The success of your sales incentive programme hinges on its ability to tap into the diverse motivations of your sales team and how it can adapt to the dynamic nature of sales environments and the specific goals you aim to achieve. Whether you’re aiming to boost individual performance, foster teamwork, or navigate complex sales environments, the right incentive structure can make all the difference.

In this blog, we’ll dive into the fundamentals of sales incentive structures, their strengths for your business, and key considerations to implementing them effectively, as well as touching on the benefits of both financial and non-financial reward strategies.

What are different types of sales incentive plans?

How do you structure sales incentives?

Financial vs non-financial sales incentives

Sales incentive structures that work for business

How to choose the right sales incentive programme for your business

What are the different types of sales incentive plans?

To be successful, your overarching sales incentive plan should be influenced by the objectives you’re trying to achieve and the audience you’re targeting to motivate. The most common types of sales incentives are:

Role-specific sales incentives – The most effective incentives are those that are targeted at an individual – the more personalised the better. Typically, these will be designed to reward activity based on your role or function. 

Team or split sales incentives – In highly technical or complex solution sales environments, these incentives foster teamwork and recognise everyone’s contributions, ensuring all parties are acknowledged for their combined focus on the customer and shared success.

Pre-sales incentives – In industry sectors or with products that typically have a longer sales cycle, pre-sales incentives can help to sustain engagement by rewarding key milestones. 

Omnichannel sales incentives – In complex sales environments where a customer may be engaging across multiple channels, incentivising the steps to a sale and rewarding the relevant stakeholders along that journey can help to reduce points of customer friction and increase sales performance.

Analytics-based sales incentives – Where accurately forecasting performance is less possible either due to a complex sales process, new product launch or new market entry, insight-based predictive modelling is often the most appropriate sales incentive plan. In these scenarios, large data sets are required to be able to provide strong predictions. Alternatively, analysing the activities and behaviours that trigger success and pivoting your incentive focus from the transaction towards replicating these. 

How do you structure sales incentives?

When structuring your sales incentive, to secure engagement and support success, the critical components that should be considered and included are:

Programme rules

Programme rules should clearly outline the specific goals of the incentive and what measurement criteria will be used to determine success. It’s important that your programme rules align with your wider business strategy and ways of working. Ideally these should be simple and easy for participants to understand and should not only target your top performers but also create motivation in your mid-performers, as this is where the biggest opportunity for growth resides.

Communications

Critically, an incentive you run should be fair in its design and transparent in its communication of the objectives, rules, rewards, and progress to ensure maximum engagement and impact. Leveraging existing channels and offering various communication options will maximise your reach and engagement. Consider how the cadence of your communications can help to build momentum and enhance motivation – for example, increasing communication frequency during busy periods or as your incentive plan is coming to an end can help to accelerate performance.

Training and education

Incentives are only effective if the participants feel they can succeed. Consider what support is available to enable people to develop their skills and maximise their opportunity for success. For example, is training available and will it be easily accessible.

Measurement

Considerations around how and what activities will be tracked, measured, and reported should be made and, importantly, how participants in the incentive will be updated on their progress to the objectives and the results. Real-time dashboards and regular progress reports ensure sales people are informed and can remain motivated throughout the duration of the incentive.

Awards

Choosing the right awards is critical to motivating sales teams. Award options can include:

• Cash and cash equivalents (such as gift cards and vouchers)
• Tangible rewards (such as merchandise rewards)
• Experiential rewards (such as personal and group travel or personal development opportunities)
• Recognition awards (such as trophies, certificates, and employee benefits, e.g. additional holiday).

Be clear on the dynamics of your sales teams and what type of awards will be most effective.

Sales environments can change rapidly, and your incentive programme should be flexible enough to adapt to these changes. This includes being able to adjust rules, communication, and rewards as needed to stay relevant and effective. Ensure within your plan you schedule regular reviews on your incentives performance to ensure it remains aligned to your goals and market conditions.

Financial vs non-financial incentives

The choice between monetary and non-monetary incentives can significantly impact the effectiveness of your sales incentive programme. Before exploring specific sales incentives structures, we briefly want to explore the benefits and drawbacks of each and how they can influence your incentive success.

Monetary incentives

Monetary incentives are cash rewards given for specific actions or behaviours, such as achieving the highest sales in a quarter. These incentives aim to boost productivity and effort.

