AMERICAN EXPRESS FORCE SUCCESS

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AMERICAN E XPRESS

USING EXTRA

INCENTIVES TO DRIVE SALES

FORCE SUCCESS

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AMERICAN E XPRESS

USING EXTRA INCENTIVES TO DRIVE SALES FORCE

SUCCESS

SALES INCENTIVE:

reward programs that foster desired sales behavior, such as collaboration, improved yield, better forecasting

— and higher sales, of course!

When she was managing a team selling exhibition space at business-to-business (B2B) trade shows, Ruthann Fisher became familiar with the falloff in productivity that begins around Thanksgiving and lasts through the end of the year. To combat it, she introduced an

incentive program with weekly payouts of a few hundred dollars for salespeople who sold the most space during those traditionally dead months.

It wasn’t a lot of money, but it drove a lot of sales activity and a lot of enthusiasm, says Fisher, now Director of Member

Programs at the Embedded Vision Alliance, an association that promotes the development of computer vision technology.

Fisher’s situation may be unusual, but the type of challenge she faced isn’t. Sales managers often run into problems when trying to get their people to do something new, whether it’s selling a product that’s been added to the portfolio or cutting down on the number and size of discounts they’re offering. Salespeople will often resist such initiatives because they distract from quarterly and annual selling objectives.

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The right kind of sweetener, however, can break through this resistance.

Incentives pique a salesperson’s competitive nature, especially when positioned as something above and beyond core compensation.

They have a psychological impact that is different from a bonus or commission that is integrated into a paycheck; it’s more about instant, and special, gratification.

Our interviews with sales managers and other incentive program specialists suggest the following four practices to maximize the value of your sales incentive program:

• Establish a clear plan with specific goals

• Communicate the plan effectively — and frequently

• Measure and share results often

• Incent with recognition as well as monetary pay

Set a Clear Goal

Before they ever talk to their HR departments about the details, good sales managers know exactly what they expect to get out of an

independent (or “out-of-comp”) incentive program. This enables them to put a simple rule structure in place. Common approaches include rewarding the salesperson who sells the most of a given product; who increases his or her “yield” (sales parlance related to profitability) by a threshold percentage; who meets or exceeds quota while sticking to an ideal product mix; or who improves forecasting accuracy.

A good plan is savvy about the level of reward that will be attention- getting. A survey focused on prepaid cards by the Incentive Research Foundation found that the highest proportion of awards to salespeople is in the $100 to $500 range.¹ Even at this level, awards can be effective in influencing behavior, sales managers say.

Incentives have a psychological impact that is different from a bonus or commission that is integrated into a paycheck;

it’s more about

instant, and

special,

gratification.

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Communicate the Plan Effectively

You can’t get the benefit you expect if salespeople don’t know a new program exists or don’t understand its underlying objective. “These plans need a lead time of at least two weeks before they begin — a month is better,” says Jason Adwin, Senior Vice President, Sibson

Consulting, which specializes in sales- force effectiveness. Training time is needed if the sales force is being asked to sell something it doesn’t know well — for example, a product added through an acquisition — or to change its behavior, such as collaborating with a different business unit.

Training, in this case, doesn’t always mean informing the sales force what they need to do to earn the extra incentive, which is typically straightforward. More often, training means helping the sales force become proficient in that new product it needs to sell, or internalize the new behavior it needs to adopt.

For instance, when he wanted to increase banner ads’ yield — the actual amount of revenue realized in selling them — media executive Jeff Strief knew he couldn’t just put a quarterly incentive in place and tell the sales staff to drive a harder bargain. He provided training for each salesperson in the art

of negotiation: what to say and how to hold your ground when clients ask for a price break. The incentive “was a way to say ‘Look guys, our

profitability is important, and what you do correlates closely to that,” says Strief, who has been a sales executive at several high-tech publishing and media companies and is now the president of RTP Capital Associates, a member-run angel investor network.

