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The Power Of Sales Incentives

Want to jump start sales? Try an incentive program.

Few management tools available to entrepreneurs can jump-start sales like a properly designed and administered incentive campaign. Why? These programs appeal to the most basic needs of salespeople--to compete, to be recognized, to have their ego stroked and to acquire stuff--the more, the better. In fact, an incentive campaign is as close to a sure thing as a business owner can get, if he or she follows some crucial guidelines:

1. Set a goal. Write down exactly what you want to accomplish. Beyond the obvious goal of creating more sales, other possible objectives include generating new accounts, launching new products, liquidating inventory and expanding into new territories.

2. Do the numbers. Define precisely what you want your sales force to accomplish in the manner that best fits the program, whether that's percentages, dollars, numbers of units, profits, new accounts or some other concrete measurement. To reach this number, consider everything from current business conditions and last year's sales for the same period to the ability--or better yet, potential--of your sales people. Intuition will play a part in this, but be careful--make the goals too difficult, and the incentive program becomes a stressful de-motivator, too easy, and you'll get little in return for what you shell out in gifts.

3. Set a budget. Budgets for incentive programs should fall between 2 and 10 percent of the projected sales increase; if you expect an additional $50,000, the budget should be in the $1,000 to 5,000 range. Obviously, you should include the cost of the incentive themselves, but don't forget other expenditures, such as promotion and administration. And be flexible. If the program works, you don't want to have to stop it because you only budgeted it to last six weeks.

4. Pick the right award. Awards fall into three categories--money, travel and merchandise--each with its own strength and weaknesses.

  • Money. Cash is good because, well, who doesn't like money? It's quick and convenient, there's no overhead involved in storing it, and no one will turn it down. The downside is it disappears into bank accounts, mutual funds or wherever. Unlike merchandise, there's no reminder to the salesperson about how your company acknowledged his or her accomplishment.
  • Travel. Bringing management and top salespeople together for a trip has the bonus possibility of building a great sense of camaraderie. Travel, however, isn't the right incentive for everyone; many people prefer to plan their own trips and choose their own destinations.
  • Merchandise. This works because people like getting stuff--but only if it's a good match. Demographically, the merchandise--electronics, sports equipment, jewelry or whatever--must fit your sales force. In other words, know thy salespeople.

5. Keep it short. Incentive programs work because they reward desired behavior. Generally, the quicker people get the reward, the more it reinforces the behavior. Stretch out the program so the reward is five or six months down the line, and your salespeople may lose interest.

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