Examples include commissions, target bonuses, profit-sharing schemes, gift cards, and stock options. Monetary incentives can significantly boost employee morale, reward efforts, motivate employees to take on less enjoyable tasks, cultivate loyalty, and provide financial security. They’re also cost-effective when structured around targets. However, they can lead to a short-term focus, diminish intrinsic motivation, create negative competition, and encourage unethical behaviour.

Non-monetary incentives

Non-monetary incentives are value-based rewards like recognition, feedback, travel, experiences, or merchandise. These rewards focus on personal and professional development, job satisfaction, intrinsic motivation, and organisational loyalty.

Non-monetary incentives are more effective at tapping into people’s emotions and therefore more impactful at enhancing employee engagement, creating lasting memories, and offering personalised recognition, and are more likely to be discussed and celebrated publicly. They’re also cost-effective as they’re often perceived as higher value than their actual cost. However, their effectiveness can vary among employees. They may miss the mark for those primarily motivated by money, and they require a targeted strategy to implement effectively.

Using both monetary and non-monetary incentives

Studies show that non-monetary incentives can significantly impact motivation and loyalty. Combining both types of incentives, such as using points systems, can bridge the gap and offer a balanced approach to incentive rewards. Point systems act as a type of currency that can be redeemed for merchandise, experiences, and personal development rewards, providing a higher level of recognition and satisfaction. This balanced approach can lead to long-term job satisfaction and effort, fostering a positive workplace culture and driving business success.

Sales incentive structures that work for business

In the competitive world of sales, keeping your team motivated is key to driving success. A well-executed sales incentive can be your secret weapon. In this section we’ll dive into a variety of sales incentive structures that can help boost performance and keep your sales force energised and aligned with your organisation’s goals.

Commission-based

Commissions are a traditional sales incentive structure that rewards salespeople with a percentage of the sales they make. This can be designed as either a flat rate percentage or in tiers based on performance levels.

The benefits of this type of incentive are that they’re easy to understand, calculate, and directly tie earnings with performance, motivating salespeople to sell more.

On the flip side, incentive earnings can be unpredictable and have the potential to encourage aggressive sales tactics, a short-term focus on gains, and cause salespeople to neglect non-sales activities. Furthermore, typically rewarded as a monetary incentive and built into employment contracts, earnings can easily be confused with salary, reducing the long-term efficacy of this type of incentive to drive specific behaviours.

Bonus-based

This sales incentive structure rewards salespeople for achieving specific targets or milestones, such as closing a significant deal, sustaining target achievement quarter on quarter, or onboarding new clients.

This is a great structure for promoting and focusing salespeople on the achievement of specific goals and can be tailored to align with the changing landscape of your business and the needs of a sales team or channel.

When designing bonus-based incentives, ensure that they balance your sales team’s focus on both short- and long-term targets and that any targets set are perceived as attainable to mitigate disengagement. Furthermore, consider how these bonuses are positioned within the overall total rewards package. To change behaviour, incentives should be perceived as additional earning opportunities, not base salary.

Profit sharing

A profit-sharing incentive structure can align salespeople’s interests with long-term organisational performance over short-term successes and can be designed to reward based on individual, team, or organisation-wide performance. However, used in isolation, it could minimise recognition of individual contributions and be more complex to administer.

Quota-based

Quota-based incentives are tied to meeting or exceeding sales quotas. This can include bonuses, commissions, or other rewards. Quota-based incentives provide clear targets and, when designed effectively, motivate salespeople to meet or exceed them.

They offer great flexibility for organisations, enabling them to be adjusted as required to reflect market conditions. These targets can be either revenue or unit-based. Best practice quota-based incentives are those that are personalised to an individual person. Using historical individual sales performance data and predictive modelling, unique baseline performances should be identified and achievable growth targets set. Better still, enabling sales people to self-select their targets provides an added layer of ownership of the goal, increasing engagement and leading to higher target attainment.

Team-based

This incentive structure is a great way to drive collaboration and share best practices among teams. In this structure, incentives are distributed based on the performance of the team, making it effective in driving overall team performance. However, it requires careful management to avoid creating unintended conflicts within teams or demotivating high performers who may feel their contributions are diluted.

Behaviour-based

Behaviour-based incentives move away from focusing on outcomes and results and focus salespeople on the steps to sale, fostering a culture of continuous improvement by positively recognising and reinforcing the behaviours most aligned with sales success, such as training participation, customer service excellence, and adherence to safety protocols.

Common challenges with this structure can be in identifying appropriate, clear, and measurable criteria to incentivise, and ensuring that it’s clearly and consistently communicated and measured.

