How to Create an Effective Sales Incentive Plan

We help our clients become the hero in their own story.

Sales is the foundation of any business, which makes the sales team some of the most important employees in your organization. However, perhaps not every salesperson puts in equal effort. According to the Pareto principle, 20% of your salespeople will generate 80% of your total sales revenue.

Does that mean the other 80% of your salespeople lack skill or diligence? Does it mean you should look to replace them? Certainly not.

That lower production usually isn’t created by a lack of skill or ability—but it can be helpful to ask yourself whether you can do anything to help motivate them. As motivators, sales incentives are essential. And since sales are one of the toughest (and most rewarding) positions out there, it's vital to know how to motivate your sales teams.

This guide will examine this essential element of your compensation plan and show how effective incentives can motivate sales teams—when you do them correctly. 

Learn what sales incentives are, what makes them effective, and how to implement them for your teams. We’ll also show you a few examples.

These types of incentive programs should be separate from your regular compensation plans—this is essential because while a standard paycheck is initially enticing, it soon becomes rote, routine, and expected.

Paychecks, even with a complicated compensation structure for different tiers of salespeople, don’t motivate much. Effective incentives, on the other hand, are exciting and motivating for all the right reasons.

We help our clients become the hero in their own story.
We help our clients become the hero in their own story.

Benefits and Potential Drawbacks of Sales Incentive Plans

A good incentive’s main benefit is that of increased motivation and productivity. The incentive will reach everyone, no matter their skill level, and motivate them to push a little harder and reach a little further. Incentives can also create healthy competition while also fostering an environment of teamwork and collaboration.

An effectively executed incentive program won’t alienate certain employees who don’t feel recognized or valued. Effective incentives won’t breed unhealthy competition that cuts down feelings of trust and collaboration. Simply put, good incentives will be effective motivators for your sales teams.

Let’s look at five different types of sales incentives and see how each one can avoid these potential pitfalls.

We help our clients become the hero in their own story.
We help our clients become the hero in their own story.

You can use different incentives to most effectively motivate different types of people and different types of sales teams. Five commonly used types of incentive are below:

  • Role-specific incentives
  • Presale incentives
  • Split incentives
  • Omnichannel incentives
  • Analytics-based incentives

Let’s look into each of those a little more deeply.

1. Role-Specific Incentives

Each team comprises people who work at different paces and handle different responsibilities. That’s why you should never use a blanket incentive that holds every salesperson to the same standard. With a role-specific incentive, you structure the incentive to fit around different roles.

One way to do this is to create separate incentives for people who focus on different parts of the sales cycle. For example, you should structure incentives for prospecting and closing deals differently.

Another way to split up this type of incentive is by how much work each person produces. For example, a salesperson who always goes above and beyond shouldn’t have a low ceiling. On the other hand, you shouldn’t pressure a salesperson who is content with average numbers to hit goals way above their comfort zone.

Create a tiered incentive that keeps the overachiever motivated throughout each quarter without making the average performer feel hopeless.

2. Presale Incentives

Some products take much longer to go down the sales pipeline than others, and if you only reward closing numbers, the salespeople who work hard during the presale process won't feel valued.

Create an incentive around the critical touchpoints that happen between prospecting and closing, especially for sales cycles that take a long time. Incentivize your people to take great care of each prospect, no matter where they are in the sales cycle, by showing them that you value their early contributions, even if no sale has happened yet.

These incremental goals are an excellent way to keep motivation up, regardless of the time frame.

3. Split Incentives

These incentives are great for groups working toward the same goal, such as teams working in the same territory or focusing on handling a complex product sale.

You can divide split incentives so that each team member gets a portion of the incentive reward equal to whatever distribution you deem fair. These incentives are great for getting underperformers to put in more effort so the entire team can succeed.

4. Omnichannel Incentives

In today’s technology-heavy society, prospects and customers will find your product through a variety of ways. Whether they interact with someone on social media, respond to an email, or use the chatbot on your website, these channels are all essentials to your sales strategy.

These types of incentives reward salespeople who work digital channels to close sales. You can ensure that each channel is rewarded equally and that each salesperson working these channels doesn’t go overlooked.

5. Analytics-Based Incentives

Analytics are excellent for seeing and analyzing sales rep behavior on a more granular scale. For example, you can use analytics to see how many meetings each salesperson sets daily or how long it takes each rep to close a deal.

With these analytics, you can set personalized incentives for each salesperson according to their production.

