How to Make a Sales Incentive Plan that Motivates Team

Are you struggling to motivate your sales team to reach their targets? Does it feel like you’re putting all your effort into not getting the target results yet? If so, implementing an effective sales incentive program with the help of the right solution providers may change the scenario for you.

Now, you might think, how does an incentive plan help increase sales? The answer lies in the mutual benefits it offers to both your company and your employees. For businesses, a strong incentive plan can boost sales and increase productivity. Conversely, employees benefit from monetary and non-monetary incentive programs.

In this blog, we’ll dive into how you can create an incentive plan specifically targeted for the sales team. We’ll also discuss the type of incentive plans you can integrate. So, with no further ado, let’s start!

What is a Sales Incentive Plan?

A sales incentive plan is a structured program that rewards sales representatives for achieving specific performance goals. It’s a strategic tool used by businesses to motivate their sales teams, increase sales revenue, and improve overall sales productivity.

These plans often involve offering financial incentives like bonuses, commissions, or other employee rewards to one’s who meet sales targets. The goal is to align the interests of the sales team with the company’s objectives. That encourages them to work harder and smarter to achieve desired results.

The core elements of a Sales Incentive Plan include:

• Defined Objectives: Clear sales targets or metrics that align with broader business goals.
• Eligibility Criteria: Specific rules on who qualifies for the incentives (sales reps, teams, managers, etc.).
• Incentive Structure: Details of the rewards, such as commission rates, bonus percentages, or other forms of compensation.
• Performance Metrics: Key performance indicators (KPIs) that determine success, like sales revenue, volume, profitability, or customer satisfaction.
• Time Frame: A set period for achieving the targets, which can range from monthly or quarterly goals to yearly objectives.

By implementing customized incentive strategies, you can motivate sales teams and increase productivity.

Types of Sales Incentive Plans

Sales incentive plans come in various forms, each designed to motivate and reward salespeople based on different performance metrics. Below are the main types of sales incentive plans:

Commission-Based Plan

A commission-based plan offers salespeople a direct financial reward tied to their individual sales performance. This structure provides a strong incentive to close deals, as higher sales result in higher earnings. This plan benefits organizations by motivating sales representatives to focus on driving revenue, which can lead to significant growth in sales.

It aligns personal goals with the company’s objectives, ensuring that salespeople put in extra effort to maximize profits. Additionally, since commissions are variable, companies can keep fixed costs lower during slower sales periods.

Bonus Plans

Bonus plans are effective in driving short-term sales growth and pushing sales teams to meet or exceed targets. These plans reward individuals or teams for hitting certain milestones, such as reaching quarterly or yearly revenue goals.

Bonuses can enhance motivation, especially when tied to specific high-priority targets. For salespeople, bonuses provide an extra source of income on top of their base salary. That helps them to keep morale high and encourages continuous performance improvements.

Team-Based Incentives

Team-based incentives promote collaboration and cooperation among sales team members. Instead of just focusing on individual performance, these plans reward collective achievements. That fosters a supportive environment where team members work together to meet goals.

This is particularly useful in environments where cross-functional efforts are required to close deals. It also creates a sense of unity within the team, as success is shared, which can help build a more cohesive and effective sales force.​

Product-Specific Incentives (SPIFFs)

Product-specific incentives, or SPIFFs, are short-term programs that reward salespeople for selling specific products or services. These plans are particularly beneficial for driving the promotion of new or underperforming products.

By offering extra incentives for specific items, companies can ensure that sales representatives prioritize these products during client interactions. That could lead to a boost in sales where it’s most needed. This approach is good for managing product portfolios and ensuring balanced sales.

Non-Monetary Incentives

Non-monetary incentives focus on rewards that are not financial in nature, such as recognition or sponsored incentive group travel. These incentives enhance the motivations of salespeople, such as personal growth, professional recognition, or work-life balance.

These incentives can help build a positive company culture and foster long-term loyalty among employees. By offering incentives beyond just financial rewards, companies can create a well-rounded incentive program that contributes to overall job satisfaction.​

Analytics-Based Incentives

Analytics-based incentive plans use data-driven metrics, such as conversion rates and lead-to-sale ratios, to determine rewards. This approach aligns rewards with measurable performance indicators, helping to identify top performers based on criteria.

This plan ensures that incentives are tied to behaviors and outcomes that drive business growth. That provides clarity and transparency in how sales performance is evaluated among the employees.​

By choosing the right mix of these plans, you can have the best incentive plan that meets the sales target and motivates the sales team.

