Motivating Peak Sales Performance
Creating Effective Sales Incentive Programs
Sales incentive programs are important for recognizing and rewarding employees for a job well done. But how such programs are crafted and the types of rewards given have to be relevant to the recipients, with motivation being the key.
"Motivation" is a trend right now in sales incentive programs. "It isn't all about extrinsic prizes anymore. You need to know that people are motivated differently," said Maggie Wenthe, solution manager, marketing strategy, ITA Group Inc., a West Des Moines, Iowa-based company that specializes in creating and managing events, incentives and recognition programs.
A 2016 study by the Incentive Federation Inc. revealed that program managers use a variety of rewards to recognize their sales teams. Among the various reward types, points' budgets tend to be the richest across all firm sizes.
"All of us have some forms of intrinsic and extrinsic motivators at play," Wenthe said. "That's why ITA Group created Motivology."
Motivology is ITA Group's own brand of motivation that identifies and balances the internal and external motivators needed to align and motivate your people and significantly boost your bottom line.
"Technology is allowing us to measure and analyze so much more than ever before, and to create personal experiences," Wenthe said.
While motivation is important, you have to know your audience, too. "Times are changing!" Wenthe said.
"With the emergence and daily use of multiple technologies, your audiences' expectations have changed," she said. "Pair that with a young workforce moving in and being able to take the job they want, and you need to stand out from your competitors to attract the talent and skilled workforce you need. Incentives and recognition programs will help you do that. (Also, they will help you build the organizational culture all job roles want to work for, not just sales teams)."
Similarly, Brian Carr, senior director of sales operations, Next Level Performance, a Dittman Company, said technology has become a part of every aspect of our lives.
It is important, he said, that sales incentive programs adapt to an ever-changing world and make it easy for program participants to receive communications and interact with the program on the go.
"In this 'instant' society, where we are basically connected at all times, it is essential to provide 'real-time' updates on the status of where a participant stands in a sales incentive, as well as quick access to reward redemptions," he said.
In addition, there is a renewed focus on sales incentive program design.
"Sales incentives must inspire employees to do the right thing, for the organization and the consumer. Incentive and recognition companies can provide the expertise needed to design a program to be effective and to achieve intended results," he said.
"While it may not be a trend, per se, the fact that sales incentive programs have made a resurgence as a business strategy is worth noting," said Russ Frey, director, People-Centered Design, Maritz Motivation Solutions.
"After having navigated a difficult economic period and burned through pent-up demand, many companies are rediscovering sales incentives as a potent tactic where growth can be hard to come by," he said.
"It seems like we're also frequently reminded about the importance of good program design," he said. "Well-designed programs invite people to contribute their full potential, while those that are poorly designed not only underperform, but risk causing lasting damage to a brand."
A more balanced, people-centered approach should enable participants to get what they want within the context of improving the sponsoring company's business.
"It's a subtle but important shift away from approaches that start with the question: How can we get them to increase our sales? to How can we help them achieve their aspirations when they support our brand?" Frey said.
In other trend-related observations, he noted that the availability of more and richer data plus advanced analytics capabilities helps companies understand how a program is performing with near-immediacy and quickly adjust as needed.
"Providing participants with the autonomy to customize their own program experience and share it with others can increase motivation and program impact," Frey said. "Highly personalized, triggered communications [not] only [can] deliver relevant progress feedback, but also serve up actionable cues about what to do now in order to achieve the next performance milestone.
"Finally," he added, "with multiple generations and multiple geographies represented in the workplace, it's important that program elements like communications, learning, feedback and rewards serve to unify a salesforce by thoughtfully representing the sponsoring organization's purpose, values and aspirations."
Most Typical Rewards
The most motivational rewards and the most typical rewards are, unfortunately, two different things, Wenthe noted.
"Motivational means personalized, authentic experiences. This could be unique travel options for top earners or hard-to-get local event tickets for mid-earners. I say 'personalized' because some people are dying for the latest technology, while others are trying to get/be healthy," she said.