We help our clients become the hero in their own story.
We help our clients become the hero in their own story.

How Can You Motivate Different Types of Salespeople?

Have you noticed a theme throughout the guide so far? You’ve probably seen much talk about ensuring everyone feels included and not leaving anyone out. That’s because good incentives encompass every sales rep on the team. But how do you make sure that happens?

A good incentive’s main benefit is that of increased motivation and productivity. The incentive will reach everyone, no matter their skill level, and motivate them to push a little harder and reach a little further. Incentives can also create healthy competition while also fostering an environment of teamwork and collaboration.

1. The Closers

Closers are the salespeople you may see parodied in commercials or movies. They work extremely hard and are 100% focused on hearing “yes” from the prospect. These salespeople don’t take no for an answer, and they love breaking their own sales records each month.

How to Motivate Them?

Standard incentive plans work well for these types of salespeople, as long as they are robust enough to continue rewarding them even after they’ve reached quota or surpassed their goals. Public recognition, cash, or vacations are good reward options.

2. The Empaths

These salespeople focus more on building relationships than on closing deals (though this focus certainly helps them close a lot of deals). They’re willing to take extra time to help prospects and clients solve an issue, and they’re great at building trust.

How to Motivate Them?

Empaths want to see that you value trust as much as they do. Set up incentives that reward them for less-noticeable numbers than total closes. Goals like solving problems or spending time on the phone are great for them because they let you reward them for their efforts, even if the results aren’t as measurable as a closed deal.

3. The Caretakers

These salespeople show up every day and work in a slow and steady way. They’re happy with where they are and the clients they have. These people may not exceed expectations often, but they reliably get the job done. You may have more of this type on your team than any other.

How to Motivate Them?

A tiered incentive plan works great for these types of salespeople. Lower tiers should be relatively easy to achieve for those who don't want to push themselves much harder than usual. At the same time, include a few higher tiers with loftier goals to motivate those who want to achieve more.

4. The Professionals

These salespeople don’t look at sales as a job—they study it like a science. Sales is a way of life for them. They use knowledge from sales books and competitive research to analyze problems and develop solutions.

How to Motivate Them?

Similarly to the Closers, this type of salesperson can respond favorably to traditional recognition and rewards. They work hard, and you should reward them for all they do. However, because they can get trapped in an unwavering routine, rewards such as professional development opportunities may be especially effective.

What If a Teammate Is Struggling?

Every sales team has those who struggle to hit their numbers or reach sales goals. You shouldn’t ignore them. Lower incentive goals can help these sellers achieve a sense of accomplishment for hitting those goals. That can build motivation and confidence, which will, hopefully, help them be more consistently productive.

We help our clients become the hero in their own story.

What Rewards Work the Best?

You know the different types of sales incentives you can use and which work best for each salesperson. But you may still be unsure which rewards to offer. Is cash always the best option? Should you go with non-monetary rewards? Trips? Exercise equipment? Free food? The possibilities seem endless!

Many leaders overlook this crucial detail when building out incentive programs. They spend hours creating a complicated, rewarding tier system that they think will motivate every salesperson on their team, but productivity doesn’t go up that much when the incentive starts. The reason is that the reward isn’t something your people want.

How can you offer rewards that will really excite your sales teams? Here are a few suggestions:

  • Ask people what they want. This one is deceptively simple. Whether you ask the whole team to agree on a reward or ask every person for a personalized incentive reward, this is an excellent way to motivate everyone to exceed their goals. And as long as you cap the reward value, this won’t break your budget.
  • Provide points. Points are a great incentive reward because the salespeople can use their points for whatever they want. And these points are different from cash because they can’t pay bills or rent payments with them. That way, the incentive reward is more pertinent.
  • Offer different options. Options aren’t as effective as offering each person a personalized reward, but it’s still a step in the right direction. Instead of offering one big prize everyone aims for, give salespeople different reward options. Include rewards that fit a wide variety of interests so the chances of everyone being excited about a reward are higher.

Any sales incentive aims to motivate salespeople to push themselves to go above and beyond their regular work. The only way an incentive will accomplish that goal is if salespeople actually want the reward tied to it.

We help our clients become the hero in their own story.

Cash Vs. Tangible Items

Both money and non-monetary rewards can be highly effective for most salespeople. However, cash is one-dimensional and can be combined with a paycheck in the winner's mind, making it less special.

Non-monetary rewards like tech gadgets, trips, subscriptions, or food are more customizable and creative, which allows you to reach more members of the sales team more easily. We suggest including both and (once again) letting your team members choose what they want.

