Creating a successful sales incentive program or even revamping a current program may seem time-consuming and challenging. However, the effort put into developing a program can help a business reach its short and long-term goals. Below are seven steps to help you get started. Additional suggestions will be included in a future blog post.
1. Define Goals & Objectives for the Program
The first step in creating a successful sales incentive program is to start with the best foundation. Meet and brainstorm with the company’s key stakeholders, and define the program objectives. Depending on the company structure, you may want to also include some key channel partners in this discussion.
Important points to discuss include:
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Record short term and long term goals (make sure they are SMART goals - specific, measurable, attainable, realistic, and timely)
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How to measure success (e.g. growth in overall sales or specific product sales, growth in the number of sellers, greater channel loyalty, etc.)
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Who will be accountable for meeting these goals
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When will progress checkpoints take place
2. Put Together Your Internal Team
It’s important to think about your internal team at the beginning of this process to make things run more smoothly throughout the program. Each team member should know the expectations from day one.
Most teams will include at least one member from each of these departments.
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Sales
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Marketing & Communications
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Finance
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Legal
3. Identify Program Participants
Identify who is going to be able to participate in this incentive program. You need to know who you are targeting in your sales channel and what you’re rewarding them for.
Typically the greater the number of participants, the more effective the incentive program will be. Dana Toland of IT Exchange Group suggests using a productivity ratio when determining who to include in the program.
For many companies that ratio is 80/20 where 80% of the company’s profits come from 20% of the sellers. Knowing what this ratio is at your company will help you structure the incentives.
With the right technology, such as our WorkStride Incentive platform, you can target incentive programs to specific partners, regions, etc.
4. Determine Program Specifics and Guidelines
First, choose whether you want a close-ended or open-ended incentive program.
- Close-ended programs have a set number of award winners, and the budget is fixed so you know your exact costs from the beginning.
- An open-ended program doesn’t have a limit on the number of award winners so you can only estimate your expenses. After the program is complete, you will know your final costs.
Next, establish the guidelines for the program. Guidelines should include:
- Who can participate (eligibility)
- Program timeframe
- Reward levels and requirements
- Any restrictions
- Tax information if applicable
5. Develop a Budget and Get Approval
If an incentive program is structured properly, it will cover the costs of the program itself. Dana Toland of IT Exchange Group suggests keeping these figures in mind.
- 5 -10% of product profits should be set aside to pay for the cost of the program.
- An administrative budget should be 15-20% of the total program costs.
- A promotion budget should be 20% of the total program costs. Communicating with the program participants is essential for the program’s success.
- The higher the participant's income, the more the reward. Typically, the rewards should equal 1-3% of participants’ income.
- The largest part of the budget should be allocated to the actual awards.
6. Choose the Rewards
Selecting the right rewards may be the most important piece of the program. Oftentimes people don’t spend much time deciding on rewards, and that is a mistake. Think about individual rewards – rewards should be unique and have meaning to each participant.
The rewards need to be something that program participants will want to strive to achieve. Examples include lifestyle merchandise, gift cards, reloadable Visa cards, company store SWAG, etc.
7. Implement an Effective Incentive Platform
Your incentive programs should be hosted on a mobile-friendly platform that can effectively manage all aspects of the program – user experience, audience targeting, rules, sales claims, sales validation, communications, rewards, reporting, etc.
A system for regularly reporting on results is essential. Metrics should include behaviors such as an increase in sales, new customers, cross-selling and up-selling, etc. Program participants will be motivated by seeing how well they are doing in comparison to a previous time period and also in comparison to their colleagues.
The incentive program should be monitored continuously so changes can be made when necessary to help optimize results. This isn’t a plan where you can just create it and then forget about it. It requires ongoing time and effort to ensure success. Also, when the program is complete, a final assessment is crucial so that you can improve future programs.
Creating a successful sales incentive plan can be hard work, and if you don’t want to do it on your own, Incentra can help you with every step along the way to having a successful program. Give us a call.
