What sales incentives help drive good sellers to be the best? What does good like and how do you keep sellers motivated? These are some questions all sales leaders ask themselves.
Sales reps are motivated by a clear line of sight between their performance and pay. The key is to have both an ongoing analysis of their historical performance and a comprehensive personal sales forecast. But what happens if their forecast and quota success don't align with the compensation payout? What if they're earning less than they feel they deserve? This confusion can quickly erode trust and overpaying low performers can damage the motivation of the rest of your team.
Overall, the goal for sales organizations is to reward their best salespeople and inspire underperformers to strive for better. So, how do you recognize your best performers and incentivize those who need to improve?
The traditional way is with a sales incentive program.
Getting aligned on your sales incentive plan
To get the best out of your team, your incentive plan should be controllable, measurable, and aligned.
For a seller to understand how a sales incentive plan affects them, it needs to be controllable. Sellers should understand what is expected and align with sales goals that are fair and attainable, yet still require stretching to achieve.
Next, to ensure a plan is measurable, it should demonstrate clear and effective communication of sales incentives and provide ongoing visibility of sales results to sales teams. Regular reporting on seller performance is also important to ensure that sales trends and overall sales direction are easy to action.
Lastly, it’s important to connect the strategic business objectives with the sales organization. Any sales incentives plan must drive the business' performance but also align with the key objectives of the sales management team.
The bottom line is don’t over-engineer it – simplification is key. Stick to three or fewer sales measures to give sellers a clear focus. When it comes to driving performance and measuring against targets, fewer objectives deliver more in the long run.
The four ways to measure performance to inform sales compensation
Traditionally, there are four measures when it comes to looking at performance to inform sales compensation: financial/production measures, strategic measures, input and activity measures and subjective/judgment measures.
1 Financial/production measures
A sales incentive plan for direct sellers should have at least one financial or production measure, and it should be the focus for the seller.
Typically, financial/production measures are core to most incentive plans. They focus on sales dollars, margin or units, and most often measure volume. You should tie any targets directly to the organization's financial success, including gross profit, net profit, billed revenue, contract revenue, total billed revenue, etc.
2 Strategic measures
What are your strategic priorities? Do you want to retain customers and improve customer service? Improve overall sales quality? These drivers usually go hand-in-hand with monetary measures and are often of high value to the business. If a plan has a financial/production measure, it’s common to see a strategic goal that helps drive overall revenue or production.
3 Input and activity measures
You should also focus on your sales professionals' activities and milestones. To do this, it will be important to understand what actions they are taking day-to-day. Ask yourself: “How many qualified leads have they generated?” or “How many sales conversations have they had?” You can add this to the incentives plan when you have significant milestones to hit.
4 Subjective/judgment measures
If you have defined a set of behaviors that you want your sellers to demonstrate or personal development objectives for individual reps, you may want to add this to your incentive plan. It is important to keep in mind however that the softer, less quantifiable skills are one of the most challenging areas to measure, and as a result have the least weight in the measurement hierarchy. As a result these measures should be used sparingly and only as a secondary or tertiary part of your incentive plan.