Sales Incentives

10 Different Types Of Incentive Programs

Here's a quick guide on different types of incentive programs for your sales teams.

1. Cohort-based Incentive Programs 

In the Cohort base incentive programs, users are classified on the basis of several cohorts like top performers, middle performers, and tail-end performers. Typically 5-10% of users are top performers, 25-30% are middle performers, and the rest 60-70% are tail-end performers. It's important to look at these users differently because they come with a different mindset, caliber, and approach.

Setting up a Cohort-based incentive Program:

Step 1: The first step is to map the performance cohorts for your organisation/ team. Identify and categorise the top 10%, middle 30% and the last 60% of your team members. Qualify every member into one of these categories.

Step 2: The objective of the cohort-based incentive program is to motivate and bring up the average performance of the cohort. For doing this, you need to identify the average and maximum performance of the cohort. If the program needs to have business impact, it needs to push performances to above the average performance of the cohort.

Step 3: Go on to create milestones between the group average and 105% to 120% of the group maximum (for the top performers of the cohort to be motivated with the program).

Step 4: Offer preferably incremental or even fixed incentives for every milestone.

A typical incentive program for an example ‘Top 10%’ cohort will look like below:

Cohort: Top 10%

Cohort Name: Super Stars

Average Revenue of last quarter: $ 10000

Maximum Revenue of last quarter: $ 12000

Reward type and value: Fixed incentive of 2.5% of the revenue. Slightly incremental for the last slab.

Incentive Structure:

Slab 1: Achieve revenue of $10000 to 10500, Get $250 rewards

Slab 2: Achieve revenue of $10501 to 11000, Get $262 rewards

Slab 3: Achieve revenue of $11001 to 11500, Get $275 rewards

Slab 4: Achieve revenue of $11501 to 12000, Get $287 rewards

Slab 5: Achieve revenue of $12001 to 12500, Get $300 rewards

Slab 6: Achieve revenue of >12500, Get $320 rewards

Similarly the slabs can be set up for the rest of the cohorts by maintaining the reward value within the permissible limits of the business.

 

2. KPI & Micro-KPI linked Incentive Programs

Typically incentives are given based on final sales output. However, to influence final output - intermediate outputs need to be incentivized too. For example - Demos lead to Opportunities and Opportunities lead to Sales. Here are more demos a salesman gives, more opportunities he will generate, and more closures to happen. Hence micro-incentivizing people based on Demos and Opportunities influences sales behavior.

Setting up a KPI-based incentive Program:

Step 1: The first step is to identify the KPIs relevant to the target team members

Step 2: The objective of the KPI based incentive program is to push team members to complete  micro-KPIs that help achieve the end goal. For doing this, you need to individually identify the average and maximum of every Micro-KPIs of the team during the past quarter/ period. Your overall target for a KPI needs to be between this average and the maximum achievement. Ideally this should be at the 2σ mark if your team’s previous performances on each of the Micro-KPIs are plotted on a normal curve.

Step 3: Go on to create milestones sequentially for every Micro-KPI

Step 4: Offer incremental or fixed incentives for every milestone.

A typical incentive program for an example ‘Sales Process’ KPI will look like below:

End Goal: Sales closure

Program Name: Super Closers

Micro KPIs: Number of Demos, Number of Project scope document completed, Number of Sale Agreements signed, Number of Sales closed

                                      
Micro KPIs 2 sigma value (Target)
Number of Demos12
Number of Project scope document completed9
Number of Sale Agreements signed7
Number of Sales closed5

Reward type and value: Variable and Incremental incentive 

                                              
Micro KPIs Rewards
Number of Demos$5 per Micro KPI after completing target
Number of Project scope document completed$10 per Micro KPI after completing target
Number of Sale Agreements signed$15 per Micro KPI after completing target
Number of Sales closed$25 per Micro KPI after completing target

 

3. Badge-Based Incentive Programs 

It's important to appreciate users' basis of their achievements and behaviors with non-monetary rewards. Badges and certificates can be used to motivate people- particularly to include and motivate performance at the starting end of the target achievement.

Setting up a Badge based incentive Program:

Step 1: The first step is to identify the badges based milestones of the program

Step 2: The objective of the badge/certificate based incentive program is to push team members to complete the distance between the start of the month and the first rewarding milestone.

Step 3: Go on to create milestones for every step identified.

Step 4: Set up and offer badges for every milestone identified

A typical incentive program for an example, ‘Badge based Program till 80%’ will look like below:

End Goal: Push users till 80% target achievement

Program Name: Badge rush

Milestones: 20% of Target achievement, 40% of Target achievement, 60% of Target achievement,  80% of Target achievement

Reward Structure:

Slab 1: Achieve 20% of Target achievement win ‘Quick starter’ Badge

Slab 2: Achieve 40% of Target achievement win ‘Milestone crusher’ Badge

Slab 3: Achieve  60% of Target achievement win ‘Blockbuster’ Badge

Slab 4: Achieve  80% of Target achievement win ‘Badge ranger’ Badge

 

4. Hierarchy-based Incentive Programs 

Sales usually have a regional sales team that reports to a zone-head and then Geo-head and then national-head. It's important to roll out incentive programs across all levels of hierarchy. This keeps each of the levels motivated at all times.

