Designing a Sales Incentive to Handle Current and Future Uncertainty

Ellen Linkenhoker
Ellen Linkenhoker

building blocks representing building sales incentives

We’ve had a fair number of conversations and inquiries lately on how to adjust in-flight incentive programs as well as how programs should change or be crafted for the next year. If you’re reading this you might also find yourself asking:

  1. What are others doing?
  2. What’s reasonable?
  3. Can we still use historic sales figures?
  4. What should we do?
  5. How does my budget change?

And in response I would counter with a few questions of my own:

  1. What’s the data telling you?
  2. What are your frontline sales members telling you about deals? Industries? Current clients?
  3. Is this a temporary or prolonged situation?
  4. Is there a threshold that demands action? (e.g., 25% decrease in sales volume?, 15% decrease in incentive earnings? Other metrics that keep you up at night?)

The answer no one wants to hear is that it always is going to depend on your situation and also the audiences at play and the data you have available to you. There just isn’t going to be a one-size-fits-all answer to these questions. Full stop.

Given that, there are some very real concerns that can come up when you’ve got sales incentives in place that aren’t tolerating the market impact. Concerns like:

  • Reps giving up on unrealistic goals
  • Low motivation to do the basics
  • Perceived lack of understanding of the reps situation
  • Don’t possess the skills or knowledge needed to navigate the new marketplace
  • Internal optics (if you’re making cuts elsewhere, why not here?)
  • Incentive budget or profit concerns (if you’ve structured programs without an incremental sales portion counter-acting the investment)
  • Forecasting appropriately

Adjust Current Incentive Program Goals

If you’ve reached the point where you need to adjust in-flight incentives here are some things you can consider to help you make better decisions. Ideally you’d involve an expert to help run some analysis on the impact the changes could have on your program and financials.

Midterm Ideas

If you’ve got quite a bit of time left in your fiscal year and the timing makes sense with your financial outlook you can consider changing course with the goals themselves.

Imagine if you will two sliders:

  1. Payout Threshold
  2. Amount You Pay

How you move these sliders up and down can solve your issues if done correctly. The trick here is meeting your needs for the remainder of the year you’re trying to get through.

If you’re trying to make your reps “whole” you could lower the thresholds and keep your payments the same. Allowing them to maintain some semblance of what they would have achieved in a normal year. Additionally, you could provide “bonus credits” that apply to their annual attainment figures based on reaching focused short term behaviors. Annual goals may stay the same, however increase their probability of achieving them by providing the boost.

For example, provide two times the credit for new client revenue or product XYZ types during the final quarter:

You may be thinking to yourself, “Why would I do this? It’s going to cost me money I may or may not have.” And the answer is it’s even more important to maintain the mindshare and morale of your people—especially your top performers. The top performers really set the momentum and act as credible examples for others (they also account for significant portions of revenue). You could think of it more like an investment into your future; one that can have extremely positive payoffs like giving you an edge that grows market share.

If your need is to reduce expenses you could lower the amount you pay by lowering the payouts themselves. Ultimately, it’s not usually a recommended solution to cut the amount you pay, it’s not quite as bad as cutting an entire program, but it can come close because the perception is that you’re asking them for the same thing for less and that can impact performance. 

One of our experts in incentives design likens this to proceeding with surgical cuts versus field trauma response tactics. Let the data strategically guide payout reductions by audience and model scenarios that would have less impact on critical or target audiences. Instead of a broad stroke reduction on payouts that has a universal impact.

Ideally a combination of threshold and amount payouts could be used so it feels like less of a hit—easier to achieve but also less paid. Marry this up with being smart about where to use surgical cuts instead of applying a mid-year program design change to an entire audience.

Measuring Incentive Programs White paper

Short-term Ideas

If you’ve got very little time left in your sales incentive earning timeframe, you could opt to change nothing and live with the outcomes.

If you go the ‘do nothing’ route you’ll likely want to run a few different forecasting scenarios to play out the ending in a few ways. We’ve helped a handful of clients with this because historical sales figures just aren’t as reliable at this point. Demand-driven sales dictate everything and demand in most industries is not stable—everything feels abnormal (and the data says the same as your gut).

Another option is to place less focus on the revenue and instead encourage behaviors that will help fill the funnel. This is playing the long-game with your short term strategies while still encouraging participation and good-will with your reps.

The way this can work is you’re continuing to invest in the people you need to drum up the demand that is there and reinforcing behaviors that will grow your market share and revenue once the market returns to closer to normal.

This is a great way to stay in front of your reps with consistency, create positive behavior change, and set yourself up for long-term success.

