.webp)
Table of Contents
.png)
Many founders have had trouble figuring out how to increase sales motivation and performance. After all, there is a dearth of specific information and no one-size-fits-all solution. However, one thing that everyone agrees on is the importance of sales incentives.
More than 90%(1) of the top-performing companies use sales incentives to boost sales. Not only do these rewards increase sales revenue, but they also keep employee satisfaction and morale high. But simply introducing incentives does not cut it- Improper planning can stagnate your pipeline and tank your growth. What’s worse? Bad planning may not be apparent until it starts making your business bleed money.
This blog explores the topic in detail and walks you through 5 common pitfalls founders make when designing sales incentive programs.
What are Sales Incentives?
Commissions, for example, are the most common type of incentive. They offer a percentage of the deal amount to the salesperson responsible for closing the deal. This gives them an active stake in wanting to win the deal, leading to higher motivation. However, incentives need effective design and implementation to have their desired effect.
Higher-than-needed incentives make sales behavior drowsy, whereas less than the required rewards make room for feelings of frustration and disengagement. Therefore, setting up your sales team with the right incentives program to push them, yet keep them satisfied is tricky.
Founders often find themselves amid pitfalls when planning their incentives for their sales team. So let’s look at the 5 most common pitfalls and circumvent ways to avoid and overcome them.
7 Common Sales Incentivization Mistakes (And Their Solutions)
It is important to note that sales incentivization is highly reactive and differs from industry to industry, however, across all domains, these are some of the most common mistakes that hide in plain sight and hinder the true performance of your salesforce.
1. Overly complex compensation structures
Most companies dive too deep into incentives and create incredibly complex compensation plans as they try to “cover all bases”. However, this only adds to the time spent processing payments by admins, and it severely undermines the employee’s ability to understand their compensation terms.
Complex incentive structures lead to more errors and hassle. They actively disengage the salesperson from keeping in touch with their earnings, making incentives futile.
A simpler, clearer compensation plan would help Sarah stay focused and motivated, while also making the process more efficient for the company.Sales compensation software like Visdum automates the sales compensation process and makes it much easier to implement clear and efficient incentives while giving full visibility into performance and earnings to the salespersons, admins, and organizational leaders.
2. Rigid incentive programs
In the modern landscape, sales have to be dynamic, and naturally, so does sales compensation. Rigid incentive programs refer to commission structures that don’t change for long periods and do not account for market changes, seasonal dips and booms, and/or product launches.
Rigid compensation structures do not allow an organization to make use of momentary changes and high-volume seasons- the reps need to be pushed especially hard to capitalize on these short-term conditions.
3. Lack of proper alignment between company objectives and incentive planning
Incentives promote certain behaviors. An increased commission on a certain product will make reps focus on selling more of that product. Similarly, higher commission rates on larger contracts will make the reps want to close more high-volume deals. Often, incentives can promote the wrong kind of behavior, which may lead to increased sales performance but not meet company goals simply because of misalignment.
For example, when a new product is launched, and the incentives are not revised to make selling the new one more rewarding, sales reps may not push hard enough to sell the new product, leading to a low market penetration.
4. Infrequent Payouts
Infrequent compensation leads to a high employee turnover rate. What’s important is to have smaller, more frequent reward and recognition opportunities. According to the Incentive Research Foundation (IRF), properly structured incentive programs can increase employee performance by 44%.
Commissions and reward programs are most effective when they’re paid out immediately after the closure of a deal or the achievement of a goal. Annual or quarterly fixed incentives reduce the efficacy of these rewards.
Such situations drive home the importance of fulfilling the sales team, and keeping them motivated every day- a task unachievable with infrequent rewards.
5. Lack of non-monetary incentives
As contrary as it may sound for a sales compensation discussion, monetary incentives alone fail to propagate a performance-based culture. According to the IRF, top-performing companies are 90% more likely to use non-cash incentives along with cash incentives.
Non-monetary incentives such as extra time off, vacation packages, awards, gifts, etc. show the employees that the organization cares about them. They lead to higher job satisfaction and high retention rates, which is what fuels fierce motivation for sales teams.
6. A lack of dispute resolution and communication mechanisms
There are always situations where clarifications and explanations regarding incentives may be required, especially if the reps have no visibility into computation and no breakdown of their earnings in their commission statements. In such situations, it gets very frustrating for sales reps to not be able to understand and record the results of their effort. If a sufficient mechanism for communication between the revenue/finance team and the sales team is absent, it can lead to disengagement and higher turnover.
7. One-size-fits all incentives
An SDR’s role is very different from an Account Executive, and so is the role of a BDR from an Inside Sales Representative- If all these sales roles are so different, then why should their incentives be the same? There are many differences that incentives need to account for such as roles, as mentioned previously, product lines, geography, seniority, etc. Similar incentive structures for these different roles can lead to frustration and feelings of unfair treatment, and incentives might simply be unable to motivate if they are not suited to the exact person they affect.
Wrapping Up
Companies must realize that the time to revamp sales processes is now upon them. The advent of AI and automation has significantly increased visibility into granular sales details, leading to manifold increased opportunities to make sales processes more efficient. For example, tools such as MeetRecord capture and analyze sales conversations to produce actionable insights into the health of the deal and sales behavior, thereby helping in sales training and coaching. Thus, just the implementation of incentives is not going to cut it.
Incentives are most effective when they ‘hit’ the exact behavioral instinct that is required to push sales. More frequent rewards, real-time visibility into earnings, sales contests, more frequent rewards, etc. are the characteristics of highly efficient new-age sales compensation methodologies. Automation is not a garnishing benefit, it is crucial to sustain sales growth in highly competitive markets.
The incentive mistakes mentioned in this blog are just some of the most common ones to begin with, and getting these resolved is the first step to having a crisp and streamlined incentive compensation strategy.
Sources :
1. https://theirf.org/research/ten-things-top-performing-companies-do-differently/2229/
.svg)
.png)
