General wisdom for motivating salespeople says the key drivers for better sales behavior are recognition badges and tangible rewards. While there may be some truth to the value of badges and trophy value awards, there are more potent options.
With that in mind, a recent Freakonomics episode – “How to Launch a Behavior Change Revolution” – offered some refreshingly candid insight into the principles that cause behavioral change. Specifically, from a sales incentive perspective, these principles are critical to executing successful incentive endeavors.
The first principle explains two types of forces that affect motivation: Restraining Forces (those that prevent you from achieving your goals) and Driving Forces (those that push you to achieve your goals).
In the world of sales incentives, there are two formidable barriers to program success that are very much within a manager’s control. Managers should work hard to eliminate them:
Drive Out Obstacles
Put yourself in the salesperson’s place. Removing obstacles from the sales incentive process will only benefit and motivate the salespeople. Drive out as many as you can.
Another interesting point to consider – and an additional barrier to success – is overpromising. The cliché of “overpromise and underdeliver” is true. That’s definitely a high-integrity posture. But there is something else to consider – inertia. Conservation of Momentum is a physical law, but it’s also a behavioral law. People don’t like to change what they do – or the way they do it. In the world of incentives, competitive products have their own merits, product life cycles come into play, and loyalty to a given brand may also be a factor.
The question then becomes: How can you change the inertia? And how, if at all, does that relate to overpromising? Consider the impact of an initial program announcement. First impressions are key, and launching a new program needs some real sizzle to get some attention in the first place. So, due consideration to your marketing communications strategy remains very important. Social media seems to have supplanted traditional marcom to a large degree, so have a clear and aggressive strategy to leverage it.
The Case for Spiffs
The manufacturer must make a profit; the dealer must make a profit; the salesperson would like a reasonable commission; and certainly the customer would like to be confident they will be sold an appropriate solution. All these things can happen in a spiff world. When used and managed effectively, spiffs are still a powerful tool to motivate, excite, and drive sales – as well as create enhanced overall business results, including profitability.
The truth is, salespeople often take the path of least resistance and sell only what the customer asks for. It would greatly benefit channel dealers to consider creative ways to reward building margin into sales, improving attach rates, and increasing staff product knowledge. Speaking of attach rates…this is one of the most underserved areas of the normal sales process. Salespeople generally sell the product the end user asks for, but rarely take the time to mention five, 10, or even 15 ancillary products that are natural go-togethers. If they sold those add-ons, the total sale AND the total margin would go up, AND the end user would find enhanced productivity and utility both improved.
Additionally (and equally important), offering salespeople significantly more, proportionately, at the front end of a program will create initial excitement and drive participation. For example, offering a 50 percent higher spiff in the beginning will get needed attention. Also, providing a spiff for everything may not be necessary. Deploying meaningful spiffs on variable products keeps their attention and rewards them for that effort.
Let’s also consider “time to payment” or “time to receive rewards” as part of this equation. Compared to the impact of a point program to a cash program, there is a dramatic difference in the impact on a person’s psyche. A point program is, under most circumstances, a long-term proposition. Accruing enough points to receive a meaningful award can take months – if not an entire year. A cash payment made via a reloadable prepaid card, on the other hand, can be processed in a few days to a week. So, if you want salespeople to change their patterns quickly and meaningfully, make the payouts quick, easy, and exciting.
Understanding the relevance of spiffs and leveraging them as sales assets is the first step; working with tools that better deliver and manage effective spiff programs is the next step. There is plenty of room for further development of spiff programs and management solutions in the marketplace.
If you’re running a sales incentive program, make sure you’re considering the following critical factors that may determine your incentive program’s success or failure. The latter shouldn’t be an option:
George Kriza is founder and CEO of MTC Performance, which focuses on Web-based technologies for the success of incentive programs.