Why sales incentive schemes go wrong – part 1

Profits cartoonPeople like to perform well. Just as a sculptor will claim that inside every block of marble there is statue, inside every individual there is a top performer.

It’s the challenge of every line manager to unlock that potential within their employees. So many sales managers turn to sales incentive schemes to improve employee performance and drive a healthy pipeline.

But sometimes these schemes just don’t work. Instead of having a motivating effect that delivers more profit to your organisation they have the opposite effect. Employees can become demoralised and staff turnover can increase.

 

So why do sales incentive schemes go wrong?

There are lots of reasons sales incentive schemes go wrong. In this article I’m going to focus on just two common causes, and I’ll cover some more in part 2.

 

Objectives

The success of your sales incentives depends mainly on its ability to achieve your business objectives. Many businesses don’t spend the necessary time linking the overall business objectives and the scheme objectives.

Too often they focus purely on sales targets. This means that all the focus of the scheme is aimed at the company’s top performers (those who feel that the reward on offer is within their grasp) – who are probably already giving 100%.

Instead, by tightly linking scheme objectives to overall business objectives you can focus your scheme and engage the middle performers where there is the greatest potential for performance improvement. If you can get your middle 50% to deliver just a bit more the impact will be significant. You can use segmentation techniques such a leaguing, best improvers, and target related measures can be used to achieve this.

 

Analytics

Sales incentive problemsBusinesses have access to wide range of analytical capabilities to help them run a successful scheme. Yet too many managers spend all their time on the ‘nice stuff’; designing the scheme logo and choosing the rewards and not enough time on analysing the data available and the results of previous sales incentives.

Recently we met a client whose incentive scheme was not working as they envisioned. We encouraged them to share their analytics with us and we discovered that although their sales team had started achieving their quantity-based sales targets since the scheme was implemented, they were selling the product at little or no profit margin in order to meet their targets and earn their reward.

As always the devil is in the detail. Regularly take the time to analyse the ongoing results of your scheme vs the business objectives that it is linked too. It may not be ‘sexy’ but it can quickly highlight any problems and allow you to make those all important changes.

 

Getting your incentive right

Sometimes it can be difficult to know exactly what you need to do to ensure success, so here’s a quick checklist for you. Work through the list and make sure you tick off each stage of developing and implementing your scheme.

 

The checklist:

  1. Set objectives
  2. Define the target audience
  3. Map the profile
  4. Research competitor activity
  5. Research reaction to historic activity
  6. Define measurement and campaign structure
  7. Develop an appropriate reward proposition
  8. Get the creative team to develop an ongoing communications strategy
  9. Draw up an implementation plan
  10. Do it!
  11. Review against objectives and adapt the scheme as needed

 

If you use this approach then your next sales incentive campaign could be the starting point for real and significant performance improvement.

 

Read part 2 >>

 

Sales incentives

 

John Sylvester

John is responsible for the motivation division of p&mm ltd and a Director on the board of the IPM. Specialising in developing, implementing and directing many large scale staff motivation, recognition and employee communications programmes.

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