Sales incentive programs: how to set targets and rewards that work

A sales incentive program rewards people for selling more, or for selling the right things. It sits alongside commission and base pay, and it works best when it is aimed at something specific: a new product, a slow quarter, a range you want to grow or a behaviour you want more of.

The trouble is that many incentive programs are designed in a hurry. A target goes out by email, a prize is announced, the top performer wins and everyone else learns that the program was never meant for them. This guide covers how to design an incentive program that the whole team takes part in.

Know what incentives are for

Commission pays people for what they sell. A sales incentive program steers what they sell and how. Use it to:

Launch a product and get early sales moving.
Lift a range that is losing ground.
Fill a quiet period, such as the weeks after the end of the financial year.
Reward behaviours that lead to sales, such as booking demos, completing training or following up quotes.
Recognise people whose work does not show up in commission, such as account managers who keep customers renewing.

If you cannot say in one sentence what a program is for, it is not ready to launch.

Choose the right measure

Pick measures your team can influence and you can check. Good measures are:

Units sold of a target product.
Revenue from a range or a new customer segment.
Activities that lead to sales, such as meetings booked or quotes sent.
Growth on the same period last year.

Avoid measures people cannot see or control, such as company profit. Avoid measures that are easy to game, such as quotes sent with no follow-up, unless you also check quality. Our post on employee KPI measurement tools covers how to choose and track measures.

Set targets the whole team can reach

The biggest design decision is the target. A single target for everyone usually means the same top performers win every time, and the rest of the team stops trying.

Better options include:

Individual targets based on each person’s own history or territory.
Tiers, with a reward at each level, so more people earn something.
Growth targets that reward improvement, not just the biggest numbers.
Team targets alongside individual ones, so people help each other.

A useful rule of thumb is that most of the team should have a realistic chance of earning a reward, and the top tier should take real effort. If almost nobody reaches a reward, the target is wrong.

Pick rewards people care about

Cash is simple, but it often disappears into the household budget and is quickly forgotten. Many teams respond better to rewards they can choose and remember:

Points that build up and can be spent on gift cards or catalogue items.
Gift cards from retailers people already use.
Experiences, such as a dinner or a day out.
Recognition, such as a mention at a team meeting or a note from a senior leader.

Mix reward types if you can. Points and gift cards work well for frequent, smaller rewards. Bigger prizes suit the end of a challenge or a year. Whatever you choose, check how rewards are treated for tax with your accountant or tax adviser.

Run challenges, not just targets

A target that runs all year is easy to forget. Short challenges keep attention high:

Monthly or quarterly challenges on a specific product or activity.
Leaderboards that show where everyone stands, updated often.
Bonus periods with extra points for a few weeks.
Team against team challenges to build energy across offices or regions.

Leaderboards motivate people near the top and can discourage people near the bottom. Show people their own progress against their own target as well as the ranking, so everyone has something to chase.

Make the rules clear and the results visible

People take part in programs they trust. Trust comes from clear rules and visible results:

Publish the rules before the program starts and do not change them halfway through.
Show each person their progress all the time, not only at the end.
Explain how sales are counted, especially for shared deals.
Pay rewards soon after they are earned.

If sales are recorded in your own systems, feed that data into the program so progress updates without anyone typing it in. If not, let people lodge their sales with proof and approve them quickly.

Measure the return

Before launch, decide how you will judge the program:

Did sales of the target product or range rise compared with a normal period?
How many people earned at least one reward?
Did people who earned rewards keep performing after the program ended?
What did the rewards cost compared with the extra sales?

Report on this to sales leaders and finance. A program that cannot show its return will be cut in the next budget round. Our older post on the business benefits of employee incentives covers why the effort is worth it.

Common mistakes

One target for everyone, so most people give up early.
Rewards that arrive months late.
Too many measures at once, so nobody knows what to focus on.
Rules that change during the program.
No measure of return, so the program cannot defend its budget.

Putting it together

A sales incentive program works when it has a clear purpose, fair targets most people can reach, rewards they value, short challenges to keep attention and results everyone can see. Start with one product or one behaviour, measure the result and build from there.

RewardCo’s Incentives and KPIs module lets you set targets for people and teams, run challenges with leaderboards and reward approved results with points. You can send sales from your own systems through our points API, so progress updates without manual entry. If your salespeople work for dealers or resellers, see how channel and dealer programs are set up.

Ready to plan your next sales incentive? Book a demo.