Sales Incentives: What Are They and Why Sales Teams Need Them?

November 22, 2022

Have you ever noticed that some salespeople are more energetic than others? They have more energy and enthusiasm than their peers. 

Why is that? It could be because they are being offered sales incentives to work harder. 

That's right; giving your sales team sales incentives can motivate them to work harder and improve their performance.

In this article, we will talk about sales incentives and why you need them. 

What Are Sales Incentives, and Why do You Need Them?

Sales incentives are a way for your business to reward its employees for selling. You can use them in conjunction with other methods of rewarding employees, such as bonuses and commissions.

Sales incentives motivate employees to sell more and increase the overall sales volume within your company. For example, an employee who sells $1 million in products during a given year may receive a bonus of $10,000. 

But if the employee sells $1 million more than last year, they will receive an additional $15,000 bonus and stock options worth $15,000.

Sales incentives are also helpful because they motivate employees to sell more efficiently than without them. Suppose an employee knows you will reward them for sales volume regardless of how much money is made. 

In that case, they will probably take extra steps to ensure that every sale is profitable and leads to new customers for the company.

Here are some reasons why sales incentives can be so effective:

They Create a Sense of Urgency

Sales incentives reward employees for meeting performance goals or reaching sales quotas. They give employees a reason to work hard and focus on their tasks. This motivates them to sell more and get customers excited about your brand.

They Encourage Efficiency

Sales incentive programs motivate employees to work smarter, not harder. They offer a way for managers to shape employee behavior by rewarding those who do their jobs well while punishing those who don't live up to expectations.

They Improve Productivity

Sales incentive programs also help reduce turnover and increase productivity in your organization as you attract new talent from within or outside your organization.

Understand What Motivates People

To motivate your salespeople to achieve their goals, you need to understand what motivates them. Motivation is a complex topic, and it's easy to get confused by the many ways people can feel motivated. 

There are four basic types of motivation: intrinsic motivation, extrinsic motivation, social-peer pressure, and rewards.

Intrinsic motivation comes from within the individual; for example, when someone wants to do something because they find it enjoyable. 

Extrinsic motivation comes from outside the individual; for example, when someone is paid to do something or rewarded when they achieve specific goals. 

Social-peer pressure comes from others in the organization who influence an employee's decisions and actions by giving them positive or negative feedback on their actions and performance (or lack thereof). 

Rewards are tangible items recognized for achieving specific goals or completing tasks successfully.

It's important to understand these four types of motivation to offer your employees incentives that will motivate them most effectively!

Traditional Sales Incentive Schemes

Traditional sales incentive schemes use tangible rewards to motivate employees to sell more. 

So, an employee's compensation would be the base salary and variable pay based on the quota achieved. In this case, the employee is only rewarded if the goals are met. 

In the old model, you incentivized the sales force solely on quantifiable output rather than behavioral performance. 

It means you will only be rewarded if you achieve the said goal. No matter how hard you work, you will not get any incentives if you do not accomplish the quantifiable output!

This scheme was effective in some ways—for example, it motivated employees to work hard and be productive—but it was also very ineffective because it rewarded people only in the future. Incentives were a distant promise. 

How Have Modern Sales Incentive Programs Changed?

Sales incentive programs have changed significantly over the years. The first sales incentive programs were based on a simple concept: if you sell more, you get a higher commission. 

This was a straightforward concept, but it could have been more effective because it needed to reward salespeople fairly. 

The problem is that most of the programs you see in companies could be more effective. They need to be simplified and provide real value to the employee so they don't motivate them to work harder.

Sales incentive programs have changed from simple goal-based payouts to multi-tiered programs that reward performance and customer loyalty. 

Here are some ways that modern sales incentives differ from their predecessors:

  • Increased transparency and more focus on achievement.
  • More dynamic, allowing employees to control their rewards more flexibly.
  • Has an aspect of gamification that makes them fun, engaging, and enjoyable for employees to participate in.