"In some cases, that overlaps with a fitness tracker, but in many cases, it doesn't. It is individual preference," she said. "So, choice is still a big factor."
Merchandise, gift cards, individual travel and event tickets are typical reward offerings for sales incentive programs that Carr's company manages on behalf of its clients, although the mix may vary based on the target audience.
The most motivational rewards
Recent joint Incentive Research Foundation (IRF) and Incentive Marketing Association (IMA) research shows that every participant in recognition and incentive programs has a unique profile, with unique preferences.
"Providing a variety of reward options increases the chances of appealing to every participant, and is a key component of motivating people to deliver their best effort," Carr said.
"Over the last year, we've seen spikes in redemptions for individual travel and event tickets," he said. "Many sales professionals already have a big screen TV or high-end grill, but there is a definite appeal to going on a trip to the Caribbean, seeing a favorite team play or attending the hottest concert of the year. These are typically trips and events they may not normally do on their own, so the program becomes linked with memories that last a lifetime."
Given that people are so different in their reward preferences, it's really important to provide choice—a wide selection where everyone participating in a program can find items that appeal to them, noted Mary Luckey, director of reward strategy, Maritz Motivation Solutions.
"Gift cards are almost always big redeemers, mainly because they're easily understood and can be given as gifts. But they may not always be memorable if redeemed for everyday necessities," Luckey said.
Wenthe agreed that many companies have relied on gift cards. "Gift cards themselves aren't bad," she said. "But if there isn't a presentation factor to go along with the award, gift cards are extremely impersonal. Make sure the award presentation matters and fits the individual."
Luckey added that tangible rewards, particularly electronics and housewares, are perennial favorites, with the brands and models varying by personal preference.
"Creating a 'wish list' of rewards remains a great way for participants to convert sales goals into personal reward goals," she said.
Also, travel isn't just for groups or top performers.
"Offering individual travel awards lets participants build their own experiences and share the memories with family and friends," Luckey said, adding that charitable giving is another growing reward category.
"People want to give back to their community, protect the environment and do what they can to make the world a better place," she said.
While traditional giving options might sometimes see a lower redemption, people will pay special attention to rewards where a portion of the proceeds go to charity or to sustainable rewards that, for example, help people in developing countries earn a living wage.
"Regardless of the rewards you offer," she added, "it's important to keep the selection fresh by changing things up frequently. Doing so helps maintain interest and gives people a reason to keep coming back to explore new offerings."
A sound design is essential to running a sales incentive program that not only generates results, but also builds business for the long-term.
"In a competitive marketplace, metrics should also be about the actions that build relationships with customers over time," Carr said. "Every sale and the service around it should be an experience that draws the customer back to buy again. It's important to consider how your incentive program fits into your long-term strategy, in addition to boosting sales in the immediate."
Wenthe said people have to be compensated properly for any incentive program to work.
"Ensure your current commission plan works effectively. Use incentives to push your people above and beyond baseline goals or to promote specific products/services or for a time-bound drive," she said.
"Many programs still put the majority of the focus on top performers, with low performers taking the rest. Don't forget about your middle performers. They need coaching, frequent goals and strong communications as much as the other two groups," she added.
For salespeople who are employees of your company, the opportunity to earn non-monetary incentives needs to be balanced carefully with base compensation and variable cash earning opportunities like bonuses.
"Here, it's important to think how these rewards will be positioned within the context of a total compensation package … with non-monetary, tangible rewards focused on achievement of more immediate goals that contribute to the organization's long-term success," Frey said.
For any sales incentive program, it's important to consider four key elements that serve to support the participation experience. "These elements or 'pillars' include: a head-turning attention strategy, a goal commitment strategy, a progress feedback strategy and a rewards strategy," Frey noted. "Each pillar, by itself, is important, so under-investing in any one risks undermining program results. Good design considers the role of each pillar and seamlessly integrates all four to create an experience that is, in itself, rewarding."
Finally, how a program is structured or the "rules" that trigger reward earnings must be perceived as fair, equitable and achievable.
