How to design a SMART Sales Incentive Plan

How to design a SMART sales incentive plan

The key to a successful sales incentive lies in the planning. According to research, 90% of the top-performing organisations use sales incentives to motivate, recognise, and reward their salespeople.

However, while organisations may mean well, the sheer existence of a sales incentive doesn’t automatically yield the desired results. For sales incentive plans to be effective, organisations need to carefully consider what will work for them.

In this article, we will explain the concept of a sales incentive plan, provide an overview of the various types of plans and incentives, discuss how to create sales incentive goals and explore some of the best practices when it comes to planning.

• What is a sales incentive plan?
• Types of sales incentives
• Ideas for sales incentives rewards
• Creating effective sales incentive goals
• Four things to consider when implementing sales incentives

What is a sales incentive plan?

A sales incentive plan is a method used to motivate and reward salespeople for reaching and exceeding their sales goals or milestones.

Traditionally, sales incentives have focused on rewarding the highest achievers, however, the biggest business impact comes with segmented strategies that reward incremental performance improvement across the entire sales team.

Not only are incentive programmes an effective way to increase motivation, but they are also a great way to boost employee engagement and improve employee retention, too.

Types of sales incentives

To design an effective sales incentive plan, you need to consider the various types of incentive programmes and select one that aligns with your organisation.

Role-specific incentives

A role-specific incentive programme is designed to reward salespeople based on their individual performance or responsibilities. Through tailoring rewards to match specific roles, this initiative ensures that salespeople are recognised for their individual contributions.

For instance, an account executive and a sales representative have very different roles. Due to their varying responsibilities, these roles would have different performance targets that need to be met in order to receive a reward.

Split sales incentives

In a split sales plan, there are multiple salespeople working on the same project or deal. When the project ends or the deal is closed, the incentives are ‘split’ amongst the team. These rewards can be allocated evenly among salespeople, or they can be distributed according to tailored criteria.

For example, if a team of salespeople are working together to close a deal, they can receive rewards based on the overall goal being achieved, or by their individual contributions. This model is an effective way to foster communication and collaboration, however, the way in which incentives are split can create a degree of tension.

Presales incentives

Unlike other plans, presales incentives reward salespeople throughout the sales journey. This model of providing rewards at various stages can be an effective way to ensure that motivations remain high, especially in instances where there is a lengthy sales process.

For instance, if a sales process is particularly lengthy you may consider breaking down the process and providing incentives when someone has:

• Scheduled a demo with a qualified lead
• Signed a prospective lead-up to a free trial
• Closed a deal

Omnichannel incentives

The sales process has evolved beyond a single-channel approach. Today, salespeople connect with prospective customers across a range of channels. Under an omnichannel incentive plan, salespeople are recognised and rewarded for the level of support and value they offer to leads, regardless of whether they convert into paying customers.

For example, customer surveys can be used on purchases. If a survey reveals that a customer’s decision to purchase in-store was influenced by an online sales representative, then that individual would receive a reward.

Analytics-based incentives

Analytics-based sales incentives use historical data to create goals and enhance the sales cycle. By using data, companies can create processes which lead to closed deals.

For instance, if data shows that the goal of converting X amount of leads typically takes 28 days, salespeople would be rewarded if they convert this number of leads within that timeframe.

Ideas for sales incentive rewards

When you have decided what type of sales incentive you plan to introduce, the next step is to decide what reward structure to use and select the most effective motivators for your team.

There are two primary reward structures that can be used to inspire and engage employees: deterministic and probabilistic.

In a deterministic structure, rewards are tied to specific actions or accomplishments, ensuring that employees are aware of what leads to rewards. This approach is great when the effort required to earn is high or you need quick results.

On the other hand, a probabilistic structure introduces an element of chance into the rewards system. As an example, in a probabilistic system, each salesperson who achieved 10 sales may enter a prize draw, with only one individual receiving the reward.

Whilst you would anticipate this approach to be less effective, when applied correctly, it can actually have longer staying power as people will continue to perform waiting for the eventual reward.

Once you have established which reward structure you wish to follow, the next step is to select the incentive rewards you intend to introduce. Below are five reward ideas that can be used to motivate your sales team and get the results you want:

1. Monetary incentives

Cash and cash alternatives, such as gift cards, are frequently used as an incentive, but they may not be the most effective means of boosting employee engagement.

Among other reasons, this is because this type of reward can easily be absorbed into everyday spending on items such as bills and groceries rather than on 'treats' for themselves or others. The most effective rewards inspire, therefore we recommend offering rewards that are as far removed from immediate necessities as possible, as cash incentives can often get mistaken as compensation, thereby reducing their effectiveness.

Gift cards

Despite technically being a monetary incentive, gift cards are one of the most popular non-cash sales rewards. Their tangible nature can be an effective way to motivate salespeople to achieve something they can hold and spend. To make this more personal, consider allowing salespeople to choose the gift card they want.

2. Tangible rewards

Tangible rewards, such as merchandise, are powerful motivators for several reasons. They offer a concrete representation of achievement which can ignite a sense of pride and act as an ongoing source of inspiration. Additionally, tangible rewards can be tailored to individual preferences, enhancing motivation. To maximise their effectiveness, it’s crucial to identify and offer rewards that resonate with your team's aspirations and desires, all while remaining mindful of potential cultural differences.

3. Learning opportunities

Many people are motivated by the opportunity to acquire new skills to advance their career or hobby. Consider providing professional or personal development opportunities such as language lessons, art classes or tickets to workshops led by industry leaders.

