Salesperson Incentives and Rewards Programs

Have you ever worked in sales? Perhaps your organization employs a sizeable sales force, and you’re interacting with your salespeople on a regular basis. Whether you’ve had firsthand experience working in sales or not, all it takes is a few minutes spent with a dedicated salesperson to realize that there’s something unique about them.

People work different jobs for a whole host of reasons. Some people go into a particular line of work because it’s emotionally rewarding. The job makes them feel useful and valuable, and they have the sense that they’re contributing something important to the world each and every day they’re at work. Other people are simply captivated by a particular topic or field and find themselves almost magnetically drawn to that job. And, of course, plenty of people end up in jobs that pay reasonably well, offer them a certain level of comfort and familiarity, and that they can count on as a reliable source of income for years to come.

Salespeople are different. Ask someone in sales why they do what they do, and you may indeed get a wide range of responses. Some people will tell you that they love meeting new people. They’ll call themselves a “people person,” and go on about how much satisfaction they get from working with customers. Other salespeople will talk up the product they sell or the company they work for, telling you all about how much they believe in the product or the organization.

To be fair, these reasons may indeed be true for some salespeople. But there’s one thing that underlies just about every salesperson’s desire to participate in this line of work, and some will cut straight to the chase and give it to you up-front. Here’s the bottom line: When it comes to sales, it’s all about the unlimited earnings potential.

Let’s face it. There are all sorts of jobs out there and working in sales can be tough. If you’ve spent a day in a salesperson’s shoes, you know exactly what we’re talking about. Customers constantly shoot you down, telling you that they’re not interested, or flat out ignoring you. It’s exhausting work, and even the best salesperson will sometimes experience dry spells where income fluctuates considerably.

But in the end, all of this adversity is worth it for salespeople. Why? Not because it’s what they always wanted to do ever since they were eight years old. It’s because they can earn a serious amount of money based on their performance, and those earnings are virtually unlimited from year to year.

Keeping these motivations in mind is important when it comes to designing an incentive (or spiff) program for salespeople. We’ll return to this point at the end of this article. For now, though, just remember: This article is all about incentives aimed at salespeople, and salespeople tend to respond to incentives that other employees may be less interested in or motivated by.

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Sales Incentives for Channel Marketing

As we discussed earlier in this article , there are all sorts of options available to you when it comes to implementing an incentive program at your company. And all of these programs can drive increased revenue. Perhaps more than any other program format, though, sales incentives for channel marketing partners can produce huge dividends—and in a relatively short period of time. These are incentive programs aimed at independent sales reps who typically work for dealerships, distributors, and retail stores.

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The reality is that effective channel marketing is difficult. When you’re in control of every link in your sales chain (as is the case with direct B2C sales models, for instance), you can zero in on each and every aspect of the sales process. You control marketing, customer engagement, customer service—literally, everything. But when you’re distributing products to third-party retailers, things are different because you don’t get to call all the shots. In fact, you don’t even get to manage your own sales force. Instead, you’re at the mercy of salespeople who may or may not be interested in presenting your particular product to customers as their best or most viable option. 

Channel marketing can also be quite challenging in very competitive industries and niches. Your products are side-by-side with several other, often very similar, options. A salesperson at a dealership or other independent retailer might have many reasons to recommend a competitor’s product over yours, too. Maybe they’ve tried your competitor’s product themselves, and they don’t have any firsthand experience with yours. Or maybe—and this is the more likely scenario—there’s some incentivized reason for them to sell that other product. Maybe their commission will be a little higher, and they’re looking to rack up some extra income before the end of the quarter. Regardless of the specifics, it’s easy to see how challenging it can be to ensure that your products get the attention and focus they deserve from salespeople at the end of a third-party sales channel.

That’s where incentives come in. With a properly focused and implemented incentive program, you can give these salespeople a reason to push your product just a little bit harder than your competitors’. And if you do it right, you’ll see impressive results in a short amount of time.

Remember: Don’t let ego get in the way. It all comes back to influencing behavior. Your goal with this kind of channel marketing-focused salesperson incentive program isn’t just to sell more of a particular product, it’s to change a salesperson’s behavior. And in order to do that, you need to consider the specific scenario you’re aiming to tackle. Let’s examine several common situations that crop up for large organizations dealing with third-party distribution and see how a well-implemented incentive program can address the needs of each of these scenarios.

