How brands can increase sales using incentives for frontline sales people
By Zach Links|5 min read|Updated Dec 9, 2024
As a retail brand, you want to increase sales. But your frontline workers might not demonstrate a strong drive to make that happen.
It’s a classic problem of misaligned incentives.
For many frontline workers, their compensation isn’t structured to nurture a vested interest in the growth of the business. Worse still, there often isn’t a clear path for promotion or skills development.
The result is an industry-wide trend of low employee retention and productivity rates. Many brands experience annual turnover rates exceeding 50% for frontline workers.
While the problem of motivating frontline workers is thorny, there is a simple solution: sales incentives.
Sales incentives are a cost-efficient way to get teams of frontline workers to prioritize larger company goals — even those who see the job as a stepping stone to a career elsewhere.
For proof of the effectiveness of sales incentives, look no further than SparkPlug. The incentive software company has seen several of its clients achieve a 50x ROI on incentives in the form of increased sales and a reduction in quarterly turnover.
In this guide, we’ll explore:
The ROI of a good sales incentive program
How to build a sales incentive program that rewards frontline salespeople
Why gift cards are the most effective sales incentive
Common pitfalls to avoid when designing your sales incentive program
How to use Tremendous for sales incentives
The ROI of a good sales incentive program
Sales incentives increase productivity and profits across a number of industries. In some instances, sales incentives are more profitable than consumer promotions.
One example: a study of the effects of customer rebates and sales incentives in the auto industry found sales incentives improve a brand’s profits more than rebates.
That means motivated salespeople can make more money for your brand than customers tempted with a good deal.
The ROI of sales incentives are especially clear in the retail sector:
An exploratory investigation into the effectiveness of sales incentives for retail store managers determined they drive measurable results.
In the study, researchers found retail store managers who received sales incentives improved yearly profits by nearly $1 million.
Another 2022 study found performance-based incentives can increase retail employee productivity by 20%.
These findings make clear that a motivated frontline workforce translates to real bottom line impact. Engaged employees don’t just get more done – they generate greater profits for brands.
How to build a sales incentive program that rewards frontline salespeople
The nuts-and-bolts of standing up an incentive program are simple – more on that later.
But before you worry about how to send rewards, it’s important to spend some time considering what you want to get out of a sales incentive program, how you want to reward frontline workers, and how you’ll continue to iterate on the program.
Clearly define your business objectives
Consider the following questions:
What are your company-wide goals?
What key performance indicators (KPIs) will signal success?
Combined, the answers to these two questions will help to inform a sales incentive program that drives improvements along metrics most relevant to your business’s success.
Improving productivity or employee retention is important. But it may not be as important to your business as offloading seasonal inventory, or selling a high volume of a new product.
Aligning your sales incentive program with your company-wide goals and measuring progress consistently ensures:
The sales incentive program has meaningful & measurable ROI
Your team can adjust sales incentives & goals based on KPIs
Identify what motivates your sales reps
There are two considerations to keep in mind here:
The incentive structure that will be most effective for your workforce
The incentive type they respond to best.
Incentive program structure
Lower-level reps often respond better to intra-team competition while high-performing reps tend to prefer incentives based solely on individual performance.
An important note: It may seem reasonable to offer both individual and group-based incentives to ensure performers of all kinds are motivated to achieve ambitious goals. However, one study found layering multiple different incentive structures can actually degrade performance.
To avoid confusing or overwhelming employees, keep the incentive program simple and straightforward.
Incentive type
When deciding which incentives to include in your SPIF (Sales Performance Incentive Funds) program or larger incentive strategy, there are a couple of avenues you can take.
You can conduct a company or location-wide survey to find out what employees prefer, prompting them to fill in their preferred incentive or pick from a list of options.
Or, you can let them choose their incentive themselves.
With an incentives platform like Tremendous, sales reps and frontline workers can choose their incentive from a list of more than 2,000+ options.
Set clear, realistic, and attainable targets based on historical data
While stretch goals can be motivating, targets for sales incentives and SPIFs must be realistic and based on historical data. If targets feel unrealistic or out of reach, some employees may mentally count themselves out. Revisit past quarterly, monthly, or seasonal sales performance to identify reasonable targets.
Once you’ve decided on a target for the incentive program, make sure to unambiguously communicate both the expectations of the program and the reward (or tiered rewards) for achieving different levels of success toward each goal.
Conduct surveys or interviews to get feedback on the program
Schedule quarterly or bi-annual reviews of your program. Use feedback from your sales team — along with performance data — to make adjustments to your incentive program.