According to a survey from Willis Towers Watson, the majority of participating organizations anticipate a negative impact on business results related to COVID-19 over the next 6–12 months. Similarly, the majority indicate a negative impact to their:

  • Short-term incentive plan (85%);
  • Performance-based long-term incentive plan (69%; among those operating one); and
  • Sales incentive plan (63%; among those with applicable plans). 

Communicate Updates & Changes to Your Current Programs

No matter what you do—communicate, communicate, communicate.

Even if you change nothing, you should still be communicating that you’re there, you’re listening, and you’re going to help them understand what is and isn’t going to change with how they earn in your sales incentive programs.

One last piece of advice: Do everything you can to avoid completely cutting a program from existence. We’re not even going to talk investment or budget here, the reason is optics (which I know is not glamorous, but a very real risk). Over several real world examples and a few regression models we’ve created, most companies stand to lose between 30%–55% of sales if they totally yank a program from the market without replacing it.

By keeping programs and instead shifting your messaging toward support and ongoing investment will not only create appreciation and future goodwill with your participants, it also sends a message of brand stability and longevity.

At ITA Group, we also study and use the nature of brain science and psychology as motivational tools to inspire and increase engagement.

If we’re going by the brain science, keeping programs in place, even if you need to make design adjustments, means you will continue to create positive emotional responses tied to your brand—because you maintained your recognition, praise and reward elements inside programs. These are the elements that release serotonin, a brain chemical that counteracts the release of cortisol which occurs when people are stressed and scared (and I think we can all imagine how often that is right now).

Serotonin is important. Sales incentive programs are important. Your reps are important. Balancing all of that with your financial situation is the question at hand and we can help.

Related: Need more advice on sales incentives? Check out another blog post, 4 Channel Sales Incentives Best Practices You Shouldn’t Overlook.

Design Future Sales Incentives

We will keep this section short and sweet. None of the traditional incentive tactics you use will change. These remain fairly constant. The thing that changes is your earning criteria and rules structure paired with the financial considerations at play in your sales landscape.

You may also be faced with a near future that requires a heavier investment in training and certification. Especially if you’ve got sales or service teams heading back into the field, the sheer amount of safety measures and regulation changes may need to be at play inside the design of your programs (heavier surely in some industries like pharma, medical equipment, manufacturing, food and beverage, etc.).

Training is also a big picture item for any industry that is re-skilling sales teams for digital and social selling tactics, new products and solutions for the changed buyer types or those who’ve changed messaging or processes.

Honestly, training should be a part of your sales incentive design no matter what. It’s proven again and again to be one of the single most important and effective things you can do inside a program.

Here are a handful of other things that you can play with (again, I encourage working with an expert) to balance motivation, sales achievement, and budget needs:

  • When you pay (Every time? Quarterly? At milestones? Yearly?)
  • What you pay (Cash, trip, points, etc.)
  • Thresholds
  • Activity/Behavior driven elements
  • Payment levels or multipliers
  • Point to dollar ratio

The key is to make sure the elements chosen match the outcomes you desire and are valuable enough to inspire action. It sounds easier than it is to pull off and always keep in mind simplicity.

A few other options you could play with:

  • Moving away from a yearly goals to shorter term quarterly efforts, which could help you adjust for future disruptions as you go
  • Long-game behaviors and activities vs. rewarding just for transactional sales
  • Combinations of sales and behaviors and training/certification
  • Proper segmentation
  • Open-ended budgets based solely on incremental gains (programs that pay for themselves)
  • Team-based goals

If you’re considering changing sales incentive design inside your programs, the sky is the limit and it’s a great time to try something new. There is more tolerance and understanding that things need to change to keep pace with the new normal.

Don’t be afraid to test a few things with a pilot or a small group. And definitely play out a few scenarios to see what it works. 

Learn more about about testing as well as what can be measured, monitored and optimized in order to help you achieve your core business goals in our blog, Beyond Channel Program Buzzwords: Differences Among Measurement, Metrics, KPIs & More.

Ellen Linkenhoker

Ellen Linkenhoker

Ellen is a life-long learner who finds joy in exploring new ideas and thrives on disruption in all forms. She is an award-winning marketer and navigates all things channel, incentives, and tech. In her role as an Insights & Strategy Leader at ITA Group she keeps a pulse on the changes in the market to direct the vision, position, and evolution of their incentives portfolio. Her position as a leader on the American Marketing Association board keeps her immersed in the latest trends and advances in the marketing field. When she’s not working or volunteering you can find her competing on the volleyball court or working on home renovation projects with her husband.