The idea of using incentives to drive business behaviors is not a new one. It happens in all areas of business, but it’s most obvious in sales, where compensation is tied to performance.
This is the most basic type of incentive, and it’s used to get people who sell for a living to sell. However, other incentives can drive behaviors more complex than simply selling.
An incentive is different from a commission. Ideally, it’s a reward for doing something different — something that benefits both the business and the person who’s being incented, whether that’s an employee, reseller, distributor or consultant. Ideally, that incentive compensation can be managed through the same system as other forms of compensation, such as commissions.
Such incentives increasingly are becoming integral parts of sales reps’ compensation plans. That’s partly because of the increased ease of managing such plans, thanks to modern compensation management software. However, it’s also because managers are starting to identify ways that selling needs to change as customers realize their greater control of the sales process.
Building into selling behaviors that cope with this new reality is far more useful and effective than giving your sales reps a lecture and expecting them to change on their own.
If the way you’re compensating sales is not getting the results you want — in terms of closed deals, customer loyalty or margin — think about building new incentives into your comp program. Following are five particularly useful areas for incentive creation.
1. Customer Experience
New business is great, but business with long-time customers can be even more lucrative. That means the experience that sales reps create during the sales process should reflect what the customer wants, and that sales reps should build rapport with the customer. If closing the deal comes through a confrontational process, it’s far more likely the customer will examine other options when the contract is over.
Incenting sales reps to do a great job of laying the groundwork for future sales is tough. One way to build it into your compensation process is to use a form of customer feedback collection throughout the sales process. Another way is to gather feedback at the end of every sale, whether it’s won or lost.
Ask questions that will expose how the sales process helped or hindered the development of a good buying experience and set in motion a good customer relationship. Sales reps who succeed at this should be rewarded — you can’t retroactively reward reps for long customer lifespans, but you can reward them for helping to create them.
2. Discovering New Markets and Territories
Have you identified new opportunities for your business — new market segments, new geographic territories, or any other previously unexploited but lucrative areas? Good! Now, what are you doing to encourage sales to go after those opportunities?
We often assume that sales will be excited about new territories and markets, but if sales reps are succeeding and making numbers, they have little motivation to change what they’re doing. You can directly assign them to those new opportunities, in which case they’ll have to struggle for a little while until mastering their new territory.
Another option: Place a bounty on deals made in those new segments or regions. That transforms those sales from a burden or a diversion to an opportunity — and sales reps who may have pertinent regional knowledge can apply it.
3. Using the Tools They’re Given
Investing in technology for your sales and marketing teams is great — as long as they actually use it. In many organizations — almost a quarter, according to a recent poll conducted by CallidusCloud — adoption runs less than 50 percent. One in 10 organizations reported no adoption of technology solutions; in those cases, the ROI calculation was very easy to compute: Their return was zero.
One of the first uses of incentives in compensation was a response to this issue. Many companies use adoption of technology as a negative reinforcement: Fail to enter the deal in CRM or to use some other designated technology, and you’ll make no commission on the deal.
A more productive approach might be to make technology use more of a carrot than a stick. Reward people for using it instead of punishing them for not using it. You also can use gamification techniques — scoreboards, badges and so on — to get reps competing for honors based on their usage.
4. Selling the Right Product Mix
If you sell a complex mix of products or services, you’ve probably assembled some bundled deals that make it easy for sales reps to offer solutions — and easy for you to protect margins. While customers will often opt for modifications and customizations of those groups of products and services, the bundles provide a starting point and can help move deals toward a faster close.
Are your reps being rewarded for using those bundles? At first, it would seem as if the bundles were doing them a favor by easing the difficulty in building proposals. However, through margin protection and bypassing complex proposal creation, the sales reps really are selling for more profit and doing it in a shorter amount of time.
The use of CPQ software helps greatly. Again, a rep who is doing this and speeding the sale toward a quicker close is getting the customer closer to the desired objective, a completed purchase, which helps with the creation of a better customer experience.
5. Making Advocates Out of Customers
The best customer in this social era is the one who’s happy with you and who’s willing to talk about it. If you have a customer referral program, in which customers agree to speak on your behalf, you’ve already grasped the power of customers engaged in a peer-to-peer conversation about your business. How do you ensure that you have plenty of these talkative, happy customers to spread your story around?
Your sales reps should work with their customers to steer them toward your referral program — and you should reward reps when they get permission from customers to use them as referrals. Otherwise, reps are inclined to move to the next deal rather than to keep engaged with the customer all the way through to a referral.
The Bottom Line
Note that in all five cases, these incentives benefit the sales rep just as they benefit your company. If your incentives are set up properly, they encourage behavior, not rewards.
If an incentive is well-designed, reps will continue the behavior even if you discontinue the incentive, because they’re being enriched by the behavior you’ve incented. The incentive rewards them even after the payments stop.