SPIFFs  (sales performance incentive funds)

This structure is a short-term incentive, deployed to drive the achievement of specific goals, such as selling a particular product or closing deals within a certain timeframe.

These can be highly effective when used tactically, especially during slower sales periods. However, SPIFFs can be costly, so careful consideration in their implementation and design should be factored to generate a positive ROI. Factors such as avoiding overuse, which can affect engagement, and programme rules to discourage negative behaviours, such as delaying closing deals to qualify for rewards, should be considered.

Hybrid

Hybrid incentive structures enable organisations to leverage a combination of different incentive types, such as commission, bonuses, and SPIFFs, to provide a balanced approach and tackle multiple objectives.

In programmes utilising hybrid structures, additional care should be taken to ensure communication is clear and rules are well-defined to ease administration, maximise budget utilisation, and avoid confusion.

In addition to these core structures, we’d recommend overlaying them with sales incentives tactics and games to help capture attention, drive competition, and increase engagement, such as:

Accelerators

Encourage your salespeople to go beyond quotas or reach milestones quicker with higher reward opportunities when thresholds are exceeded. Careful consideration should be made when applying these to ensure you don’t encourage negative behaviours.

Qualifiers

Qualifiers refer to any activity or threshold that must be achieved before a participant’s eligible to start earning awards. For example, completing a certification or a certain course or selling a minimum number of units. This can be a useful overlay where you want to restrict rewards to your most engaged sales people, but must be implemented carefully so as not to disengage your wider audience by creating too high a barrier to succeed or unintentionally disqualifying a typically strong performer.

Multipliers

Multipliers are overlays that increase incentive results based on a number of actions being completed. They’re particularly effective when a programme may be incentivising a number of activities or products but there’s a desire to give additional weight to one element over another. This can be a great tactic for additional recognition where additional effort is required or where more focus is desired.

These are just a few examples of sales incentive tactics that can drive performance. Incorporating sales incentive games such as leaderboards, bingo cards and badges, for example, can help to create a competitive and fun environment around your sales incentive activity.

How to choose the right sales incentive programme for your business

Most sales organisations, whether selling direct to customers or through complex channels, will benefit from having a sales incentive strategy in place. However, not all sales incentive structures are created equal. it’s a common misconception that designing and delivering an effective sales incentive is easy, especially if you’re trying to incentivise sales teams across multiple regions and markets. Even if you feel you’ve identified the most suitable incentive structure, there are many complexities to its implementation and maximising its effectiveness.

Consider legal and tax implications

When implementing a sales incentive programme, it’s crucial to consider the legal and tax implications in each region. Different countries have varying regulations regarding employee incentives, and non-compliance can lead to significant penalties. For example, in the EU, incentives must comply with GDPR regulations, while in the US, the IRS has specific guidelines on taxable benefits.

Tailor your programme for global implementation

A one-size-fits-all approach rarely works for global sales teams. It’s essential to segment your audience and tailor the programme to meet the unique needs of each region. This includes understanding local market conditions, cultural nuances, and sales practices.

Understand reward effectiveness and cultural expectations

The effectiveness of rewards can vary significantly across cultures. What motivates a sales person in the US might not have the same impact on a sales person in Japan. Understanding these cultural differences is key to designing a programme that truly motivates.

Overcome communication complexities

Effective communication is critical to the success of any incentive programme. This includes overcoming language barriers and personalising messages to ensure they resonate with the target audience.

Build a robust technology infrastructure

A robust technology infrastructure is essential for managing a sales incentive programme, especially on a global scale. This includes secure data hosting, easy access for participants, and the flexibility to adapt the programme as needed. With stringent rules and barriers to entry in certain regions of the world, ensuring your incentive technology solution can be deployed effectively is important.

Elevating sales performance with tailored incentive structures

Crafting an effective sales incentive programme isn’t just about choosing the right rewards; it’s about understanding the unique dynamics of your sales team and aligning incentives with your business objectives.

By integrating a mix of commission-based, bonus-based, profit-sharing, quota-based, team-based, behaviour-based, SPIFFs, and hybrid structures, you can create a robust incentive strategy that drives performance and fosters a culture of continuous improvement.

The key to a successful sales incentive programme lies in its ability to adapt and evolve with your business needs and market conditions. A well-structured incentive plan can transform your salesforce, turning challenges into opportunities and driving sustained growth.

By leveraging data-driven insights and understanding the diverse motivations of your sales team, you can design a programme that not only meets but exceeds your business goals.