Motivating sales teams effectively is a challenge several leaders face. Sales rewards are incentives, bonuses, and other motivation tools that help leadership boost rep performance. When combined with your sales compensation plan, they can push sales teams to increase performance and maintain high levels of quota attainment.
There are many different ways to use sales rewards you can use to encourage performance and several critical considerations you need to keep in mind about the relationship between sales reps and incentives. To help, here are five best practices to implement successful sales rewards.
1. Keep Monetary Compensation Simple
Financial compensation, usually in the form of a sales commission structure, is the most common means to motivate your sales reps. In fact, our 2018 Sales Compensation Administration Best Practices Survey, which included responses on sales compensation processes from more than 250 companies, found that plan complexity impacts sales rep attrition:
- 72% of companies with low complexity plans achieve the desired turnover rate (of 15% or less) vs. 66% of companies with a high complexity plan
In fact, there are several benefits beyond lower sales rep attrition that come with less-complex compensation plans. Incentive compensation is put in place in order to maximize rep performance, but convoluted plans throw away money that’s meant to grow your company. The lesson? Keep your plans simple if you want monetary compensation to be an effective sales reward. In fact, studies show the optimal set of measures for a plan is no more than three.
2. Keep Rep Psychology in Mind
Leveraging incentives to maximize rep performance is more than dangling carrots in front of your reps. The effective implementation of sales rewards is a behavioral science. This means considering the psychology behind why incentives work as you decide on the possible sales rewards you will implement.
Consider the following when choosing the sales rewards to use for your team:
Risk and Reward
Ask yourself this: Is this worth it? Whenever presented with rewards, your reps instantly weigh the perceived value of the reward relative to the effort needed to attain this goal. Fail to balance this line and you’ll set objectives that are too easy or so difficult that only a few salespeople will waste their time. The rule of thumb: rewards should be desirable and goals should be realistic and attainable.
Rewards Can Demotivate
This is a bit of a contentious claim as some of the research community is split. But there is enough evidence to prove that in specific contexts, rewards can negatively affect performance and be an ineffective tool for achieving business goals. In one field study, factory workers were incentivized to come into work on time. It worked—at first.
Eventually many employees fell off, high-performers showed a 6 to 8 percent drop in productivity, and overall it cost the plant $1,500 a month. The problem? The researchers propose that this incentive program did not work because instead of rewarding high performance, it awarded fulfilling basic job expectations.
The takeaway here is to always consider the overall message your rewards system sends and how that plays into the motivations of those who perform well and those who don’t.
Reps Will Game the System
In the same factory study mentioned above, researchers were surprised to find what any sales manager in the world could have told you: reps will look for the holes in your sales rewards programs and exploit the system. Hey, it’s not cheating if it’s not against the rules, right? The factory workers, in particular, would call in sick if they thought they would be late in order to maintain eligibility for the program.
Run your program through some critical minds as a beta test, so you can plug up any loopholes. And once your program is in place make sure to closely watch how reps are navigating the rewards program and make adjustments to the plan components accordingly.
3. Treat Non-Cash Incentives as Relative
Non-cash rewards are an effective way to support your traditional monetary compensation mechanisms. The power lies in the ability to incentivize reps with a reward that is novel and ideally lies between highly desirable, but not a must-spend-money-on item or experience.
The challenge sales leaders sometimes face is that not all non-cash rewards will be appreciated equally. Think of giving a gift to a friend. What’s going to go over better: a gift with mass appeal or a present that suggests you understand their personal interests? But in this case you’re not giving away this gift from the goodness of your heart, you’re attempting to catalyze a specific behavior from your sales team.
So let’s consider the most difficult group of people in the world to motivate: teenagers. One teenager may do his chores if you allow him to go a party. Another teenager would rather get the latest Game of Thrones book. The same can be said about between two sales reps. One could be excited about receiving an iPad, another may not only have no use for a tablet, but hate Apple products.
In each case, success comes down to a saying sales professionals know well: know your audience. This audience includes the reps you're managing or building compensation programs for—not just your customers. While it’s unlikely you can cater to everyone’s specific wants, the better you know your reps, the better you can motivate and reward reps in a way that speak to your team personally.
4. Choose the Right Sales Rewards Structure
Almost as important as the sales rewards is the actual structure in which your reps obtain these incentives. Using a simplified, easy-to-understand form and rule set will help funnel your reps towards achieving goals that align with your overall business strategy. How you give out rewards matters. Two ways that have shown promise are spontaneous rewards and gamified rewards.
While you wouldn’t intuitively think of an unexpected reward as a “structure,” surprises can be deployed strategically to incentivize predetermined behaviors. Like sales SPIFs, also known as Sales Performance Incentive Funds, studies have found that surprise rewards were better received than expected rewards.
Gamification of Rewards
Interactive means of obtaining rewards, aka gamification, comes with a few advantages that leverage two motivational systems: timed-rewards and rewards compulsion loops. Time-rewards lean into the fact that people will often repeat actions that lead to pleasure. Compulsion loops tap into the satisfying behavioral pattern of action, reward, prompt, action, reward—ad infinitum.
It probably goes without saying to choose and design structures that push reps to achieve specific sales goals. This way they’re not just getting presents or playing games, but fueling the business.
5. Distinguish Between Intrinsic and Extrinsic Rewards
These two types of motivations are not entirely disconnected, often feeding back into one another, but it helps to know the distinguishing features. Extrinsic motivations are any external rewards, e.g. SPIFs, prizes, or incentives outside the rep’s self-driven desire to perform well.
This aspect of rewards is often handled well enough, but how extrinsic rewards bolster intrinsic motivators is usually overlooked. Intrinsic motivations are the self-directed and innate psychological levers that drive a rep, e.g. respect, competence, validation, etc.
These internal motivators have been shown to be more powerful than any extrinsic reward, but you can use rewards to reinforce these intrinsic drives. For instance, does a rep like being self-directed? Strategically reward them with more autonomy in their role. Does another hold respect as particularly important? Award them publicly. Tap into what drives your individual reps and you’ll inspire performance.
The point is, when possible, build your sales rewards around the notion of intrinsic motivators. This way you’re not only providing your reps a reward for good performance, you’re validating and encouraging a sense of self that pushes them to excel every day.
Want to learn more about maintaining high levels of performance? Download the guide, "How to Build and Retain Sales Reps to Drive Top Performance."