Article: Creating a sales incentive that works over time

Compensation & Benefits

Creating a sales incentive that works over time

A well built sales incentive plan, along with a well-defined sales strategy, can help you achieve challenging targets even in today's scenario

A sales incentive is a mere instrument of motivation, not everything you need to know about motivation


No better time than a recession to take stock and look at things in perspective. Time now to relook at what a sales incentive should and can do


A well built sales incentive plan, along with a well-defined sales strategy, can help you achieve challenging targets even in today’s scenario.

The India launch of the alkaline battery was on. The market was not as ready as the marketing team. Poor first results pointed, as normally they do, to the sales force not giving the new line of batteries enough priority. A massive sales incentive plan was announced and to hype the retailers’ mood a very attractive sales promotion was planned. Buy 8 cases of Alkaline batteries and win a color TV.

About seven months later I was visiting the shops in Nehru Place, New Delhi. The sales person took me to a little retail store that had participated in the Alkaline sales promotion. The complaint: the retailer was yet to pay for the stocks he had taken under the TV promotion scheme. I walked in to find Alkaline batteries displayed all over the store. The retailer claimed that he had barely sold 75 pieces of the 8000 odd pieces he had bought. As it was obviously an outlet with little potential for high- end batteries, it was arranged to take back the stock. The retailer claimed he was unable to return the TV as it was given to his son-in-law! Better to get back the stock and cut the losses.

All that was fine till I returned 3 months later and found the little store stuffed again with Alkaline batteries. It appears there was now a scheme where you got a microwave for buying a lot of batteries! The power of incentives!
The Sales Manager understands that he deals with people who work, for the most time, unsupervised. How can he be sure the employee is really at work and not goofing off? How can anyone be sure that the last possible sale is really chased and converted to the order-book?

A Sales Incentive Scheme that makes sure?

Management is discovering, to its dismay, that all is not well where the sales incentive is concerned. Motivation that was considered automatic, failed to present itself. Often it is the source of employee discontent.
With the downturn and recessionary conditions abounding, many companies are having to over ride established ‘Sales-incentive’ schemes. Sales people are wary of the fine print that covers all such plans. More often they want to be assured of “take home” without the performance award scheme. What is the real problem in Incentive Land?
“A sales incentive is a mere instrument of motivation, not everything you need to know about motivation” says Ramesh Mani, CEO of Focus Brands. Ramesh should know as he has set up sales teams and has been one of the main brand builders especially in the launch of organized marketing of Scotch in India. He will be honored in Edinburgh this May as one of the prime founders of Scotch brands in India. “A poor work culture and indifference to other aspects of motivation can kill whatever little, a reasonable Sales Incentive Scheme can do for motivation”.

Sales Incentive Over time

In the Seventies, there was even a little resentment if money was blatantly waved before the sales force. And this was from the sales team themselves. Managers felt that their competence in being good team leaders was in question if sales incentives were resorted to. As India became increasingly competitive, the Eighties gave way to team contests in sales, where motivation came from being a part of the branch team. Many tales of valor are recounted by sales veterans as they slayed impossible ‘Target Dragons‘to keep their branch flag flying.
The Eighties saw the emphasis on the individual and the team. Sales force contests tried to give the devil his due while singing the praises of the platoon. The Nineties saw the pressure on sales teams build relentlessly and it became difficult to retain the Star Performer. It was the Age of The One. A time to let the jungle might of individual excellence alone be rewarded. To the Lion King went the spoils.
It seemed the right medicine for the wonder years. HR took note of the large amounts that went into Sales incentive budgets. Then came the magic formula - a remuneration plan could well include the possibility of performance payment of, at times, 60% to 80% of the salary. The heydays of the new century saw good times roll and it was clear that the performance pay was here to stay. For had it not spawned the Good Times? Or was it the other way around?
The trouble started with the bust of many miracle industries. The Dot com bust and the over- heated financial pressure cooker now burst the safety valves across the world. Suddenly, the ‘take home’ became the problem. The Salary was not enough.

Building a Sales Incentive Plan today

No better time than a recession to take stock and look at things in perspective. Time now to relook at what a sales incentive should really do and to understand what it cannot and, more correctly, should not be allowed to do.
Let’s look at what we need to build a good sales incentive:

Define Sales Values. This is the basis of all sales that one can plan in the future. Write down what is the extent we are ready to bend rules to get the sales results. This is easier said than done. If we do not write down how a serious breaking sales rule is, we will have nothing really to defend. All the sales team wants to know is how far the “Boss” goes before the blink comes.

Customer Satisfaction. These are two words so brutally assaulted during boom times by callous sales forces that had not the slightest regard for the spirit of such a calling. We need to work back from our commitment to the customer.
Create warning flares for excessive selling or “dumping”. This happens often when sales are made to distributors and money power of individual distributors creates market disturbances. Like shipping into weaker territories or States with sales tax differentials. Clarify what is great selling from dangerous selling. Incentive plans must curb such temptation using appropriate penalties.

Seek a balance between the need to spur the individual while keeping the team objectives and motivation intact. Often peer group pressure from a well designed team incentive has greater motivational pull.
Every challenging target must also clearly lay the ‘how- to’ path. A generous sales incentive plan without a strategy for achieving results is a blue print for disaster. Let not the Sales Incentive become the strategy.

The Most important trait: Make it memorable

Jayashree Mohanka, who has led sales teams in Eastern India for Titan, Nerollac and Eveready has this to say “In my experience, largely in a ‘base + incentive’ model, I’ve found that it doesn’t add much to motivation levels to keep increasing the money value of incentives. The best incentive plans are those that are unique, that generate excitement and give the salesperson something they would never experience on their own, even if the cash component of the incentive made it affordable. One successful plan was the Asian Paints’ first use of the ‘Palace on Wheels’.

A necessary aspect is the hype associated with the plan. What began to be called ‘the train scheme’ turned magical once they knew what ‘Palace on wheels’ was all about. Brand it; give it a catchy name, and see that the team’s adrenaline levels are kept pumped up by regular updates and standings. It can become a sort of Sports league in its intensity, without costing too much.”

With times getting tougher the need to work in a sensible sales incentive plan is very necessary. The more we can work out an exciting promotion, the greater is the feeling that the management cares enough. Within that lies the seed of true motivation. Sales incentives must be a part of the larger scheme of making sure that all motivation is essentially to make the sales person come out a winner. Not just lubrication to meeting targets. Once this is in line there are so many rewards of a well clicking sales promotion.

Just like the Asian paints Palace on Wheels gave unique experiences and had an unbelievable impact on sales, So did the Pune getaway. Years ago, well before Capt. Gopinath introduced the concept of ‘Simplify” travel by plane was akin to a ride to outer space. At least for a beat salesman who won this unbelievable Pune getaway with his new brideā€¦but getting there was to be by plane. No one in their extended family had ever travelled by air. Bombay –Pune flights were very early in the morning and relatives started coming to their Girgaum residence by 3.30 in the morning to partake in the Puja and to bid farewell to the couple at the Santa Cruz airport. A whole contingent left for the airport. It was only a 40 minutes flight and a weekend in Pune.

The memory untarnished, even today. Sales incentives plans that work should be memorable.

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Topics: Compensation & Benefits, Performance Management, Employee Engagement, #TotalRewards

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