Effective Design Patterns for Sales Incentive Programs

60% of all U.S. businesses use non-cash sales rewards, spending conservatively $23 billion annually on these awards.  Following is a summary of research completed by the Incentive Research Foundation about the effective design elements of these sales incentive programs.  For purposes of the research, the respondents were designated either top performing companies (those with the highest revenue growth, customer satisfaction, and employee satisfaction scores in their industry) or average companies. 

Setting Program Objectives: Emphasize Multiple Behaviors

In the past, sales programs concentrated almost completely on increasing sales dollars.  The research showed that many more objectives are now used in these programs.  Most companies now use a mix of objectives, including: 

·       80% increasing overall sales

·       76% improving morale

·       58% productivity

·       47% gaining market share

·       27% increasing sales of specific products

·       21% changing the sales culture

·       17% promoting cost reduction

·       16% rewarding training completion

Rules Structure: Center on Quotas

Companies use multiple targets to achieve awards, including:

·       80% earn awards on achieving quota

·       71% earn awards by being a top performer

·       51% earned awards based on team performance

·       40% for discretionary sales awards

Rewarding the Right People: Expand Your Footprint

Designers are shifting from programs that just award the top performers to one that includes more of the middle.  More than half (56) of top performing companies said they wanted their program to reach more participants.

Program Funding: Start at the Bottom

Top performing companies are nearly 100% more likely than average performing companies to use a bottom-up budget model and fund programs as a % of income during the program period.  Other interesting notes were:

·       The average business used 7.2% of income to calculate budgets, top performing businesses use 9.4% of projected income.

·       Less than half of average performing companies in the United States have no top stop on their programs, but almost 80% of the top performing businesses have no top stop.

·        The typical sales person can expect to earn $3,916 in a top performing business annually, with the top performers in these companies earning over $5,000 in award.

What Awards to Use: Combination is Common

Sales programs can use one of many award types, including recognition awards, recognition events, merchandise, symbolic awards, gift cards, logo merchandise, individual travel, group travel, group incentive travel, and cash. On average, businesses use more than seven types of awards for sales incentives.

The top four awards used were:

·       72% use gift cards

·       44% use award points redeemable for a variety of things (including gift cards)

·       44% use merchandise

·       34% use group or individual travel

Multiple Programs: Efficiency in Consolidation

Most companies reporting use a single sales incentive program for the entire organization, but more than half of the top performing companies had multiple sales programs managed by one operation.

Program Support: Think Outside Your Walls

·       60% of all companies operate their own sales programs. 

·       60% of top performing companies used outside support from external partners.

·       Half of companies engage outside supplier expertise for best ways to motivate participants and over two-thirds using external award suppliers

Administration: Communications and Tech Support 

The IRF research indicates that 43% of a top performing company’s budget generally goes to program administration (design and operation) versus only 30% of a budget of an average performing company.

Over 70% of businesses use some level of program-specific technology to support their non-cash sales incentive programs.

Measuring Effectiveness: Multiple Metrics

More than 75% of top performing firms fully leverage the data produced by their programs to quide decisions in future program design.

Following are the most used metrics and %:

·       66% overall product sales in dollars

·       49% net new customers

·       37% product sales in unit

·       36% revenue

·       25% productivity

·       24% staying in budget

·       14% customer satisfaction surveys

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