4. Sales incentive travel

Few rewards are more powerful than a sales incentive trip. By giving your sales channel the opportunity to earn a memorable event for the hard work they have put in, you are not only rewarding a job well done but creating a loyal and passionate sales team.

5. Experiential rewards

Experiential rewards have gained popularity in recent years due to the rise of the experience economy and people's desire for personal travel.

These rewards not only provide employees with the chance to celebrate their achievements outside the office with their friends and family, but research consistently demonstrates that they inspire stronger engagement and leave a lasting impact. This impact extends not only to the person earning the reward but also to those who watch it happen.

Creating effective sales incentive goals

One of the key elements of a successful sales incentive plan is the use of SMART goals. By setting SMART goals you will be able to clarify what you want your sales team to achieve, how you will measure the performance, and how you will reward them accordingly. SMART goals can also motivate the wider team.

Here are a few things to consider when setting sales incentive goals:

Be specific

Your sales team needs to understand what the purpose and focus of the sales incentive is. Avoid vague objectives such as ‘to increase leads’. Instead, elaborate and precisely state how you plan to achieve this. For instance, if the wider organisational goal is to increase revenue by £5 million, you may set a sales incentive where those who increase their revenue by 10% get a reward.

When setting a SMART sales goal, it’s beneficial to allow your employees to personalise their goals to create an Idiosyncratic Fit. This term describes the emotions you experience when you have a positive advantage over others to earn, achieve or win a reward. If your sales incentive programme doesn't fit your audience, they won't bother to participate in it.

So it comes as no surprise that, when given the opportunity, most people will set higher goals for themselves and will be more committed to the goals they set. 550 BI WORLDWIDE GoalQuest sales incentive programmes have confirmed the effectiveness of this process - when given the choice of three goals, more than 42% selected the highest goal offered.

Ensure it is measurable

For sales incentives to be effective, progress must be able to be measured. Measuring progress helps people to remain focused, meet target dates, and experience the exhilaration of getting closer to achieving their goal (known as the Goal Gradient Theory).

An example of a measurable sales incentive goal would be: To generate 25% more sales leads within three months in order to receive a 10% bonus. To make this sales incentive effective, individuals should be able to track their real-time progress towards achieving this goal.

At BI WORLDWIDE, we create strategic and engaging sales incentive programs to help your sales team excel. We motivate and display progress to your target audience through the use of fun, creative and vivid measurement and communication tools such as real-time dashboards, league tables, leaderboards and performance-driven communication.

Make it attainable

We compete to win. If we can’t win, we don’t compete. Yes, goals should be achievable but they should also be challenging. In other words, goals should stretch your abilities but still remain possible.

In line with the principles of the Hedonic Treadmill, people will always want to move on to the next milestone. For this reason, your sales incentive program should recognise and reward smaller milestones while also reminding them of how close they are to achieving their overall target.

Gamification tactics such as earning badges, social recognition, and targeted communication can all enhance motivation.

If a sales team has a history of generating 20% more sales leads quarter-on-quarter, an example of an attainable sales incentive goal could be: To generate 25% more sales leads within three months in order to receive a 10% bonus.

Be realistic

When creating sales incentive objectives, you need to ensure that the goal is one that your audience is willing and capable of achieving.

By incorporating your sales incentive programme with tactical campaigns, you not only drive discretionary efforts but will also increase their confidence in achieving their targets.

When you combine this with the right business tools such as knowledge, communication, and rewards, you create a winning formula for a successful sales incentive programme.

Make them time-bound

Effective sales incentive plans and goals are anchored within a timeframe. Not only does this help to provide focus and drive, but it also makes it much easier to measure progress.

You can also consider rewarding the greatest improvement within a certain timeframe. This can be specific to those who are new to the incentive or apply across the participant base over a series of set periods (typically a quarter of the length of the incentive).

An example of a time-bound goal would be: By the end of Q1, achieve the highest number of closed deals among the sales representatives to earn a points to redeem a reward from a selection of luxury merchandise items.

Four things to consider when implementing sales incentives

Creating a sales incentive plan that works requires careful consideration. What may seem like an effective approach may not necessarily resonate with others.

Here are 4 things to consider when creating a sales incentive strategy:

1. Find out what motivates your team

If you offer sales incentives that don’t resonate with your team, they won’t be motivated to achieve their goals. Instead, you need to ensure that your sales incentive plan is aligned with the motivations of the wider team. Take the time to get to know your employees. What are their hobbies? What motivates them? Why do they come to work? Not only will this enable you to create effective incentives, but your team will appreciate the time you are taking to get to know them.

2. Maintain variety

To avoid people’s motivations depleting towards the goal, it is important to maintain variety in your initiative. Some ways in which you can maintain a sense of excitement with your sales incentive are through gamification, “surprise and delight” rewards, and opportunities to earn bonus points.

3. Utilise sales reward and recognition processes

Recognising and magnifying success is key. People’s need for instant gratification has no doubt been influenced by social media.

Social recognition can be hugely beneficial to making someone feel appreciated within the workplace. At BI WORLDWIDE, our effective sales incentive programmes have been designed to create a contagion effect, also known as Relativity Bias or “keeping up with the Joneses”. This means that our sales incentives leverage the human tendency to compare themselves to one another and be influenced by the success and rewards of their peers. This can be a powerful motivator in a sales team, as it encourages healthy competition and drives individuals to excel in their performance to achieve similar, or better, outcomes.

4. Focus on non-monetary sales incentives

The effectiveness of sales incentives is influenced by the rewards on offer: if the rewards don’t resonate with the people, then they will not be motivated to achieve their goals.

Non-cash hedonic rewards that provide an idiosyncratic fit have been proven to impact performance more than their cash counterpart.