"If that's not the case, people may not perceive opportunity or will choose to opt out," he added. "Designed right, sales incentive programs engage everyone across the performance curve and provide rewards in proportion to contribution."
The rapid increase of available data has caused significant changes. Enhanced reporting and analytics allow program owners to refine incentive strategies and show the value of a program, Carr said.
"Because incentives are known to be a sound business practice to focus sales forces, companies are not afraid to launch a program, but they do want to make sure they are getting the right results," he said. "Reporting and centralized program management allow for the best view into the program and its potential outcomes."
The emergence of sophisticated technology and analytics capabilities enable program designers to create program experiences that are more tailored to the individual and more social than ever before.
"These tools permit companies to move well beyond one-size-fits-all approaches and give participants a level of autonomy and understanding that empowers them to perform at full potential," Frey said.
Sophisticated analytics also help program owners to develop program performance scenarios and accurately forecast total program impact at both the macro (program) level and micro (individual) level.
"The exponential increase in computing power has enabled machine learning to become practical for an incentive program of any scale. This allows analysts to work faster and with more accuracy," he said.
"It's also important to note that with so many recent advances in the social sciences—especially neuroscience, social psychology and behavioral economics—program designers have access to a wealth of behavioral insights to create participation experiences that enrich lives well beyond the acquisition of status and stuff," he added.
When it comes to technology, Wenthe said that it "is allowing us to be much more precise and get closer to the individual. Analyzing data can help programs become more predictive.
"Many companies now also have the proper data to truly understand the value an incentive program provides to the organization," she said. "For example, CRM systems help program designers know when to reward movement through the system, providing incentive to move a prospect through the sales funnel. We can see what kinds of movements and timeframes are most likely to result in a sale and award for those."
Making Programs Effective
For a program to be effective, it has to be communicated with creative and memorable program materials. "After all, if no one knows about the program or remembers what they have to do to hit the goals you set, it cannot achieve the lift needed," Carr said.
Also, it is important to connect with the aspirations of the audience. "Images and words that make participants envision themselves enjoying their reward can go a long way toward inspiring the right actions," Carr said. "Whether their personal dreams include sitting on a beach, going to a concert, or showing off a high-end watch or piece of jewelry, the right message will motivate eligible participants to hit their goals."
He also suggested giving updates throughout the qualifying period to keep the program top-of-mind and everyone engaged.
"E-statements and program dashboards can help participants track their progress. Keeping the rules simple and easy to understand is key," he said.
To make programs effective, don't solely focus on revenue. "Branch out to also include product mix and margin attainment or even training completion or deal tracking and registration," Wenthe suggested. "Multiple studies show that product and sales training have a positive impact on sales goals and growth."
Frequent goals or quarterly opportunities will keep your people engaged, too.
"And, of course, make sure they actually know how they're performing. Communicate frequently," she said. "Consider performance levels to keep your mid-performers reaching. A large annual goal can feel unattainable unless there are markers throughout the year to encourage continued progress."
Frey suggested a number of considerations for designing effective sales incentive programs. Here are some of the basics:
"When it comes to assessing the status of a sales effectiveness effort and then consistently building salesforce loyalty over time," Frey said, "we've adopted a science-based program design framework that includes three levels."
The first level is called the "Exchange" and represents the starting point, which is generally a simple "Do this, get that" earning structure for earning rewards in exchange for desired behaviors. It enables salespeople to answer the question: "What's in it for me?" and is an essential foundation for building loyalty. But, it's really only the beginning.
The second level is focused on the "Experience"—creating a more immersive participation journey by using science-based design principles like social proof, narrative engagement, status, scarcity, novelty and others. "Oftentimes, we'll co-create the design for an immersive experience with program owners as part of a Persuasive Design Lab," he said.
The final level, "Brand Identity," is the ultimate in loyalty, where sales associates see themselves as ambassadors for the brand and have internalized the sponsoring company's value proposition, customer benefits and the personal benefits of championing your brand over competitors. Achieving this level of loyalty is accomplished by enabling salespeople to grow their capabilities across multiple dimensions of performance, as individuals and as a community of practice.