Return to Vendor

By Malcolm Fleschner

Whether using cash, gifts or travel, nearly every sales organization runs sales-incentive programs. Yet after programs have ended, few sales organizations follow up to determine just what kind of return their sales incentives are delivering. “Traditionally, most measurements by sales managers have been very intuitive and relationship oriented,” says John Farrell, the senior director of channel marketing for Carlson Marketing Group. “What has been missing is a more quantitative financial justification. But incentive programs do have a measurable impact on the quality of business, so there’s no reason not to measure their ROI.”

Why have managers shied away from incentive ROI measurements? Because, Farrell says, they think it’s too complicated. “We make it harder than it needs to be,” he says. “Once you begin talking internally about measuring something, there is a groundswell that begins among people from a variety of departments who need to contribute to it, put systems into place and monitor it all. Sometimes it seems easier to send up a space shuttle than to measure an incentive program.”

Not to worry, says Farrell, there are ways to simplify the process. The key is to measure both individual and corporate results so that external factors are eliminated. “Individuals typically should be measured against the prior year’s performance or against a current plan,” he explains. “These measurements neutralize some of the external factors, such as market trends, the economy, pricing changes, competition and new product introductions.”

Most important, says Farrell, is to measure the effectiveness of a program’s goals and objectives. And that requires planning on the front end, he says. According to Farrell, “Measurement has to start at the beginning of the program – it can’t be an afterthought. You measure as part of the design of the plan. Based on the goals that you set and the behaviors that you want to reward. That’s what determines the measurement standards and criteria. Then you should measure, review and analyze individual performance on at least a monthly basis, and update and revise on a quarterly basis.”