Fundamentals Of Effective Sales Incentive Plans

Sales incentives are a powerful tool for motivating employees to perform at their best. When used correctly, they can increase sales, improve customer satisfaction, and reduce customer attrition. 

Sales incentive plans allow businesses to reward employees who have demonstrated their value to the company.Sales incentives are most effective when they are designed with the following characteristics:

Clear Goals and Easy Calculations

A sales incentive plan should include clear goals that motivate employees to achieve them. 

The goals should be measurable regarding the number of sales expected from each customer or the dollar amount each employee will earn.

In addition, bonuses should be based on actual performance rather than predicted performance, so there's no room for error.

Significant and Immediate Rewards

Employees know what's expected of them and their reward when they complete a goal — but they need to see how much they're worth not to lose motivation or interest in achieving those goals. 

This is why employers need to offer appropriate rewards immediately after completing a goal — otherwise, employees are not incentivized to continue working toward them!

Allows for Multiple Winners

The goal of any incentive plan is to allow employees to win to get them excited about selling your product or service. 

The best incentive plans allow for multiple winners; this makes it more likely that the employee will stay motivated and continue selling for your company. 

If there is only one winner, it becomes harder for employees to feel like they're winning because they know the person who was awarded the prize won the last time around.

Rewards for Specific Sales Activity

Employees love seeing tangible rewards for their hard work, so ensure you reward them based on how much money they generate from each sale. 

For example, if an employee made $10,000 in sales during a month but only received $500 as an award, it might make them feel their hard work needed to be recognized or appreciated more by management. 

Instead, give out awards based on specific performance metrics such as the number of new customers acquired, or the number of existing clients serviced per week or month.

Five Types of Sales Incentive Schemes

1. Role-Specific Incentives

Role-specific incentives are given to employees who perform a specific task. For example, if your company sells a digital product( like online courses), you would assume that the salesperson who sells more will get a higher salary than the other salespeople. 

But it is not true. There are different necessary roles in the complete sales process.

While one salesperson can visit educational institutions and promote your product and service, the inside sales team can handle calling new prospects. 

Everyone will have a different function in the sales process. 

That's why you have to come up with different incentives for every role.

This type of incentive scheme motivates employees by allowing them to show their abilities and earn more money for themselves and their employers.

2. Split Incentives

Split incentives are sometimes referred to as bonus pools, which refer to multiple bonuses distributed among different employees in a single distribution period, such as a month or quarter. 

The purpose of split bonuses is to encourage individual effort from employees who work together on a project or assignment. 

For example, you sell a project management tool to enterprises. But your salesperson needs to understand the product better. 

In that case, you can bring a project manager or developer to explain the product in detail. 

It helps the salesperson better understand the product, and you can share the incentives among the team. 

These incentives reward employees for their efforts instead of giving them all the rewards at once.

This can create an uneven playing field among employees since some may have better work ethics, and others might need to be more willing or able to work as hard as others on projects or assignments.

3. Presales Incentives

Presales incentives are typically offered when a new product or service is introduced. It can also be provided when the customer journey is a long one. 

These incentives encourage salespeople to generate leads early in the sales cycle, so they stay aware of deals progress through the pipeline later in the process.

A presales incentive plan helps ensure that the right people receive targeted benefits at all stages of the pipeline and gives them a reason to talk with prospects who may become future customers.

4. Omnichannel Incentives

Omnichannel incentives are when a sales rep uses digital technology to close more deals. It means a sales rep uses technology as an asset to increase sales. 

Omnichannel incentives are effectively a way to boost sales among your customers. You can align these incentives with digital and physical campaigns, targeting different customers at different stages of the purchase process. 

For example, if your sales rep wants to sell more products online, they could offer discounts for those who buy from your website or app. 

They could also offer free shipping on pre-order purchases or offers to buy additional products to reach a higher revenue. 

Success in sales will result from both digital channels and sales reps interacting. In this sales process, incentives are offered after the lead qualification stage.

