules meant to be broken? Not when your profits depend on them. The purpose of a sales incentive program is to engage, motivate and increase sales for your employees and partners. Sounds simple. But, in order to develop an effective sales incentive program, you need to start with rules.
To develop your rules, consider the following questions:
- What are your objectives?
- Who can impact success?
- What are the budget parameters?
- How will success be measured?
Let’s dig into each of these questions.
1. What are your objectives?
And no, “depends on who you ask” does not work. All stakeholders need to be involved in the program objectives to make sure they are met. What objectives and goals do we want to impact? What specific behaviors do we need to modify?
Objectives can include increases in terms of units, revenues, net bottom line, steps to the sale or other factors. To build a strong foundation for a successful incentive program, objectives should be:
- Measurable; performance can be tracked via existing systems/processes
- Realistic and attainable; challenging yet achievable for at least 70% of the target audience
- Based on activities participants can control
- In alignment with corporate objectives and vision
Effective incentives limit the number of objectives featured in a program. One to three objectives fall within the sweet spot. Too many may cause participants to lose focus and decrease the impact of the program.
A focus on sales incentive design translates company objectives into individual goals. Participants want to make a personal commitment to these goals and are, thereby, more likely to achieve.
2. Who can impact success?
This should be obvious, but hear us out. While everyone can impact the success of your sales incentive program, you should identify the specific members of your sales team, or those of your channel partners or their employees, who can help achieve your high-level goals. They need to be your champions. Ideally, everyone who can influence objective achievement should be included in the program design. From managers to sales support and service teams, all roles should be represented. In many organizations, service teams can provide valuable leads that could result in a new sale or an upgrade in services.
Members of the sales support team often have direct customer contact and are in a position to affect sales. Channel partners and their sales teams also play a role in goal achievement for organizations with an indirect sales process. One key to successful channel incentives is to drive the program beyond the dealer/distributorship principle down to the actual sales reps.
Another key consideration in identifying the participant audience is determining whether the program is based on individual or team performance. Featured objectives typically determine this. Some goals cannot be tracked to an individual level and, therefore require a team reward. An example might be increasing customer service. This is an objective that is typically tracked and measured at the team level. These types of goals can and should be included in the program but ideally would be partnered with objectives that can be measured at the individual level.
3. What are the budget parameters?
If you don’t have a budget, I am sure we could figure out what to do with that extra money burning a hole in your pocket. All jokes aside, the following elements need to be considered:
- Type of budget
- Projected results
- Participants’ earnings potential
- Length of program
Program structures can be based on either open or closed budgets. Closed budget structures are designed to not exceed a specified amount, such as a “Scratch & Win” or another gamification element where a pre-determined number of winners and reward spend is known upfront.
In comparison, open budget structures are variable. The program spend is based on the performance delivered. These structures are typically known as “pay for performance” programs in that they are typically designed so that clients pay only for incremental sales and/or over-objective performance. If designed correctly, these types of programs can pay for themselves.
Once you have determined your budget strategy (open vs. closed), the next step is to determine the value of the budget. The two elements to consider are projected results and potential earnings. Determining the projected results for the program will help you uncover the overall value of your total budget spend. Understanding the value of the reward that will motivate your program audience will help you determine the potential earnings value.
The last piece of the budget puzzle is program duration. Studies show that longer-term programs tend to drive higher levels of performance. However, in this fast-paced world, organizations need to have the flexibility to address and adapt to marketplace changes. Ideally, a program would feature both long-term and short-term objectives. Longer-term components should address critical business objectives that are key to organizational success. Shorter-term programs could be used to address seasonal or immediate market needs.
4. How will success be measured?
Rinse, test, and repeat. Measurement is ongoing for incentive and recognition program management. Successful programs embrace the program and member-level analytics to understand performance drivers and influence behavior. The way you measure success should be established from the very beginning.
This program will be a success if…
- We reach __% of our overall sales goal
- We sell __incremental units/market share
- _% of our channel partners participate
- _% of eligible participants actively participant and earn
- Understand what behaviors drive success
- Impact on customer service or loyalty
- Strengthen relationships with your best performers
Establishing the success parameters upfront will drive you to identify the tracking mechanisms needed to measure the program greatness. In some cases, where reports and systems information are not available, additional tracking tools may be required. As an example, if channel partners are involved, a claims process is often a part of the tracking/measurement tool.
It is also important to develop a measurement approach that captures data on KPIs throughout the program and make recommendations to improve campaign effectiveness. Any necessary changes—to the rules, communications, technology or rewards—can be made to drive even greater return on investment.
There you have it. Strategic sales incentive design begins with the end in mind. One10 has decades of experience working with companies on their program design. Contact us for more info.