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Premium Incentive Products Magazine - Products and Ideas That Inspire Performance

New Directions in Sales Incentives

Technology, Gaming Elements Influence Programs

With intense marketplace competition, sales incentives are more important than ever to a company's business strategy. What's more, companies are using incentives programs as a means for overall success.

"We see a shift away from not just 'making the sale' but also wrapping in 'how' the sale gets made, and if it's in line with the culture of the organization," said Melissa Van Dyke, president of the Incentive Research Foundation (IRF). "Whether this is through peer-to-peer recognition or via qualifiers that include meeting certain training/culture goals, more organizations are using their incentives program as a tool for overall organization success as well as sales success."

The Latest Trends

One of the latest trends is that a number of new tools are being used in sales incentive programs to help build engagement.

Robert Purdy, founder, CarltonOne Engagement, noted that some of those tools include:

  • Gamification: "This is the art of developing special sales metrics that once achieved trigger a special badge or they may unlock a game piece," he said. "Collect all the game pieces and the salesperson will earn bonus points. In most cases, these game pieces are triggered by specific sales achievements, which help drive higher sales engagement."
  • Express Claiming: "This is an amazing tool that is designed to help sales reps to identify and claim their sales," Purdy said. "For many large channel sales organizations, it's often very difficult to associate the sale to the correct sales rep. Point-of-sale data may not identify the sales rep; however, in most cases, we do know the sales organization, so we built Express Claiming to help pool unclaimed sales by channel partner. The tool notifies the sales team that there are unclaimed sales in their pool and the reps simply claim their own sales. In order to moderate any potential conflicts, we added the ability for a manager to approve the claims as well as make any changes to correctly align all sales claims by [the] rep."
  • In the end, the best sales incentive programs always will underperform if the rule structure isn't defined correctly.

    "It's a balance between driving the right product mix at the right time to the right sales target customers," Purdy said. "Determining what's 'right' is where the seasoned sales managers earn their stripes."

    Victor Sawi, vice president of sales and services, Next Level Performance, said his company's clients are experiencing fierce competition in the marketplace, making sales incentives especially important to their business strategy.

    "We are particularly seeing growth in channel programs, where capturing mindshare and brand loyalty are more and more important," he said. "As a result, many clients are committing to more robust communications and technology plans to support their programs and to keep them engaging on a constant basis."

    In addition, he is seeing an increasing understanding that to capture the entire sales force's best efforts the program also must inspire those who might not win the big rewards.

    "Smaller rewards, proportional to efforts and achievements, can help keep everyone involved," he said.

    In fact, the IRF released a study that showed top performing companies prioritizing "reach over exclusivity."

    "When there is so much competition, most organizations are looking for ways to capture every possible incremental increase throughout the sales organization," he said.

    The study, "Ten Things Top Performing Companies Do Differently," released in August 2017, stated that when top performing companies were asked "whether their non-cash program design was structured with the goal of rewarding and recognizing the truly exceptional performers (exclusivity) or if it was structured with the goal of each participant receiving a recognition or reward in the program (reach), top performers were statistically more likely to say 'reach' regardless of program type. While 56 percent of top performing companies said they prioritize reach for both employee and sales programs, only 36 percent and 28 percent of average companies said so respectively."

    How Programs Differ Now

    Sales incentive programs of today differ a bit from those of 20 years ago, and what's driving that change is technology. "We are delivering programs and communications via mobile apps and websites, using digital marketing to get the message to the sales force in the moment," Sawi said. "It gives much greater immediacy and urgency to programs. Especially with year-long campaigns, it is essential to keep the program front of mind, and that's possible with the tools that are available today.

    With intense marketplace competition, sales incentives are more important than ever to a company's business strategy. What's more, companies are using incentives programs as a means for overall success.

    "And with our e-blast capabilities," he said, "we have a view into who's engaged with the program and what communications are working with each audience. Open and click rates, along with other metrics, give us better insight."

    Salespeople are consumers, Sawi said, and their expectations from incentive programs reflects the consumer interfaces they are used to, including online social interactions, real-time data and maximum access points for delivery of information. "Sales incentive design and technology must keep up with those expectations to be relevant," he added.

    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."

    Program Benefits

    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.

    Dealing with Challenges

    Sometimes challenges can arise with sales incentive programs, with Van Dyke noting that "rising costs, greater regulations, tighter involvement of sourcing and procurement" are a few.

    In the past several months, Sawi said there have been a number of programs that confirm very late in the game.

    "Additionally, many sales incentive travel programs are growing significantly in size," he said. "When it comes to travel rewards in this seller's market, this can make it challenging to secure the space they need at a truly inspiring destination."

    Another challenge is that many clients are facing a rapidly changing regulatory environment. "Recent legislation and/or public perception have a profound impact on certain industries, most particularly financial services," he said.

    "Finally, 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," he said.

    Purdy noted that there are many challenges, but wanted to look at some of the often-overlooked challenges that can have a very big cost:

    • Taxes: "There are very strict taxation rules within the U.S. and internationally that ensure all rewards earned by the sales and channel customers are tracked at fair market value and then added to individual tax returns," he said. "The IRS will assume that if your company is issuing rewards to salespeople or third-party dealers that you are ultimately responsible for properly tracking and reporting the taxable benefits as well. Failure to do so will be expensive."
    • Data: "Building data warehouses to help cleanse, align and evaluate sales trends while shifting your sales strategy and aligning your incentives with these strategies is a challenge, but it's also a goal worth achieving because now you can calibrate your campaigns with accurate and timely data," he said.
    • Competitive Insights: "While I don't often care about the competition, knowing what they are doing as well as their strengths can help you align your sales campaign where it will have the most positive impact for your company versus the competition."
    • International: "If your program is international in scope, there are differences in Europe, especially Germany and Czech Republic, where the use of sales incentives has very special rules. Incentives are often directed at the company and not an individual sales rep. The company can, at its own discretion, reward the sales rep or team as well as track and report the value for tax purposes of these rewards."

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