5. Advanced-Analytics-Based Target Setting

Advanced analytics-based target setting offers more sophisticated approaches than other incentive schemes because it uses data analysis tools such as machine learning algorithms or predictive analytics tools to identify customer demand and behavior. 

Retailers can use this information to determine a sales incentive plan that rewards sales reps on metrics and value-driven behavior. 

Advanced analytics tools help you analyze data and create specific campaigns that can reach the right audience at the right time and predict your sales. 

When setting up an advanced-analytics-based target-setting campaign, it is vital to remember that not all data sources are equal when creating predictive models. 

Some sources may be more accurate than others because they include more relevant information about past behavior (e.g., purchase history).

So make sure your incentives are based on quality work rather than the quantity of work your sales reps do. 

Sales Incentives Examples (Real-Life)

English Blinds

English Blinds is a company that uses cold hard cash as an incentive. But how do they prevent rivalries from happening in the sales team?

They keep their incentives small and cumulative. It means that the rewards will not overwhelm the others, but the sales rep is receiving it will value it in the long run!


Nifty offered neat incentives to its clients. The ones who were using other project management tools not only got credits but annual contracts.

Jeffrey Kegan, Chief Revenue Officer at Nifty, said this helped them get new business without affecting their current subscription. 

Better Proposals

Better proposals offered fantastic incentives to its affiliates. They received double the commission for a limited period and also a special gift along with it. 

Petra Odak, Chief Marketing Officer at BetterProposals, shared that limiting the promotion offer encouraged affiliates to work harder in that limited time to get the benefits.  

How to Motivate Different Sales Representatives

Star Performers: Standard Incentive Plans

Star performers are the top performers in your organization. They have been performing well for a long time, and you have high expectations for them. 

You can use traditional incentive plans like trips, cash, and recognition at the annual meeting to motivate them. 

You can set up a tried and tested incentive program so your top performers can get used to it. 

Better to have no caps on their commissions because these are the players that bring you the most profit; best to keep them satisfied. 

Core Performers: Tiered Incentive Plan

A tiered incentive plan uses different levels of performance to determine the size of payouts

  • Tier 1: Incentives should be based on sales levels that are easy to achieve. 
  • Tier 2: Incentives should be based on sales levels that are harder to achieve, and only some performers can get them.  
  • Tier 3: Incentives should be based on sales goals expected from your top performers. 

Laggards: ‘Carrot And Stick’ Plans

Companies typically use carrot-and-stick plans with low-performing salespeople who want to motivate them to improve productivity. 

These plans are typically structured as bonuses or punishments based on individual performance metrics, such as closing rates or the number of deals closed per month.

3 Big Mistakes to Avoid When Launching a Sales Incentive Plan

No Input from The Team

When launching a sales incentive plan, it is vital to have input from all team members. 

This includes everyone involved in the program, including sales reps, managers, and executives. 

It's also essential to ensure everyone understands what the plan is supposed to accomplish and how you will implement it.

Having a One-Size-Fits-All Incentive Plan

Each individual must have a specific incentive goal aligned with their performance metrics. 

Even if your company already has a sales incentive plan, it's important to keep looking for ways to improve it for yourself and your team members. 

A good example would be adjusting how often the bonus is paid out or whether it's based on actual sales or profits instead of just gross profit figures (which can be rough on small businesses). 

Consider adding more flexibility to the rewards.

Allowing for Only One Winner

It is vital to have multiple winners because no one person can win everything all the time. 

Suppose someone needs to perform better for an award or promotion but is still motivated enough to perform better. 

In that case, you should still reward them by being added as a runner-up for something else instead of losing out entirely on.

8 Ideas for Sales Incentive Programs

Incentive programs are an effective way to motivate employees and keep them excited about their work. 

They can also be a great way to increase sales, increase brand recognition, or reward employees for a job well done.

Here are eight ideas for sales incentive programs:

A Billboard

Consider a billboard on your company's headquarters campus or at a major intersection.A billboard is an effective way to catch people's attention; if you have a large enough budget, you can afford to pay for it. 

