Want to bring in top sales talent? Learn how to design and implement an effective sales incentive plan that will help attract the best sales people.
May 13, 2023
You've made the job postings, you've conducted hours of interviews, and at the end of the day, you still don't have the sales talent you need. Instead of getting discouraged, ask yourself why the top sales talent in your industry wants nothing to do with your business. The answer is you don't have a competitive sales incentive plan.
In the post below, you'll get a complete look into what a sales incentive plan is, what it entails, and how your business can set one up to finally start drawing top sales talent.
A sales incentive plan is a program designed to reward and incentivize your sales staff for meeting or exceeding specific goals. This can include increasing sales, acquiring new customers, or upselling existing ones.
The way it works is simple: You set specific targets for your sales team to achieve within a certain timeframe. Once they hit those targets, they are rewarded with bonuses or other incentives such as vacations, gift cards, or even promotions. The idea is to create a sense of healthy competition among your team members while also fostering a culture of hard work and dedication. By setting clear goals and offering meaningful rewards, you can create an environment of healthy competition that benefits both you as the business owner and your employees.
While time-consuming, sales incentives planning isn't all that difficult if you know what you're doing. Below is a list of specific steps that'll help any business owner create a successful sales incentive plan for their employees.
Learning about your industry has a list of benefits for any business. Your marketing material will be easier to create, your customer service will satisfy customers easily, and you'll learn what motivates customers to make purchases in your particular niche.
By understanding your industry, you can identify key trends and patterns that may inform the design of your incentive program. For example, if you notice that customers in your industry respond well to discounts or free trials, you may want to incorporate these incentives into your program. Does your competitor use webinars or workshops to generate leads? Have plans to add this method to your strategy and reward a sales rep for each lead they close on a virtual event.
Researching your industry also allows you to benchmark against competitors and identify areas where you can differentiate yourself. Take inspiration from successful strategies you find competitors implementing while also using their mistakes to avoid costly errors. A helpful way to learn more about a competitor's process is by signing up for a consultation call. Go through the process of talking with the sales team and see if there are areas you can use for your own business or mistakes that you would like corrected.
The information you gather from your research should inform all the following steps. It serves as the foundation and basis from which you'll make all future decisions. Spend the necessary time to research thoroughly because every decision you make from here on out will be based on this work.
Once you feel confident in the information you've gathered, take a hard look now at your current business. Set aside a couple of work hours to conduct a revenue audit for your business. Focus on the areas of the business that are driving revenue. How have sales changed over the past few quarters? Where do the majority of your sales come from? Which products or services are generating the most revenue?
Look at your current client base and identify where you can increase sales. Are there certain types of customers who may be more willing to purchase additional services or products? Answering these questions will give you a clearer view of what your business goals should be.
By identifying your business goals, you can determine what specific behaviors or outcomes you want to incentivize among your sales staff. For example, if your goal is to increase overall revenue, you may want to incentivize upselling or cross-selling to existing customers. If your goal is to acquire new customers, you may want to incentivize lead generation or customer referrals.
Ultimately, identifying business goals when developing a sales incentives program ensures that the program is designed with purpose and intentionality. It helps keep both the business owner and sales team focused on achieving key objectives while also providing a sense of direction and clarity for everyone involved.
The people on your team making the cold calls and hosting webinars will be an easy choice for eligibility for your sales incentive program. However, not all employees are going to be as clear of a choice when it comes to offering commission bonuses.
Defining eligibility criteria makes sure your incentives are awarded fairly and consistently across the team. It also helps to align incentives with specific job responsibilities and performance metrics. For example, you may want to limit participation in the program to those employees who have direct involvement in generating or closing sales.
Restrict eligibility too far, though, and you'll get an earful from unhappy employees who feel their contributions aren't being valued as highly. What about customer service agents who help answer calls through your website chat? If one of those customers ends up making a sale, do they deserve compensation?
Deciding exactly who is eligible for compensation will change over time. As your program grows along with your company you'll have to make several adjustments to make it fair. Starting with a foundation and gathering employees' feedback will help guide your future decisions.
To maximize the success of a sales incentive plan, it's essential to align the program with specific performance measures that are linked to your business goals. This way, all incentives are targeted at behaviors and outcomes that directly contribute to the success of your organization.
For example, if your goal is to increase revenue growth, you may want to tie incentives to metrics such as total sales volume, revenue per customer, the number of new accounts opened, or other factors of the sales process. If your focus is on selling specific types of products, you don't want a general revenue incentive compensation plan, instead, you want one that highlights only the products your business needs to push.