Source: Incentive Research Foundation survey of 75 organizations

(results pictured are of 45 organizations who answered this question).²

FIGURE 1:

PREPAID CARD AWARDS FOR SALESPEOPLE

Less than $25

$25 to $50

$51 to $100

$100 to $500 More than $500

40%

27%

18%

9%

6%

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Measure and Share Results

Independent incentive programs tend to be short in duration. Thus, it’s essential to generate excitement. Sibson Consulting’s Adwin recommends distributing the rewards at frequent intervals — every month, say, or even every week. “The payoff’s got to be quick,” Adwin says. “You should pay it out as soon as it’s done. You want that direct reinforcement and the Pavlovian aspect.” A survey of 500 business decision makers by marketing analytics firm Ebiquity (and sponsored by American Express) underscored the importance of fast payouts; frequency of recognition ranked high, second only to monetary value, in boosting

employees’ morale.³

If you’re paying rewards less frequently — say, quarterly — there are other ways to keep the program at the forefront of people’s minds. Turning the program into an ongoing contest with a leaderboard is one option.

Salespeople’s competitive nature is such that every one wants his or her name to appear at the top of the winner’s list, and would run through walls to not appear on the bottom of the list.

In his last sales management role at Ziff- Davis Enterprise, Strief used a combination of a leaderboard and lottery approach to drive forecasting accuracy of print

advertising buys from a roughly 50 percent plus-or-minus error six weeks before close to

only 10 percent. “Every time a sales team forecasted within the range we wanted, the salesperson and the account manager would earn tickets for the lottery. By the end of a month, we’d have 40 or 50 tickets in a hat and pick a winner, blind. They loved the recognition that came with earning the tickets, and they actually enjoyed the randomness of who finally won the reward card,” says Strief.

USING PREPAID REWARD CARDS FOR SALES INCENTIVES

Interviewees tell us that prepaid American Express® Reward Cards make excellent sales incentives because of their flexibility and inherent separation from core salespeople compensation. Salespeople increasingly want to decide for themselves how to spend the extra $100, $500, or $1,000 they’ve earned. Prepaid cards’ wide acceptance makes them as good as take home pay in that regard. But unlike take home pay, they aren’t deposited in an employee’s bank account, where they might end up being used for daily necessities – food, rent, mortgage payments. Instead, prepaid cards are more often spent on something special, which interviewees say makes the reward more memorable.

3 2015 Ebiquity Survey Results, Sponsored by American Express: The Business of Incentive Programs http://www4.ebiquity.com/Business-Incentives-2015-Amex-Survey

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Use Praise

In Addition to Pay

While the incentive itself is the most tangible way of saying thanks for doing something extra, sales executives shouldn’t underestimate the basking-in-the- spotlight factor. Talk about making someone’s day: The salesperson who wins an award not only gets the financial benefit; he or she also enjoys the pleasure of being singled out in a positive way.

Sales executives should capitalize on this extra psychological lift by taking pains to publicize the efforts their salespeople make on special initiatives. For Fisher, during her days of trying to juice sales in December, this meant middle-of-the-week emails indicating who had already sold how much floor space, and an end-of-week email saying who had come out on top. On the weekly emails announcing winners, she copied senior executives in her company, who would often follow up with their own congratulatory emails to the winners.

The office buzz helped. “Salespeople love public recognition,” Fisher says.

“We work harder if you’re appreciating our efforts. That little pat on the back goes a long way.”

Conclusion:

Win With Independent Incentives

When special circumstances arise or new sales behaviors are needed, a well- designed out-of-comp incentive plan can be a great solution. Follow these four practices — set a clear goal, communicate the rules and celebrate the winners, measure and share results often (and in progress), and use praise in addition to pay

— to create plans that drive the sales behaviors you’re looking for. ■

Four Essentials of a Sales

Incentive Program:

1

Identify desired sales behaviors that could make a real difference to business success

— not only increasing sales.

2

Communicate program rules clearly, consistently, and frequently to avoid misunderstanding.

3

Measure and share progress during the campaign to drive enthusiasm and participation.

4

Remember — praise can sometimes work as well as pay.