Monetary vs Non-Monetary Sales Incentives Ideas

Monetary Sales Incentives	Non-Monetary Sales Incentives
Commission: A percentage of sales earned by the salesperson based on their performance.	Recognition Awards: Public acknowledgment such as “Salesperson of the Month” or “Employee of the Year” awards.
Bonuses: Additional financial rewards for hitting or exceeding sales targets.	Career Development Opportunities: Training, mentorship, or educational programs to help personal growth.
Profit-Sharing: A portion of the company’s profits distributed to the sales team, fostering ownership in company success.	Flexible Work Hours: The ability to choose work hours, offering better work-life balance.
Stock Options: Offering shares or stock options as part of the reward system to provide long-term financial gain.	Team Outings/Events: Group events, such as dinners, trips, or team-building activities.
SPIFFs (Short-Term Bonuses): Quick financial rewards for achieving specific short-term objectives, such as selling a new product.	Recognition on Company Platforms: Featuring high-performing employees on newsletters, social media, or internal channels.
Raises: Permanent increases in salary tied to consistent performance improvement.	Health and Wellness Programs: Access to gym memberships, wellness coaching, or stress-relief programs.
Expense Coverage: Covering additional business expenses like travel, accommodation, or meals for top performers.	Job Title Promotions: Advancing the salesperson’s job title or role for outstanding achievements.

How to Create a Sales Incentive Plan?

Creating a sales incentive plan requires careful planning to ensure it aligns with business objectives and motivates sales teams. Here’s a step-by-step guide to help you design an effective incentive program:

Step 1: Define Business Goals

Before creating a sales incentive plan, it’s essential to identify the business objectives that the plan will support. These goals could be increasing overall sales, improving customer retention, launching a new product, or expanding into new markets. Clearly defined goals will help structure the entire plan around driving performance toward these outcomes.

Step 2: Understand the Sales Team’s Motivations

Understanding what motivates your sales team is crucial for designing an effective incentive plan. Monetary rewards such as commissions and bonuses are common motivators. Conversely, non-monetary rewards like recognition, professional development, or flexible work arrangements can also be good loyalty rewards.

Step 3: Set Measurable and Attainable Targets

A good sales incentive plan should include clear, measurable targets that are challenging yet achievable. Targets should align with overall business goals and be based on metrics such as revenue generation or sales volume. To maintain motivation, ensure that the targets are realistic and segmented for different levels of performance.

Step 4: Determine the Incentives

Choose the right mix of monetary and non-monetary incentives to motivate your team. Common monetary rewards include commissions, bonuses, and profit-sharing. On the other hand, non-monetary rewards can range from recognition awards to career development opportunities. You can also consider hybrid models, such as offering both cash rewards and incentive travel.

Step 5: Choose the Right Type of Incentive Plan

Depending on your business structure and sales goals, select a type of incentive plan that best suits your team. Options include commission-based plans, team-based incentives, product-specific incentives (SPIFFs), and analytics-based plans. For example, a bonus plan may work well for achieving quarterly goals​.

Step 6: Establish a Payout Structure

Define how and when the incentives will be paid out. For commission-based plans, decide on the percentage and frequency (e.g., monthly, quarterly). For bonus-based plans, outline the specific milestones that need to be achieved to trigger the bonus. Make sure that your payout structure is transparent and clearly communicated to the team to avoid confusion.

Step 7: Implement a Tracking System

To ensure the effectiveness of the incentive plan, implement a system for tracking performance. Use tools such as Customer Relationship Management (CRM) systems to monitor how well the sales team is meeting their targets. Regularly reviewing performance allows you to design and understand which incentive plan is motivating the sales team.

Step 8: Communicate the Plan Clearly

Once the sales incentive programs are finalized, communicate it effectively to the sales team. Clearly explain how the plan works, what the targets are, and how the rewards will be distributed. Transparency is key, so ensure there is no confusion about how the plan is structured or how performance will be measured.

Step 9: Regularly Review and Adjust the Plan

Track the success of your sales incentive plan through regular performance reviews. If certain elements aren’t producing the desired results, adjust the targets or the custom incentives offered​. When you make adjustments, ensure to take feedback from the sales team to enhance the effectiveness of incentive programs.

By following these steps, you can create a sales incentive plan that not only motivates your team but also drives organizational growth. If you are looking to integrate such a plan, consider getting help from our incentive solution providers for effective results.

FAQs About Creating a Sales Incentive Plan

Final Thoughts

Creating a successful sales incentive plan requires careful planning, implementation, and ongoing evaluation. By following the above mentioned guideline, you can develop a plan that motivates your team, drives sales, and fosters a positive company culture.

To create an incentive plan, start by defining your business goal and understanding what motivates the sales team. After that, choose a type of plan, structure monetary incentive, and communicate it clearly to the employees.If you are looking to integrate such plans, get professional help from incentive and loyalty solution providers. They can effectively make an incentive plan that benefits your organization and the employees.