A typical hierarchy based program could either be a KPI based or cohort based program mapped for every hierarchy individually - with their own targets.

 

5. Behavior-based Incentive Programs 

Different types of sales teams face different behavioral barriers. Some may face fatigue for improvement, or certain sales ratios aren't improving (like Demo : Closures, Cross-sales, Upsells, etc). Incentive programs can be configured to improve these ratios.

Setting up a behavior based incentive Program:

Step 1: The first step is to identify the behaviors/ business ratios that result from these behaviors

Step 2: The objective of the behavior based incentive program is to push team members to break through their stagnant performance ratios. Similar to the micro KPI programs, identify a range of values between the 2 sigma and 3 sigma of each of these ratios in your team.

Step 3: Go on to create milestones that checks for fulfilment of each of these ratio limits identified.

Step 4: Offer fixed/ incremental rewards for every milestone

A typical behavior based incentive program for an example, ‘Sales Allrounder’ will look like below:

End Goal: Push users to participate in Cross selling and Upselling

Program Name: Sales allrounder

                                              
Milestones Reward
1 - Cross  sales revenue $10000 AND Up sales revenue $10000$250
2 - Cross  sales revenue $11000 AND Up sales revenue $110000$300
3 - Cross  sales revenue $12000 AND Up sales revenue $12000$350
4 - Cross  sales revenue $13000 AND Up sales revenue $130000$400

 

6. CRM-Utility based Incentive Programs

It's been a fact that 70% CRMs fail to convince sales teams for its full adoption. Sales teams are reluctant to change and use a CRM. Communicating 100% dependency on incentives on the sales team's CRM feed and creating an incentive program that pulls data from only the CRM increases its usage/adoption radically.

 

7. Seasonal or Time-Based Incentive Programs

Businesses may have seasonality during the month or during the year. To evenly spread the business volumes - Time-based incentive programs are launched.

Seasonal incentive programs are also rolled-out during business spike season. This makes users go the extra mile when the market is most potential.

A typical hierarchy based program could either be a KPI based with special targets applicable for the time period. (These could be dip season targets that are lower than a normal period target and festive targets that are higher than the normal period targets.)

8. PIP (Performance Improvement Programs)

There are users who either are not competent or are not willing to deliver/sell. It's important to churn those users objectively. PIP programs (or next 30 day plans) are configured based on the past performance of users. The output of which is considered for retention.

Setting up a PIP incentive Program:

Step 1: The first step is to identify the KPIs that the user needs to complete in the next 30 days to be allowed to be retained.

Step 2: The objective of the PIP program is to help retail team members and develop them to become better performers. You need to identify the lower rung of performances of KPIs of the rest of the team during the past period. The target for the PIP KPIs need to be set as this minimum performance. Split these targets into 4 intermediary targets (typically one for each week)

Step 3: Go on to create milestones for every group of PIP KPIs

Step 4: Offer badges at every milestone and if the budget allows a reward.

A typical incentive program for an example ‘Rising Star’ PIP will look like below:

End Goal: Performance improvement

Program Name: Rising Star

PIPs KPIs: LMS module completion, PIP Target achievement

                                              
Milestones Reward
1 - LMS module completion 25% AND PIP Target achievement 25%Striker Badge, $10
2 - LMS module completion 25% AND PIP Target achievement 25%Fighter Badge, $10
3 - LMS module completion 25% AND PIP Target achievement 25%Power Badge, $10
4 - 2 - LMS module completion 25% AND PIP Target achievement 25%Winner Badge, $10

  

9. Team-Based Incentive Programs 

In order to bring a sense of togetherness as a team - team-based incentive programs are launched. These incentive programs are typically geographical or managerial-led.

A typical team based program could be a KPI based program with overall team targets broken into milestones.

10. Beat-The-Champion Incentive Programs 

To give a mega-boost to users - Beat-The-Champion of last month/quarter/year is launched. This influences users (especially middle and lower level performers) to get a self-push to achieve more and beat the champion.

Setting up a Beat-The-Champion incentive Program:

Step 1: The first step is to identify the list of champions (first 4 rank holders) and their respective ranks

Step 2: The objective of the Beat-The-Champion program is to help users beat the target achievements of these champions.

Step 3: Go on to create milestones for target achievements of each of the rank holders.

Step 4: Offer rewards at every milestone.

A typical incentive program for an example ‘Beat the Champion’ program will look like below:

End Goal: Performance improvement

Program Name: Beat the Champion

                                          
Milestones Reward
1 - Achievelast Bronze winner target of $10000$100
1 - Achievelast Bronze winner target of $11000$100
1 - Achievelast Bronze winner target of $12000$100
1 - Achievelast Bronze winner target of $13000$100


Like the article? Spread the word