Consider using anonymous surveys to encourage honest feedback about the program's effectiveness, fairness, and impact on motivation. Ask specific questions about reward preferences, goal clarity, and any unintended consequences of the program.
Incorporate legal and ethical safeguards into your incentive structure
Be aware of tax regulations regarding incentives, such as reporting requirements for non-cash rewards exceeding $600 annually.
Consider ethical implications as well. For example, rewarding individual performance may result in a culture of unhealthy competition, where frontline workers feel a degree of resentment rather than appreciation for coworkers who go above and beyond.
Similarly, if the same few workers repeatedly dominate contests or win SPIF rewards over others, it may be time to adjust your incentive structure such that they’re more attainable for other employees apart from the handful of top-performers.
Group incentives can help to distribute rewards more evenly across the workforce. Brands can also incorporate additional incentives and methods for recognition that reward employees for things other than sales results.
Offering an incentive or public recognition to employees who demonstrate company values, like loyalty accountability, or a positive attitude, may help to keep people motivated who aren’t consistently winning results-driven contests and campaigns.
Leverage technology to streamline incentive distribution
Implement an incentives platform to automate reward distribution, provide real-time tracking, and ensure transparent reporting. Look for a solution that offers a wide range of digital reward options — from monetary transfers to gift cards — to delight every recipient.
The right platform allows recipients to easily redeem their rewards immediately. Choose a system that integrates with your existing tools for seamless data flow.
Why gift cards are the most effective sales incentive
Employees tend to prefer flexible rewards over traditional fixed rewards because they allow employees to select the incentives that best align with their individual preferences.
Money offers maximum fungibility, but cash isn’t king when it comes to sales incentives.
In a recent field experiment, researchers observed two consecutive sales tournaments held at the same company — one with cash rewards and one with tangible rewards like gift cards. The sales reps vying for gift cards significantly outperformed those competing for cash.
A University of Wisconsin study of Amazon Mechanical Turk (MTurk) workers yielded similar results — employees were more motivated by tangible $20 movie theater gift cards than direct $20 payouts.
Gift cards encourage employees to treat themselves to something special
People use gift cards to buy the things they want, rather than the things they need. Cash usually goes towards bills and other necessities, but gift cards are almost always used for fun purchases. In turn, gift cards feel like more of a reward — and a greater one at that.
Hedonistic rewards are inherently more exciting than utilitarian purchasing power.
Gift cards feel like an extra perk, rather than routine compensation
Gift cards stand out as separate from an employee's regular paycheck. Unlike cash bonuses that blend in with salary, gift cards are clearly distinct. This makes them feel more like a special bonus on top of normal pay.
Mental accounting theory supports this idea. Employees tend to categorize cash rewards in the same mental "account" as their salary, diminishing the perceived value.
Gift cards, however, are more likely to be placed in a separate mental category. This distinct framing can make gift cards feel more valuable and motivating, even if the monetary value is the same as a cash reward.
Common pitfalls to avoid
Here are the two biggest traps companies fall into when launching a sales incentive program, and how to avoid them.
Overcomplicating the incentive structure
Simple is better. When the criteria for earning rewards are too complex or involve numerous variables, team members may struggle to understand how to achieve their goals. It’s one of the reasons why offering both team-based and individual-based incentive programs at the same time is less effective than just choosing one program over another.
Keep the incentive structure simple, straightforward, and transparent.
Neglecting regular reviews
Neglecting regular reviews of the sales incentive program can result in outdated and ineffective incentives.
Market conditions, business goals, and employee performance levels change over time. So, too, should your incentive program structure and the size of the incentives you offer.
Conclusion
Sales incentives are a powerful tool for motivating frontline workers and driving measurable business results.
The key is to design a program with clear objectives, attainable targets, and rewards that truly excite your team.
How to use Tremendous for sales incentives
Tremendous enables you to give sales reps the gift of choice. With over 2,000 reward options — including popular gift cards, prepaid Visa cards, and monetary transfers — you can satisfy every employee's preference and ensure that they’re always getting the perfect incentive.
Plus, our rewards catalog covers over 200 countries and territories, so you can incentivize employees around the world.
With Tremendous, you can send thousands of incentives in minutes and track payouts in real-time. We handle all the logistics, from automated W9 collection to expert support for your recipients. Instead of fielding questions from sales reps, you can focus on strategies for continued growth.
Chat with our team today to learn more about how Tremendous can make your sales incentives program as easy and effective as possible.
Updated December 9, 2024
