How to Design a Sales Incentive Plan

What is the theory behind incentive plans? Having an incentive plan in place won’t guarantee universal satisfaction within the sales team ranks. For instance, incentivized commission and bonuses were found to be less of a motivating factor than brands had hoped. Having incentives rewards repeated excellence in performance and contribution.  On the flip side, poor performance or repeated inadequacy garners a correction or disciplinary action. This is the theory behind a sales incentive plan.

But this theory does not specifically mention monetary incentives or standards. It mentions rewards. You must pay attention, observe,  listen to feedback, and get clever when defining what type of rewards your sales team deserves Knowing your team well will help you link their personalities into a (hopefully) universally pleasing reward plan.   Be as traditional or as creative as you wish.

The challenge is to design an incentive plan that pushes your business towards its goals. Goals that are most likely represented as revenue growth.

For instance:

Our goal is for our sales team to sell as many wholesale vape products as possible. There are some products that we’d like them to sell more than others depending on availability and profitability. Our sales incentives strategy needs to be focused on these goals. 

We also want our customers to have the best experience possible and have easy access to an incredibly wide range of vape products at bulk prices. So, we encourage our team with incentives on the customer service aspect as well. 

Remember, even if your goals are revenue-oriented,  increased revenue depends on other services unrelated to sales. Think, customer service. 

That said:

Keeping your sales team motivated is challenging. It’s our job to help you find the right strategy. 

6 Tips on How to Design a Sales Incentive Plan

1. Identify What Behaviors You Want to Motivate

Before you define the sales commission structure you want in place, understand your business’s overall goals. You want revenue to rise, but that is a staircase comprised of many steps. 

Identify the steps you’ll need to take to meet your goal and consider the markers where you’ll implement incentives.  . Sales are motivated by money, so start there when brainstorming incentive ideas.

However:

Not all sales activities involve sales.  Communicating with customers directly, creating a rapport that enhances the company’s reputation, and generating leads are perfect examples of sales methods not linked to a transaction. A happy shopper now could be a loyal customer later. 

2. Define a Sales Commission Structure

Variable compensation may take many forms. The most common of all: commissions. Here’s a list of the most common sales commission structures you should look into when designing your incentive program:

• Revenue Commission Structure: Sales reps receive a percentage of total revenue made on each sale they close
• Gross Margin Commission: Sales reps receive a percentage of gross revenue made on each sale they close.
• Tiered Commissions:  Increased percentage of commissions earned by sales reps as they reach previously specified total revenue goals
• Multiplier Commission: Commission percentage is defined by the progress the sales rep has made towards their sales quota
• Straight Commissions: Sales reps are without a base salary and earn solely based on one of the  commission structures mentioned on this list
• Draw Against Commission: Sales reps are granted a cash advance that, based on their monthly sales, may or may not be paid back to the company 

3. Tailor Incentives to Each Role

There are many different roles in the sales team that have their own supporting responsibilities. This is a good reason why each role needs a tailored incentive plan. While some may generate leads or close deals, there are others who are responsible for the administrative tasks involved with making a sale. It is smart to have in place a commission structure that is inclusive to every position. 

4. Research Competitor Incentive Plans

This may give you an idea of the aspirations of your top salespeople. But most importantly, it will ensure the retention of your top-performing employees.

5. Make Your Sales Incentive Plan Simple

Ensuring that your employees understand the incentives is crucial to their intended effects... Keep it simple!

6. Make Sure Payouts Are Done On Time

It’s no surprise that people like payments to be scheduled. Employees are way more than just the people who work for you. They have lives and bills. While incentives are not counted as part of their base salary, they can help cover next month’s rent or finally get the car into the shop. Pay on time. Your team needs their reward. 

Conclusion

Sales incentive plans must be designed to satisfy both your company and team goals. Starting with an incentive plan rewarding sales percentages is expected,  but it’s far from being the best option. Being competitive and giving your team the best means they’ll do the same for the company. When your team is incentivized, you all earn together.