SPIFFs can effectively drive immediate results. How do you make sure you’re getting what you need out of the SPIFFs you run? Let’s take a closer look at what goes into sales SPIFFs – and what you may need to think twice about.

What is a SPIFF in sales?

A sales SPIFF, also known as a Sales Performance Incentive Fund (sometimes written as SPIF or SPIV), represents a unique incentive programme. In this setup, salespeople receive a discreet bonus for successfully closing a sale or scheduling a demo.

Unlike conventional sales incentives, SPIFFs often come with a cash value. Currently, the prevalent method of delivering sales SPIFFs is through reloadable debit cards. However, they can also be provided in the form of gift cards, merchandise, or experiences.

According to the Oxford English Dictionary, the term dates back to 1891, with “spiff” meaning “to allow a certain sum as commission on (an article).” This historical context highlights the long-standing tradition of using financial incentives to motivate sales performance.

Sales SPIFF ideas: 11 ways to run successful sales SPIFFs

Running a successful SPIFF can significantly boost your sales team’s motivation and performance. Whether you’re looking to clear out old inventory, introduce a new product, or simply drive more sales, the following strategies will help you design and implement effective SPIFFs. Here are 11 proven ways to run successful SPIFFs in sales:

1. Set clear objectives that are quantifiable and achievable.

The most important aspect of developing and designing a sales incentive plan is to define what the objectives of the programme are and what the quantitative measures of success will be. The success of the programme is measured only by the results that are achieved. The primary objectives of the programme must be “hard” (meaning they can be accurately measured) and there should never be more than two or three.

For example, to increase sales of [insert your specific product] by 20% vs. last year between the months of January through March 2022. Other objectives could be set for productivity metrics (increase units per sales rep), market share increases or shifting product mix to support a gross profit improvement.

• We recommend tailoring the SPIFF programme to your organisation’s unique needs and sales goals.
• Understand what you want to achieve—whether it’s driving specific product sales, increasing revenue, clearing inventory, achieving sales milestones, or enhancing overall performance.

2. Budget without competing with sales compensation.

Budgeting for promotions can be tricky but there are some best practices worth considering. Sales SPIFFs should complement, not overshadow the regular compensation plan of the audience participating in the programme.

A general rule of thumb is to allow participants to earn approximately 5-7% of their average income (in perceived value) during the programme duration. Consider the degree of difficulty—the more challenging the goal, the higher the potential award value.

Evaluate the incremental results and compare them to the expected outcomes without the programme (expressed in gross profit minus programme expenses).

• Percentage of sales revenue: Allocate a percentage of total sales revenue to SPIFFs. The exact percentage depends on your company’s size and industry norms.
• Fixed amount per sale: Set a fixed reward amount for each sale. This approach ensures consistency.
• Tiered approach: Consider different SPIFF amounts based on performance tiers (e.g., Top performers receive higher rewards).

3. Every dollar spent on a SPIFF should produce at least a dollar’s worth of response.

The idea is to get a group of people individually or in teams to respond in the form of some defined performance to the opportunities presented in the programme. The goal is to maximise response by the audience at the least possible expense. An example of this is the frequent flyer mile strategy. The monetary value (in dollars and cents) of a mile is extremely small. The response from flyers in the form of flying repeatedly on a particular airline is significant. For 1,000 miles, approximately $10 in expenses to the sponsoring company, airlines, and partners drive hundreds and sometimes thousands of dollars in response.

4. Never confuse what you pay for with what you hope for.

Rewards are only a means to an end – a response is what we want. In a SPIFF, there can be a tendency to focus on the specific reward, whether it’s points, travel, a new TV, or golf clubs. But the award is only relevant in the context of response.

If the audience doesn’t respond, it doesn’t matter what the reward is or how much it costs. Focus on getting the maximum response from the audience.

5. Avoid entitlements like the plague.

When SPIFFs become confused with compensation or become expected because they’re done in the same form repeatedly, the audience can feel as if they’re entitled to the reward. When this happens, the effectiveness of these programmes is reduced significantly as they’re no longer seen as earning something extra for doing the extra. Response is diminished as the audience no longer perceives that response is required to earn the award.

To avoid entitlements, keep promotional initiatives fresh. Change the programme rules, change the communication approach, and don’t run continuous programmes – have starts and stops that vary over the course of a year. By keeping sales reps guessing about when the next SPIFF might occur, you discourage them from delaying sales in anticipation of a SPIFF.

• Decide how often you’ll distribute SPIFFs (weekly, monthly, quarterly).
• Immediate rewards (same day) can boost motivation, while delayed rewards (end of the month) may encourage sustained effort.

6. Optimal response is driven by emotions, not reason.

Ever wonder why people would run a 10K road race for a t-shirt but not for $20? It’s because they’re emotional about the accomplishment the t-shirt symbolises. All great things are achieved for emotional reasons, not logical ones. From this standpoint, an effective short-term sales incentive strategy takes the dollars and cents off of performance. Once someone knows how much their performance is worth in dollars, the next question they ask themselves is, “Is it a good deal?” It’s all very rational. The opportunity of the reward in cash is weighed against the effort necessary to earn it and in most cases, people rationally decide not to respond.

Think back to the frequent flyer example: If you knew the value in dollars of a frequent flyer mile, the idea of going out of your way for a hotel or rental car partner would be out of the question. It’s not worth it. But you’re emotional about the opportunity to earn an airline ticket, and since you don’t know the dollar value of a mile, you respond!

7. If they aren’t working toward specific, personal goals, they’re not responding.

“Doing my best” is not a goal. A key success factor in a SPIFF sales incentive programme is to get people to set goals for themselves. This can be accomplished by getting them to set their sights on earning something specific that’s meaningful to them or through a rules design that allows them to self-select their performance goals from a menu of options. The choice should allow for a greater earning opportunity in exchange for a higher goal selection.

8. Getting and maintaining attention is a challenge.

Don’t skimp on communications. Nothing is more frustrating for a person than to be unaware of where they stand in a SPIFF sales incentive promotion. Think of this as if you were advertising to customers and trying to get them to respond by buying your products and services. You wouldn’t send them a memo on letterhead. In a fiscally responsible way, we must promote to our employees or sales teams no less aggressively than we would to our customers.

Awards without promotion won’t only diminish the understanding of the programme but, more importantly, won’t engage the emotions of the audience. Communicate, communicate, communicate, and do it in a way that will engage your target audience’s emotions.

9. Measure ROI.

SPIFF sales incentive promotions must produce specific measurable results for your organisation. Continuously track the impact of SPIFFs on sales performance. Calculate the return on investment (ROI) to assess the programme’s effectiveness.

Remember that there’s no one-size-fits-all answer to how much you should spend on SPIFFs. The right budget depends on your company’s size, industry, and specific sales goals. Be flexible and adjust your SPIFF budget as you evaluate the success of the programme.

10. Keep it simple.

It’s been said that the best incentive rules design (how people earn) is one you could understand if you saw it on a billboard driving by at 60 miles per hour. The easier it is for your audience to understand, the greater the likelihood they’ll respond.

11. Most people have difficulty running a marathon but not a sprint.

There are exceptions to every rule, but in general, people can focus on short-term goals – 60 to 90 days. The longer the programme is in duration, the more chance people will lose focus.