Increasing Marketing Share: Competing Products at the Same Location

One of the most common problems for some of our clients has been trying to successfully compete with other products at the end of their sales chain. As we just discussed, there are only so many options available to you if you want to crank up your revenue in this sort of scenario. The people selling your products directly to consumers aren’t actually your salespeople. They don’t answer to you, and your company’s products may only represent a handful amongst dozens (or hundreds, or thousands) of others they offer to their customers. 

Fortunately, a good incentive program can dramatically increase market share in this situation. We’re speaking from experience when we say that a year-over-year sales increase of 20% or more is a completely reasonable goal and achievable with a minimal amount of hassle.

A special note: Incentives for channel partners increase in importance if they can reasonably be considered a commodity. Ego aside, don’t let your product’s benefits fool you. Sure, you need to believe that your widget is significantly better than the competition’s. But is it really that much better? Honestly? If the differences are negligible, and the channel partners would probably see it the same way, think of how much impact a sales incentive would have on improving market share. If they can sell two relatively comparable widgets, and your widget carries a $50 spiff, that will likely make the difference in which product they’ll promote, steer customer towards, and ultimately sell.

Incentives to Balance Sales Across Products and Models

The automobile industry makes for a great object study in many of these scenarios. Why? In the United States, a car is something that almost everyone needs, and most can afford at one price point or another. At the same time, there’s a huge range within the industry: Everything from cheap, efficient, economical vehicles up through expensive, gas guzzling luxury SUVs. If incentives can work in a variety of situations in a market as dynamic as the automobile industry, they can work anywhere.

Aside from increasing market share, incentives can also be used to balance a company’s sales across various products and models. This is something we’ve helped our clients do, and which virtually any company can achieve with the right incentive program.

When oil and gas prices change significantly, automobile sales patterns often shift in parallel. Economy cars will sell faster when oil prices are high, while SUVs and other less-practical vehicles will sit on the lot. Customer preferences also can often change quickly. Perhaps the once-popular sedans are gathering dust at your local dealership while the compact SUVs are flying off the lot.

These kinds of market trends are inevitable, regardless of what industry you’re talking about. Some companies try to constantly adjust production and marketing to roll with the punches, and there’s no doubt that those are important levers to pull. But once you’ve got the foundation for an incentive program in place, you can simply adjust that program to meet your organization’s changing needs. When the economy cars are selling like crazy, you incentivize third-party salespeople to push SUVs. And when the SUVs start disappearing faster than you’d ever thought possible, you put powerful incentives in place to encourage salespeople to move as many compacts as possible. Whatever the specifics of your industry or niche might be, the bottom line is the same: If you have the framework of an incentive program ready to go, you simply incentivize salespeople to rebalance sales whenever necessary.

Selling off Old Stock

Channel marketing incentives aren’t just helpful when it comes to balancing sales across products and models. You can also use them to help you sell off old stock. Need to empty out last year’s inventory so that you can focus on marketing new products? Salesperson incentives are a great way to make that happen.

Some years ago, during the Great Recession, our firm connected with a company that was going out of business. They were sitting on a massive inventory of heavy trucks, and needed to liquidate that inventory as quickly as possible. We helped them put together a liquidation strategy, and their inventory virtually evaporated.

What did we do? In this particular case—because the situation was emergent, and the client needed to get rid of their inventory immediately—we recommended a combination of both salesperson incentives and heavy consumer-facing discounts. As a result, salespeople were incentivized to push the trucks on customers, while customers were heavily incentivized to purchase discounted vehicles. Within a few short months, they’d managed to liquidate their entire inventory and could shut down without the massive losses associated with holding extra inventory.

Moving Surplus Inventory

Every organization does its best when it comes to sales projections and inventory planning. No company knowingly produces more of a product than they think they can sell. Still, it’s impossible to predict the future perfectly. Try as you might, you’ll inevitably end up in situations where you have excess inventory you need to move. And when that happens, salesperson incentives are a great way to achieve your goals in the shortest amount of time possible.

As in the case above, coupling consumer-facing product discounts with salesperson incentives is an effect way to move surplus inventory. You do have to be careful, since you don’t want to go overboard with discounts, particularly with certain brands and products. As referenced earlier, excessive discounting can be damaging to your brand, so tread lightly.

