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5 Tips to Improve Your Sales Incentive Plans

Mar 24, 2021
4 min read
Sales compensation is key to motivating reps and driving revenue, but it’s difficult to measure the effectiveness and competitiveness of your incentives with access to limited performance data. To help, here are five tips to design stronger incentive plans and improve your overall performance.

It’s not surprising that competitive compensation plays a critical role in your ability to motivate and retain top performers, as well as hit your revenue targets. In fact, HubSpot reports that the number one reason salespeople leave their organization is for a higher paying opportunity.

However, designing a sales strategy isn’t an easy feat. It can be challenging to decipher just how competitive and effective your incentives are, depending on the pay and performance data you have available. There are a lot of moving parts within your sales team, and creating a balance between engaging incentives and revenue-driving activities is difficult without the right data to guide you. 

The best place to start is with your sales compensation plan itself. To help you design a sales strategy, here are five tips to improve your incentive compensation effectiveness and overall performance.

1. Strike the Right Balance Between Variable and Base Pay

Getting a sales incentive plan right is a balancing act. You need a secure amount of base pay to recruit and retain top sales talent, and your variable incentives must be aggressive enough to motivate reps and achieve your organizational goals.

The right pay mix will motivate reps around the specific actions and behaviors they have the most control over, and encourage them to exceed their quota. Ideally, pay mix should be closely aligned with your organizational goals and motivate reps to only take actions that progress deals and drive revenue.

Pro Tip: Examine past sales performance data to identify which incentives have succeeded in driving revenue, trends in periods of high performance, and how different teams across your organization are motivated differently.

2. Tailor Compensation to Different Sales Roles

Xactly Insights data shows that leveraging the right pay mix drives higher sales performance and helps maintains peak levels of quota attainment throughout a sales rep’s career. It’s important to remember that not all sales roles have the same responsibilities, and their sales commission structures should reflect that.

For example, consider the differences between a sales development rep and account executives. Account executives (AEs) are responsible for moving deals through the pipeline towards close. Their incentives should focus more on their target revenue quotas and deals closed. 

On the other hand, a sales development representative (SDR) has more influence on qualifying leads and/or prospecting, and as a result, their compensation may focus more on the number of qualified leads or new prospect accounts brought in.

Pro Tip: Consider the varying levels of responsibility for different sales roles and formulate commissions and incentives that individuals have control of based on their position. You can learn more (and get commission templates) in our Complete Guide to Sales Team Compensation.

3. Adjust Pay as Reps Gain Experience

According to Xactly data, there is a correlation between sales tenure and performance, with salespeople achieving their peak quota attainment levels between two and three years in a role. 

Like any role, as reps gain experience, their pay structures will change. Consider a newly hired rep versus your 10-year industry veteran on the team. Realistically, you can’t expect the new rep to hit the same target a seasoned salesperson would, and your sales incentive plan should adjust for that difference in skill level.

For many organizations, this is tied closely with your sales ramp time. As a salesperson goes through training, they may operate with a lower quota and less-aggressive variable pay structure. Once a rep is fully ramped, their incentives should change and be on par with a skilled seller.

Pro Tip: Continuously reviewing your sales data is essential and allows you to understand the relationship between your industry, sales cycle, and incentives to optimize your plan and increase performance.

4. Benchmark Incentives Against Your Industry Peers

The more data you can use to guide your compensation planning, the stronger your performance will be. Leveraging industry data to benchmark your sales compensation plans allows you to compare your pay mix to other enterprises in your space, and it helps you easily identify opportunities to improve your compensation, attract new talent, and retain top performers.

Tools like Xactly Benchmarking provide users with 16+ years of empirical real-world insights to help inform decision making and strategic incentive design.

Pro Tip: In a recent survey, we discovered that salespeople are more likely to leave their current role now than prior to the COVID-19 pandemic. Benchmarking compensation helps eliminate pay gaps and retain top performers by ensuring your pay is competitive.

5. Gain Strategic Insights with Incentive Technology

Like any part of sales, having the right incentive compensation technology is essential. Automation helps align your entire organization, ensures data accuracy, and enables you to make strategic, agile decisions. 

With a centralized single source of truth for all things incentives, you’re able to review and analyze performance in real time. Reps can see up-to-date earned commissions and resolve any disputes quickly within the solution. With continuous analysis, you can adapt plans, adjust incentives, and consistently stay on track to hit your goals.   

Pro Tip: In addition to incentives, taking a data-driven approach to your entire sales processes with a Sales Performance Management (SPM) solution can empower you to optimize your entire revenue-driving operations and ultimately drive more revenue.

Creating a Strategic Sales Compensation Strategy

Getting incentive compensation right is essential to motivate reps, retain top performers, and achieve revenue goals. But it’s difficult to implement the steps above effectively when you’re managing compensation manually. 

Incentive Compensation Management (ICM) technology, like Xactly Incent, creates a central source of data and provides leaders a granular level of visibility into performance. This allows you to continuously analyze performance effectiveness in real-time, allowing you to make quick, informed decisions that will keep you on track to hit your revenue targets. 

To learn more about how you can improve your compensation planning, download “The Sales Compensation Administration Survey.

  • Benchmarking
  • Incentive Compensation
Kelly Arellano, Senior Content Marketing Manager at Xactly
Xactly News Team

Led by Editor-In-Chief, Kelly Arellano, The Xactly News Team reports on the latest products, events, and market trends taking place within Xactly and throughout the revenue intelligence industry.