By linking incentives to these specific performance measures, you create a direct line of sight between individual employee efforts and organizational success. This helps motivate employees by providing a clear understanding of how their work impacts the bottom line.
Not only that, but aligning sales incentive schemes with specific performance measures allows for accurate tracking and measuring of your program's success. By measuring progress against these key indicators over time, you can determine whether the program is achieving its intended goals and make adjustments as needed.
A pay mix is the combination of fixed salary and variable compensation (such as commissions, bonuses, or other incentives) that make up an employee's total compensation package. Most sales reps will be concerned with your pay mix before any other bonuses or other compensation rewards.
When creating a pay mix for the right sales incentive program, you need to consider several factors. First and foremost, make sure the overall package is competitive with industry standards and reflects the level of talent you want to attract and retain. If your current strategies haven't attracted the type of resumes you see at other companies, it's time for a rehaul.
Beyond this, companies also need to think about how much weight they want to place on variable compensation versus fixed salary. Generally speaking, higher variable pay can be more motivating for employees since it directly ties their efforts to financial rewards. However, it also creates more uncertainty around income stability and may not be feasible in all industries or roles.
Other factors that may influence the pay mix include company culture, performance expectations, and budget constraints. In the U.S., an average sales team receives a 60/40 pay mix structure. Businesses that emphasize a strong team-based culture over individual incentives will value a stronger salary over variable compensation. Others businesses may focus more heavily on top performers who drive revenue growth.
Another comparison you'll have to weigh is between tenure and performance. In general, employees who have been with the company longer will be more experienced in their roles and may expect a larger financial reward than newer hires. However, you don't want to let your best performers become complacent and undervalued by offering too much job security without enough incentives for continued growth.
In fact, a study done by Xactly shows sales reps hit peak performance sometime between the second and third year in their position. So, while it may seem like sales reps who have been on your team for long periods of time deserve higher pay, they may not be earning that compensation.
To avoid sales employees who have outstayed their value in the position, consider promoting them to higher roles in the company like a sales manager. That way, you can reward sales managers for their longevity without overpaying for performance that may be lower than newer team members.
Striking the balance between tenure and performance is a long-term process that changes over time. Decisions you make today will rarely hold up over the period of a few years but by setting out a clear incentive plan and tracking its performance, you can adjust your strategy as needed.
While base pay and commissions are important components of any sales compensation package, bonuses, and non-compensation rewards can provide additional incentives that go beyond just financial compensation.
One reason for adding bonuses or non-compensation rewards is that they can help differentiate your company's sales incentive programs from competitors in the industry. In a competitive job market, having unique and attractive incentives can make a big difference in attracting top sales talent.
Additionally, bonuses and non-compensation rewards can help incentivize behaviors that are aligned with company goals beyond just revenue growth. Offering rewards for achieving customer satisfaction metrics or completing training programs can help create a more well-rounded approach to improving your sales team.
Non-compensation rewards are also great for increasing an employee's engagement and sales productivity. Recognition for achievements outside of financial success creates a sense of ownership over individual performance goals. This type of recognition can be particularly motivating for top performers who value being recognized for their contributions.
The last step to creating a successful sales incentive program is to give your program some parameters before you start dishing out compensation. Without quotas, there's nothing to incentivize your sales team, and without caps, you risk overpaying.
When setting up quotas, consider the size of your customer base and what it will take to hit certain goals. You can also benchmark KPIs across different industries if you're unsure of where to start. Setting unrealistic quotas is an easy way to discourage your team and lower morale. You want a quota that is challenging but also reasonable so that when it's achieved there is a sense of accomplishment.
Once you have a good idea of what your team needs to earn in order to hit quotas, you can set caps on how much each salesperson can earn. The cap must be high enough to create a desire but not too high where you're getting diminishing returns. It's also important to be consistent with the caps and not single out certain performers. Keeping payouts within a reasonable range ensures that no one is overpaid and prevents budgeting issues down the road.
The top talent in your industry is interviewing you just as much as you're interviewing them. They need to see you have a competitive sales incentive plan before moving forward with your company. With a bit of time, you'll be able to use the steps above to create a program that rivals those of your competitors and gets the best salespeople on your staff.
If you don't have the time to wait to build an entire sales incentive plan and want more immediate results, use The Sales Connection to jump-start your growth. Our team of selling experts can immediately start making an impact on your business and achieve the results you want. Talk with one of our experts today and get the top sales talent you need to move your business forward.
Kayvon has over two decades of experience working with high-level closers and perfecting his sales methodologies. He has earned the title of Canada’s #1 pharmaceutical sales representative and continues to share his expertise as a keynote speaker and through his multi-million-dollar coaching program.