Replacing Discounts with Incentives

We’ve previously discussed some of the traditional ways that companies attempt to market and sell their products, and one method we looked at was the use of discounts and promotional offers. As we saw, discounts and promotions obviously have their place as part of an organization’s overall sales strategy, but can sometimes be damaging to your brand reputation.

It’s not just extreme situations like the grocery stores we discussed earlier that can be problematic when it comes to discounting, though. For some companies, discounts of virtually any kind can be damaging to brand image. If you’re selling a premium product, attempting to use discounts to bring in new customers can tarnish the way your brand is perceived over time. With enough discounts put in place, your brand no longer appears to be premium to your customers. Next thing you know, you’re competing with products and companies that were previously considered to be of a lower quality than what your company has to offer.

Fortunately, discounts and customer promotions aren’t the only way to increase your sales. If you’re in a position where you need to cut back on the amount of discounting you’re doing—or where discounts don’t fit well with your brand image in the first place—salesperson incentives can replace customer discounts, promotions, and rebates. In fact, a properly designed and implemented incentive program is likely to outstrip discount-based sales strategies when it comes to overall performance and return on investment.

Using Salesperson Incentive Programs for the Right Products

There’s no doubt that these kinds of salesperson incentives can be effective. In fact, we’d argue that they’re often one of the best things you can do to increase your company’s sales, particularly when it comes to specific products.

That last point, though, is worth noting. Salesperson incentives don’t work for every single product out there. In fact, the modern consumer marketplace for the majority of products is such that these types of incentives won’t work all that well. Let us explain.

In this day and age, consumers are savvier than they’ve ever been. Since the advent of the internet, it’s become easier and easier to access information on the fly. Now, all a consumer has to do is pick up their phone if they want to determine which product best meets their needs (and best fits their budget).

You’ve likely noticed the explosion in consumer-facing “blog content” over the past few years. Now that placing in the top tier of search results becomes increasingly difficult, companies are racing to create useful, user-friendly web content that will help them achieve a top-ranking spot when a lead or customer searches for a particular product or keyword phrase. As a result, the internet is now replete with Top 10 lists, product guides, and side-by-side reviews and comparisons. If you want to know whether you should go with product A, B, or C—or if all three are a bad choice compared to product D—all it takes is a quick search to find out.

As a result, it’s harder than ever for salespeople to influence consumer decision making, and that means you have to be careful about where you try salesperson incentives. If you pour time, energy, and resources into creating a salesperson incentive program for the wrong types of products, you simply won’t see the type of return on investment you’re looking for.

We recommend sticking to products that still require human interaction and a personal touch. Cars, jewelry, expensive watches, carpets and flooring, heavy machinery, kitchen cabinets, and other high-ticket items are still frequently purchased after a conversation between a salesperson and a consumer. For businesses, items like trucks, heavy equipment, parts, and other capital expenditures are often great targets. These sorts of expensive purchases often warrant expert input. Buyers actually want to have an interaction with a knowledgeable salesperson who can guide them toward the product that best fits their unique needs and desires. If your company manufactures these types of products, properly implemented incentives for salespeople can be highly effective.

The only exception to the above recommendation involves occasional product merchandising for lower-cost products. Whether it’s a sporting goods retailer or a grocery store, the way products are displayed within a physical space can often have a dramatic impact on sales. That said, we’ve seen sales incentives be extremely effective at the retail level when they’re targeted at managers, those people who have sway on the proper placement of your merchandise. Items as low as $1, yes one whole dollar, have seen positive impacts from a well-conceived program that helps to influence product merchandising.

Remember Your Target Market

We’ve talked here about how salesperson incentives can be an effective form of channel marketing and how these types of incentives can work for companies looking to increase market share, balance sales across products and models, sell off old stock, and move surplus inventory. We also discussed the potential of replacing discounts with incentives to achieve the same goals without tarnishing your brand’s premium image.

But what’s the most important thing of all when it comes to salesperson incentives for channel marketing? That’s simple: You have to remember your target market. These incentives aren’t aimed at your customer service reps, your product development team, or your customer base. They’re targeted at salespeople, none of whom work directly for your company. Remember that salespeople are motivated by earning potential, and that your incentive program will have to play into this motivation if it’s going to be effective. If this is your first time trying to implement such a program, consider connecting with a firm with specific experience in salesperson incentives for channel marketing. The wrong types of incentives won’t produce the results that you want—but properly designed incentives can result in 20% (or more) year-over-year revenue increases.



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