How to Create a Sales Incentive Compensation Plan Which Benefits Different Performers in Your Sales Department?

November 20, 2022
Daily digest

Creating A Sales Incentive Plan That Retains Employees

Quick fact: The sales team of a company contributes to about 35% of its average turnover. (link) This astonishing number shows that it is an arduous task for any company to retain talented professionals.

The management needs to put a good incentive plan in action withon-target earnings (OTE) and attractive compensation strategies.

An optimum sales behavior needs the correct motivation. Therefore, motivating sales representatives directly allows the company to reach the targeted growth and revenue.

Meeting revenue targets is a challenge but, if you have a sales team that is highly motivated and backed up by a good compensation plan, the company is more likely to achieve its targets at a quicker pace.

A good incentive plan can improve employee engagement, acknowledge their extra efforts, boost motivation and help the sales team reach its goals in amore productive and result-oriented way.

Why Is A Sales Incentive Plan Needed?

A lot of legwork is required for reaching the sales target in any firm. While a sales incentive plan can give an extra nudge to your sales team, it can be the reason for the downfall of the company if it is not structured well. This is the reason why sales compensation plans should revolve around earning higher profitability.

An efficient sales manager needs to focus on both:

  1. Sales incentive plans are designed to motivate individual sales reps.
  2. Sales incentive plans which focus on team collaborations.

Team-focused incentive schemes are important because your client experiences a completely different path of sales since everything is dependent on the internet.

The client no longer associates himself with just one sales representative. He reaches out to the sales team after proper market research of the product with more specific questions.

To convince such a customer into buying your product the buyer has to go through a sales process in which more sales representatives get involved.

A sales incentive compensation plan has various benefits:

  • The sales reps work more efficiently towards the goals
  • It improves the performance of the sales team.
  • Productivity is highly increased, and hence, more deals are cracked because the team works efficiently towards achieving targets.
  • The sales reps put more hard work into the business which improves loyalty.

Different Designs Of A Sales Incentive Plan

Designing an efficient sales incentive plan requires a deep understanding of the needs of the client and how these needs would be fulfilled by your sales team.

Here are a few important strategies to use while devising a sales incentive compensation program:

  1. Encourage The Right Behaviour  

Proper sales behavior is responsible for reaching effective company targets. The company should align incentives with high-end objectives. The plan should lay down guidelines about efficiently prioritizing sales.

Here the sales incentive plan should keep in mind that all sales reps cannot achieve 100% performance. And so, while the sales incentive plan rewards the top sellers, it should be equally efficient in encouraging the scope of improvement in mid-level and low-level performers.

  1. Workout The Correct Sales Commission     

A defined budget in mind would helpin building a correct incentive plan. The most popular form of sales incentive is commission. There can be several ways of paying commission to your sales reps, for example:

  • Gross Margin Commission, where the sales reps earn a percentage of the earned gross revenue from a deal they close.
  • Revenue Commission, where the individuals earn a percentage from the revenue of the deal.
  • Multiplier Commission, where the sales rep receives a reward based on their progress in multiple deals or products.


  1. Personalize and Customize Incentives

Every company follows various forms of sales techniques that help their sales professionals to better understand the sales process. Every individual puts his strength into this process according to his capabilities.

Therefore, their incentives should also be role-specific.

A tiered approach to monetary incentives does not let your top performer get bored of performing well consecutively.

A higher incentive for a greater milestone will let the fire keep burning for the lead performers, while the average performers will have an attainable reward to focus on.


The incentives will also defer based on the team’s hierarchy. While a sales representative will focus on talking to the client and closing deals over calls or meetings, a manager would rather look more into the administrative side of the deal.

In this respect, the compensation plan should provide strong opportunities and targets according to the role of an individual. 

  1. Split The Incentives

Sometimes the base product has a new addition or upgradation, the sales rep might need the help of the product manager to convince the client and close the deal. In such situations, therewards should be split between the professionals involved. This encourages healthy collaboration between different people in the sales team.

  1. Set A Benchmark According To Industry Standards

An incentive plan which maintains industry standards will help you to retain your top performers by not letting them be lured by your competitors. Using AI tools and software enables you to compare different incentive structures within your industry.

  1. Simplicity Is Everything

Incentive compensations should be simple to understand and equally transparent. The sales reps should know what they are appreciated for, and which actions need improvement.

All information about the sales incentive plans followed by the company should be clearly stated while giving them a payout. New goals and any structural re-alignment should be highlighted. This can only happen through open communication.

List Of Sales Incentives Which Work

Here is a list of 10 fail-proof ideas for sales incentives that can beuseful in retaining talented professionals in your sales team.

  1. Travel vouchers
  2. Tickets to sports events, seasons, or concerts
  3. Team bonding trips or daycations
  4. Individual dinner cards or team lunches
  5. Tech goodies
  6. Fitness memberships
  7. Online certifications or courses
  8. Additional Paid Time Off (PTO)
  9. Gift Cards
  10. Money in the form of salary raise, bonus, stocks, shares, or  commission. (source)
Do What Is Best For Your Team!
A well-motivated sales department can ensure higher productivity. Effective sales incentive plans help your organization to retain performing employees in the long run. Gamifying the process of achieving goals and getting rewarded is the “in” thing.

Spend time brainstorming why a certain strategy of incentives is notworking well and make efforts to fix it.
Nevertheless, showing gratitude through simple words always builds morale and helps in strengthening the bond of the employee with the company and the team members.

FAQs

  1. For how long does a short-term incentive plan need to run?

Ideally, a period of 30 days to 90 days should be considered for gathering proper data on employee performance.

  1. Give an outline of a Sales Incentive Plan schedule.
  • In Q1, communicate goals and lay out quotas for incentives.
  • In Q2, if the plan is not triggering the right sales behavior, make changes.
  • In Q3, take feedback by conducting surveys.
  • In Q4, calculate and share the compensation.
  1. How to calculate the commission percentage on sales?

Typically, the industry average ofsales commission is considered between 20% to 30% of the gross margin. (link)

Recommended articles
Footer

Let your pay practices shine with Compport

Line footer
Arrow