We help our clients become the hero in their own story.

How to Design a Sales Incentive Program: 7 Best Practices

While sales incentive programs vary across organizations, we firmly believe in seven best practices. These tips aim to help you stay on track as you build the program. 

1. Key stakeholders should understand how the sales pipeline works.

Closing deals are essential, but it’s not the only critical stage in the sales process. There are several other touch points with which key stakeholders must familiarize themselves. 

For example, an HR manager responsible for greenlighting the sales incentive program may need help understanding how the pipeline works and why. Directly collaborating with the sales team ensures all parties are on the same page.

2. Incentives should be achievable and realistic.

Define clear goals. Align these targets with overall business objectives and the purpose of the incentive plan. In addition, objectives should reflect the strengths and weaknesses of the sales team to inject the program with a developmental focus. 

3. Incentives should link directly to sales performance metrics.

Establishing KPIs enables you to track whether the incentives are actually working. Common KPIs include total sales revenue, sales growth rate, customer acquisition rate, average order value, profit margins, and sales conversion rates.

4. Incentives should focus on behaviors employees can control.

In other words, a salesperson can’t control whether or not a lead says yes, but they can control the number of calls they make. Providing incentives solely on the number of “yeses” simply sets one up to fail the incentive programs. Alternatively, centering on behaviors like making calls provides a focus on effort—an essential trait that you should reward.

5. Incentives should be clear.

Communicate clearly how the incentive program works to your team. Have in-person or virtual conversations about it, and have a document ready that team members can reference. 

6. Incentives should connect to organizational initiatives.

When you step back, sales incentives are just one part of the bigger picture. Ensure you communicate the sales incentive program to key stakeholders across the organization. 

Communication requires having cross-departmental conversations to create a shared understanding of how sales efforts contribute to the company’s overall strategic direction. Be prepared to address stakeholders’ concerns or questions. Addressing concerns proactively helps build consensus and obtain buy-in for the incentive program.

7. Incentives should undergo regular feedback and iteration processes.

Receive input from the key stakeholders discussed in step #6. Initiate these discussions with your team members as well. The program directly impacts these individuals, so they must always have an open invitation for feedback. Work with team members on the iteration process to ensure they’re satisfied with updates on the incentive program.

Avoiding the Potential Pitfall of Sales Incentives

We want to reiterate the importance of acknowledging the: 

  • Different types of sales incentives
  • Different types of salespeople on your team
  • Entire sales cycle (cycles look unique across various organizations)

Approaching your incentive programs through those lenses will help avoid potential pitfalls such as: 

  • Demotivation: If you don’t link incentives directly to a team member’s interests or learning path, they may not have the genuine enthusiasm, drive, and willingness to pursue their goals or tasks. It’s essential to stay focused on the types of individuals who encompass the team and what recognition means to them.
  • Short-termism: Achieving short-term sales goals is essential for driving immediate results and maintaining momentum. However, a sales team’s sustainability and overall success depend significantly on aligning these short-term goals with broader, long-term objectives. Otherwise, your team lacks strategic focus along with adaptability and resilience—two attributes that are key in driving momentum amid a rapidly evolving industry. 

Your sales team comprises unique individuals with diverse strengths and weaknesses. We highly encourage you to prioritize an incentive program that recognizes this diversity and fosters genuine connections with incentives.

We help our clients become the hero in their own story.We help our clients become the hero in their own story.
We help our clients become the hero in their own story.

What Are Some Examples of Sales Incentive Plans?

We all know that examples are helpful, so below are some sales incentives to use as inspiration for your team. Remember, you shouldn’t copy these examples exactly—customize the incentives to fit the individuals on your team to get the best results possible.

Activities as Incentives

When you reward employees with an experience, they'll make the connection between a fond memory and hard work. Activities such as the following are some sales incentive ideas:

  • Airplane tickets or paid travel expenses
  • Tickets to theme parks, concerts, or festivals
  • Sports tickets
  • Spa treatments
  • Museum or art gallery tickets
  • Outdoor excursion opportunities (camping, boating, bungee jumping, skydiving)
  • Escape room tickets
We help our clients become the hero in their own story.We help our clients become the hero in their own story.
We help our clients become the hero in their own story.

