Incentra Insights

What’s Trending in Sales Incentives?

Posted by David Chittock on Jan 28, 2015 2:27:00 PM

Hope Springs Eternal


Well, it’s that time again.  The start of a new year and a renewed hope that 2015 will be one of the best sales years ever!  Your team is ready and you’re putting the final touches on your sales incentive plan.  But, are you sure you have the right plan?  It’s not too late to make some changes.  You may want to after learning what the research is telling us about sales incentives in 2015.


The Rise of Non-Cash Awards


For some time now, the use of non-cash awards in sales incentive programs has been steadily growing within direct sales and channel partner sales operations.  Sales managers are discovering that non-cash awards such as travel, luxury merchandise, and experiential gifts can offer salespeople considerable motivation to both deliver sales and adopt behaviors that produce improved sales results.  Recently, the Incentive Research Federation (IRF) conducted a survey to determine just how widespread the use of non-cash awards has grown in the incentive marketplace.


IRF Findings


In a study of a cross-section of US businesses, IRF sought to uncover the use of non-cash incentives to reward and recognize employees, sales teams, channel partners, and customers. Key findings from the study include:


  • 74% of U.S. businesses use non-cash rewards to recognize and reward key audiences in the form of incentive travel, merchandise, or gift cards

  • U.S. businesses spend $76.9 billion per year on incentive travel, merchandise, and gift cards

  • 98% of businesses running non-cash programs include merchandise or gift cards as a reward, spending $54.4 billion each year

  • 46% of businesses running non-cash programs include incentive travel as an award, spending $22.5 billion per year • Smaller firms account for half of the market based on the sheer number of these companies

Let’s take a closer look at what they found regarding sales and channel marketing incentives.


Use of Non-Cash Awards as Sales Incentives


According to the IRF study, the use of merchandise/gift cards exceeds even incentive travel in both the direct sales and channel sales marketplace.  Over 60% of companies use merchandise/gifts cards to incentivize their direct sales teams.  In the channel marketing arena, over 75% of companies incentivize their channel partners with merchandise/gift cards.  The popularity of merchandise/gift cards appears to be steadily growing and adopted more widely by sales organizations. 


Psychology of Non-Cash Awards


The cash vs non-cash incentive issue has long been debated.  However, recent research seems to come down on the side of non-cash as the best motivator of high performance. In many people’s minds, a cash award equates to the purchase of a necessity whereas a merchandise/gift award is considered more of a luxury.  In a study conducted by Columbia Professor Ran Kivetz, researchers discovered that people are more likely to desire or precommit to a luxury reward rather than a necessity when the requirements to earn the reward are increased. In other words, if you raise the bar in a sales incentive program, it’s more likely to be well-received if the payoff is a non-essential item.


The Lesson for Sales Managers


The bottom line of all this is fairly obvious. People are willing to work harder for a perceived luxury item than for a perceived necessity.  It has to do with experiencing a pleasure one would not buy for oneself and not feeling guilty about it.  Sales managers take note.  It may be time to pamper your sales people and channel partners.  You might just love the pay off!

Categories: Sales Incentives