When designing a sales incentive plan, your goals typically include: - Limiting total spend to a reasonable amount
- Maximizing the effectiveness of your spend
- Ensuring that top performers feel recognized
- Ensuring that participants are challenged to reach for the next level (which should feel attainable)
- Ensuring that under-performers don't consume too much of your sales incentive budget
- Being able to clearly communicate with participants regarding their potential total compensation
We recommend the following:
- Define 4 attainment levels
- L1 is a baseline attainment level with a difficulty of "Trivial"
- No monetary rewards should be assigned at this level (you can learn more about why defining a baseline attainment level is useful here)
- L2 is an attainment level with a difficulty of "Easy"
- The threshold should be set so that the lowest 25% of participants reach this level
- L3 is an attainment level with a difficulty of "Standard"
- The threshold should be set so that another 50% of participants reach this level
- L4 is an attainment level with a difficulty of "Difficult"
- The threshold should be set so that the top 25% of participants reach this level
- Submit calculations (consider using simulation)
- Run reports to understand
- What your total spend would be
- Configure your plan to cap total spend
- This protects your plan from overspend scenarios
- You could let participants know that rewards will be re-adjusted if the budget is exceeded
Keep in mind that you may be able to increase the effectiveness of your plan using the following:
- Consider using profit instead of revenue to avoid overpaying for low-margin sales transactions
- Consider using scoring to boost certain sales behaviors (ex: promote the sales of new products)
- Consider using innovative approaches such as ranking or % increases instead of traditional quotas
- Consider creating personalized plans (ex: plans specifically designed for specific job titles or individuals)
- Consider non-monetary rewards (ex: announcements, badges, prizes) as a way to motivate and recognize participants