You can also use billboards to promote local events or your company's products.When you can afford a billboard, you should try organizing a contest. It can be a perfect incentive for your employees. 

Anyone who comes up with the best billboard idea will win the contest and get featured on the billboard. 

It is better if their idea is used on the billboard! It is an incentive that not only does your brand good but also encourages your sales reps to be creative.

Special Wardrobe Pieces

If your employees have worked hard on their sales goals, why not reward them with unique wardrobe pieces? 

This could be anything from t-shirts with slogans like "I need more sales!" to jerseys displaying your company name and logo to hats with slogans like "Get out there and sell!" 

If you want something more elaborate, consider creating themed clothing that represents specific that the sales reps have achieved. 

Unique clothing for salespeople — like t-shirts and jackets with your logo — will help them stand out among other employees. 

This will make them more visible and more desirable as a candidate for promotions.

More Time In The Limelight

A sales incentive program is a great way to reward employees for their hard work and dedication. 

But what if you could increase that amount of time in the limelight? That's exactly what some companies do with sales incentives. 

By offering extra company perks, like free tickets to a special event or a day off to spend with family, you can motivate employees to sell more and stay loyal to your brand.

Try to focus more on them so they know their work is getting noticed. 

An Extra PTO Day

Paid time off (PTO) is one of the most powerful tools available to managers. It gives employees time off without having to devise an excuse for why they're not working, which frees up valuable time for them and their employers.

But instead of offering just one day off every six months, why not provide an extra day once every month? 

This way, you'll show your employees that you care about them and their needs.

Almost-Impossible-To-Get Tickets To A Special Event

This is a great idea when you want to reward your best performers in the company. The only problem is, who gets the tickets? 

It can be anyone who makes more sales than anyone in that month or has worked for the company a long time. 

You could get them tickets for this Fifa World cup or their favorite Premiere league team matches. It can also be concert tickets for any renowned artist!

Hard-to-come-by tickets are a great reward because sales reps would work hard to get those tickets, encouraging healthy competition.

Provide VIP Parking for The Month

Many companies offer their best employees the chance to park in a parking area reserved just for them. 

This might be reserved for those who have achieved sales goals, or it could just mean giving the employee's car a spot next to the head of HR. 

Either way, it's something that makes employees feel special and appreciated.

Lunch with The Executives

One of the best things about working at a company is getting to know its top executives — especially when they're willing to take time out of their busy schedules to meet with your sales team!

If someone from HR or finance can arrange this meeting, consider having executives come in and eat lunch with them instead. It will be just as rewarding for everyone involved!

Family-Oriented Incentives

If you want to motivate your sales force, consider using incentives tied to family-oriented activities. 

This is a great way to drive sales and retain your best employees.A family-oriented incentive will keep your employees excited. 

The idea is to tie a reward to the employee's family, whether with a vacation, a gift card, or an event. 

You can do this in many ways, such as offering a free night at the hotel if they take their spouse out for a nice dinner.

FAQs: Sales Incentives

What are the 3 types of incentives?

There are five sales incentive types: role-specific, split, presales, omnichannel, and Advanced analytics-based target setting. But to generalize, there are three types of incentives: economic, social, and moral. 

What do you mean by sales incentive?

Sales incentives are rewards set by a company to encourage salespeople to perform better. An incentive is a reward to an employee who achieves the set goals. 

Are sales incentives effective?

Sales incentives are effective when offered correctly. Ensure you provide the proper incentives to a sales team, or it will need to be more encouraging. 

Moreover, sometimes incentives can cause friction among the sales team, as it may lead to unhealthy competition and chaos. 

Conclusion: Sales Incentives

Sales are an integral part of business; if you want to keep up with the competition, you must invest in your sales force. 

Different sales incentives can uplift your business's performance in this field. 

Making the right choice is crucial, and before implementing any incentive program, you should carefully analyze the needs of your sales team and the market in which you compete.

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