New Directions in Sales Incentives
Technology, Gaming Elements Influence Programs
By Deborah L. Vence
Van Dyke noted that besides the overall growth in non-cash sales incentives, the biggest change is a much larger inclusion of technology and gaming elements. "Automated leaderboards, point-driven challenges, various award badges all available in the palm of your hand were not as readily available 20 years ago," she said. "There is also a greater reliance of procurement throughout the process, more regulatory oversight, and a tighter integration with outside information systems."
Similarly, Purdy said technology delivers real-time sales data and line of sight to the source of the sale, which is a really big difference from 20 years ago.
"Twenty years ago sales data was poor at best, and most channel and dealer sales incentive programs were tracked manually, often requiring the sales rep to fill out and mail in paper sales submission forms with their proof of sale attached," he said. "Today, we tend to have [a] much better line of sight to who within our channel [is] selling our products. Plus, we now receive real-time sales data that enables us to automatically validate and award points instantly to the sales team.
"Real-time tracking, rewarding and gamifying sales rep to motivate them to sell more wasn't possible 20 years ago. In addition, our ability to communicate wasn't as easy as it is today," he added. "Plus, we now post sales results and individual and team achievements on sales leader and wall boards all in real time."
While sales incentive programs offer significant advantages, "these are subject to how well the program is designed in order to drive results and meet the programs objectives," Purdy said. "Let's assume you have a well-designed program; then the benefits include [the following]:"
- Drive incremental sales: "This is often the primary goal," he said, "so awarding points or bonuses is measured period over period, whereby participants that exceed budget earn greater points and prizes for their hard work."
- Launch a New Product: "Gaining early stage adoption is critical for new products, so building incentives to achieve new listings or distribution deserves a reward."
- Competitive Gains: "For some companies, the war is all about converting a competitive user to adopt their companies' products and services. Conversion gains drive new growth, and retaining these clients over the long haul is often the result of a well structured loyalty program which acts just like a sales incentive program but targets end customers directly."
- Building Dealer/Distributor Loyalty: "Building loyalty throughout your companies' distribution channel is extremely important because many companies, such as technology companies, don't actually control or even sell their products to the end user. These companies may have one, two or even three layers of distribution, and knowing your distributor sales reps and motivating them to stay loyal to your brand is key to success."
An organization's ability to track sales data and provide results to program participants in a timely manner can be an obstacle. Many companies keep this information in different parts of the business, or in silos, and it presents an IT challenge to bring it all together in a meaningful way.
Sales strategy, Purdy said, often includes a heavy emphasis on incentives to help build growth and market share.
"And, it's especially valuable when your in-house sales team knows and works closely with your dealers and/or distributors, which can help to make rapid sales gains at the expense of your competition," he said.
What's more, Sawi said that there's simply no better way to focus the entire field on an organization's goal. "It is important to remember that the principles of sound program design require that incentives be targeted, tied to specific sales goals, and pay for themselves out of the incremental increase in profit," he said.
"A growing body of research—from the Incentive Research Foundation's recent biometrics study to researcher Scott Jeffrey's work on value and perception of cash versus non-cash rewards—proves that cash rewards simply do not have the impact of tangible, non-cash rewards," he said. "Sales incentive programs with experiential or tangible awards connect to individual aspirations and give people reasons to hit their goals."
Van Dyke said best-in-class companies are more than twice as likely as all other firms to provide non-cash incentives (21 percent of best-in-class vs. 10 percent of other companies use R&R programs).
Sixty-four percent of best-in-class companies, she said, have a process to incentivize rapid activity around a particular product, an end-of-cycle-push, or even a way to dispose of excess inventory using spiffs versus compared with 48 percent of industry average firms, and 38 percent of laggards.
Organizations that provide non-cash reward/recognition had an average year-over-year annual corporate revenue increase of 9.6 percent vs. 3 percent for all others.
She noted increased sales, increased productivity and high potential return on investment (ROI) as being a few of the benefits.
In an example of increased sales, the 2009 annual "Allsante Inc. Encounter" event for Georgia/Louisiana healthcare insurance brokers was designed to increase sales and profits in those specific markets and engage channel partners with the company's brand. The event included more than 50 key insurance owner/principal brokers, each of whom were individually selected and invited by Allsante Inc.
Allsante wanted a better understanding of the actual ROI that it could expect from the Allsante Encounter conference and hard data against which to make decisions around improving future programs. Allsante collaborated with the "ROI of Engagement" Group to measure the return-on-investment (ROI) of Allsante Encounter 2009.
"After their event, the client found that tremendous uptick in broker engagement, as evidenced through the high majority citing better attitudes toward and improved connections, led to increased sales, according to the brokers who attended the event with 94 percent of brokers presenting products more often, 98 percent quoting repeatedly, and 90 percent reporting greater sales," Van Dyke said.
"Incentive travel is a sales promotion tool and works well in raising sales productivity," she added.
In a case example, research was done into the effectiveness of incentive travel at an insurance company in Great Britain. The company allowed researchers to confidentially dissect the implementation and impact of its incentive program in exchange for anonymity. Overall, the study's findings revealed that incentive travel has a positive impact on performance, but that better understanding of program dynamics can yield even better results.
"In the case of the studied company, productivity increased by 18 percent on average," she said.