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Sales Management – Do Sales Incentives Really Motivate Salespeople?

Sales Management – Do Sales Incentives Really Motivate Salespeople?

Here is a question I recently received from a sales manager:

“I get a decent budget for sales contests and our team is spoiled by ‘big money prizes.’ What successful ideas do you have to get salespeople motivated without always having to win something?”

This question points out a common problem with sales incentive programs, which is that the newness and excitement can wear off quickly. Salespeople may come to see incentives as just another component of their overall sales compensation.

Does this mean that money and prizes can never motivate salespeople?

Of course not! Let me share two examples from my own experience.

In one of my past sales jobs the compensation plan offered a $500 bonus for achieving each quarterly budget and another $500 bonus for achieving the annual budget. Salespeople could earn a total of $2,500 in bonuses (on top of commissions) if they achieved each of the four quarterly budgets and the annual budget.

I can vouch for the motivational value of this type of bonus program, even though it was not large when compared to the total target annual sales compensation. One year I earned the first three quarterly bonuses and sold enough during those three quarters to also earn the annual bonus. Yet, there was still one quarter to go in the fiscal year. My pipeline was pretty empty, yet I REALLY wanted to go five-for-five and earn the final bonus. So, I ramped up my prospecting activities and ended up selling more in the fourth quarter than I had in the previous three quarters combined! Needless to say I earned the final bonus…AND some very fat commission checks.

The other sales incentive that consistently caught my attention was an annual all-expenses-paid trip to an exotic location. A very small percentage of the company’s salespeople and sales managers could win the trip each year, and the winners were joined at the exotic location by the company’s top executives.

This promotion generated motivation in several ways that included:

  • Salespeople wanting to earn recognition as one of the company’s top salespeople
  • Salespeople wanting to “rub shoulders” with the company’s top executives (which could lead to future promotions)
  • Salespeople’s spouses/significant others wanting to enjoy trips to exotic locations (NEVER discount the power of this type of “indirect” motivation!)

Clearly it is possible to motivate salespeople by offering contests and prizes. With that said, sales incentives can also fail.

Why do sales incentives fail?

When sales incentives fail, the most common reason for the failures is that many of the company’s salespeople lack key talents required for sales success. When salespeople lack these talents, no amount of incentives will cause them to suddenly sell more effectively. A more likely outcome is they will start to press harder to close sales and suffer a decline in sales performance!

In other cases sales incentives fail because the contest is perceived to be “stacked” in favor of certain salespeople. Look closely at your sales team and your company’s sales incentives and contests while considering the following questions:

  • Do the same salespeople consistently win all of the contests and incentives?
  • If some salespeople service larger or more productive accounts, are your contests and incentives structured to enable all of your company’s salespeople to have a fair chance of winning?
  • Are the incentives generating incremental sales, or are they simply rewarding salespeople twice for results they would have produced without a special contest or incentive program?

Don’t over-use sales incentives and contests

Rather than constantly running new sales incentives and contests, save them for special situations such as jump-starting sales of NEW products or services or reinforcing desired changes in how your salespeople sell. Structure your company’s sales compensation plan to motivate desired daily behaviors such as new business generation, maximum account penetration, team selling, and cross-selling.

Top sales performers are usually very internally motivated, success oriented and outcome focused. If you hire the right kind of salespeople and provide them with a properly designed compensation plan that rewards the correct activities and results, you won’t need to offer a lot of sales incentives and contests to motivate your sales team!

Copyright 2007 — Alan Rigg