Subscriptions as Incentives

Subscription rewards are the rewards that keep on giving. When a salesperson wins a year’s worth of their favorite subscription, they’ll be gratefulfor that entire year. Here are some examples:

  • Entertainment subscriptions such as Netflix or Spotify
  • Personal growth subscriptions such as Adobe Creative Cloud or Masterclass
  • Personal care subscriptions such as TheraBox or Dollar Shave Club
  • Interest subscriptions such as Home Chef or Stitch Fix
We help our clients become the hero in their own story.We help our clients become the hero in their own story.
We help our clients become the hero in their own story.

Physical Items as Incentives

Prizes are the age-old way to reward effort and are still effective today. As long as you ensure the items are ones that people will want, you’ll be surprised at how excited your teams can get during your incentives:

  • Tech gadgets such as headphones, smart watches, or computer equipment
  • Gaming equipment such as video games or board games
  • Food-centric rewards such as food delivery credit or a gift card to a restaurant
  • Care packages filled with personalized rewards for the winner to enjoy
  • Office equipment such as an ergonomic office chair or a desk treadmill
  • Exercise or sports equipment such as weights or golf clubs
We help our clients become the hero in their own story.We help our clients become the hero in their own story.
We help our clients become the hero in their own story.

Intangible Items as Incentives

Not everything you give out has to be physically there to be rewarding. Here are a few examples of intangible rewards:

  • Extra PTO
  • Public recognition in front of the company
  • Donations to a meaningful cause of the winner’s choice
  • Online learning opportunities

No matter what you decide to do for a sales incentive, you must focus on crafting an incentive program that motivates your sales team. That includes customizing the program to reach both overachievers and underachievers and including rewards that motivate everyone, not just the vocal minority.

Case Studies

Real companies have reaped the benefits of incorporating sales incentives. Here’s one example.

WOW! mobile boutique

WOW! mobile boutique is a retail business specializing in cell phone sales and services in mobile locations. They faced challenges maintaining high employee morale, retention, and sales performance. 

To address their issues, the business implemented an employee recognition and incentive program using the Awardco platform.

  • Solution implementation: Wow! mobile boutique partnered with Awardco to create a customized employee recognition and incentive program. This program aimed to motivate and engage employees by recognizing their efforts and achievements.
  • Program features: The program offered personalized recognition and rewards to employees based on their performance and contributions. Employees received points redeemable for a wide range of rewards, providing flexibility and appeal.
  • Positive impact: Implementing the recognition program led to measurable improvements in employee morale, engagement, and performance. Employees felt valued and motivated, leading to enhanced customer service and increased sales.
  • Results:
    • 120% YOY increase in performance
    • 30% decrease in YOY attrition
    • 10% YOY increase in employee engagement scores

Overall, the implementation of the Awardco platform helped WOW! mobile boutique address their challenges and achieve tangible improvements in employee engagement and sales performance through personalized recognition and rewards.

Learn more about our customers here.

Tracking & Measuring the ROI of Sales Incentives

After all, what’s the point if your incentive program isn’t producing lucrative results? Ensure you’re tracking and measuring the ROI of the program by focusing on two areas.

How does the incentive program impact team members’ behaviors and performance?

This area provides insights into how relevant and appealing the incentive program is to your sales team members. Does the program engage and motivate enough? Has employee turnover decreased? The intention is to measure how the incentive program impacts team and individual performance. 

Tracking KPIs such as the following can help the team assess the incentive program’s ROI: 

  • Incentive participation
  • Incentive payout 
  • Number of qualified leads per month
  • Average time for conversion
  • Dollar value for new contracts signed per period

How does the incentive program impact strategic organizational objectives?

The intention here is to assess the effect of the sales program on long-term strategic objectives. In other words, are sales incentive programs driving the business’ key priorities? 

Examples of metrics include: 

  • Customer retention
  • Customer service
  • Sales revenue
  • Employee retention

These metrics directly contribute to the organization’s overall revenue and productivity. Of course, as priorities differ across organizations, regular discussions with key stakeholders are essential to ensure incentive programs align.

We help our clients become the hero in their own story.We help our clients become the hero in their own story.
We help our clients become the hero in their own story.

Set Sail With Sales Incentives to Sell More

Good incentives can increase motivation and build teamwork in any sales team. You know how your sales teams function and can customize the incentive programs to fit the different types of team members. When you offer awesome rewards that excite everyone, we’re confident that you’ll craft sales incentives that knock it out of the park.

With Awardco in your corner, you can easily set up incentive programs and offer rewards that will electrify your sales team and boost everyone’s motivation.

We help our clients become the hero in their own story.
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