Sales incentives: Everything you need to know
By Zach Links & Jessica Malnik|10 min read|Updated Aug 21, 2024
Quotas motivate sales reps to meet expectations. But sales incentives push them to go the extra mile.
One Fortune 500 company boosted total revenues by 32% by designing a new incentive program for its employees in an increasingly competitive market. Overwhelmingly, research shows sales incentives can improve employee performance by as much as 20%. They’re also proven to increase job satisfaction, employee motivation, and retention.
Of course, the effectiveness of sales incentives varies org by org. The structure and rewards of a sales incentive program range from an all-inclusive vacation for selling the most of a specific product, to a $50 gift card for booking a certain number of meetings.
In this guide, we’ll dive deep into how sales incentives work, the types of sales incentives companies can offer to their teams, and how to structure an effective sales incentive program.
Jump to the section you really care about:
What is a sales incentive?
A sales incentive is any reward given to a salesperson for achieving a goal or outcome, whether that’s upselling or closing the most deals on a team.
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.
Companies typically offer sales incentives in addition to the standard base pay and commission-based pay structure, rather than as a replacement.
There are several ways to structure a sales incentive program. Your sales incentive program will look different depending on your company goals and the preferences of your employees. Below, we’ll outline the most common and effective sales incentive options.
Types of sales incentives
There are two primary types of incentives: monetary and non-monetary.
Both have their benefits, but they’re most effective when used together. One study from Dublin Business School found a combination of rewards for employees, whether it be stacked monetary or non-monetary rewards, increases motivation the most.
Monetary incentives
Cash bonuses
Direct financial rewards such as cash bonuses and cash incentives provide a clear and immediate financial benefit by directly linking performance to earnings.
Cash bonuses can be issued to individual employees for achieving specific goals, or to all frontline workers at a certain retail location or facility as a group bonus.
One 2020 study by authors Salimi and della Torre found that group bonuses tend to be more effective at driving performance improvements for frontline workers than individual bonuses. However, both have a net positive effect. Individual bonuses are more cost effective, so they may make more sense as a tool for some brands.
Commissions
Commission-based incentives are a common component of many sales compensation plans. Commissions are designed to motivate salespeople by linking their earnings to performance against sales quotas.
In a commission-based incentive structure, salespeople receive a percentage of each sale they make, which connects their efforts and their income.
This ongoing incentive encourages consistent high performance. The connection between the incentive and the outcome couldn’t be more aligned: the more they sell, the more salespeople earn.
Like cash bonuses, this type of incentive is especially effective for roles where individual contributions significantly impact the overall success of the business. It also provides a straightforward and predictable earnings model.
SPIFs or sales campaign incentives
Sales Performance Incentive Funds (SPIFs) incentivize sales representatives to hit specific KPIs or quotas in a set period of time.
For example, an insurance company might run a SPIF campaign to boost homeowners policy sales during a slow period.
The program could run for two months and offer increasing rewards based on the number of new policies sold. For example: 5 new policies = $250, 10 new policies = $750, etc. The tiered structure motivates agents to push harder for more sales while the time limit creates a sense of urgency.
SPIFs can also be used to boost sales of new products, seasonal inventory, and high-margin items in a specific window. To put it another way: Commissions are the marathon of the sales world and SPIFs are the sprint.
A well-structured program can deliver serious results for your company. One study found that SPIFs can increase performance by as much as 44%.
Non-monetary incentives
Non-monetary incentives have several benefits when combined with monetary incentives. For one, they’re typically quite cost effective – public and private recognition, for example, is free.
Non-monetary incentives include any incentive that isn’t cash: exclusive trips, extra days off, tangible prizes, words of recognition, etc.
While money is a powerful motivator, it’s not the only type of validation people appreciate. In addition to receiving tangible rewards, people also respond well to feeling valued, special, or fulfilled.
For example, a cash bonus isn’t sufficient to create a sense of purpose and meaning for employees. Putting employees in a position to grow in their career or master their craft is a much better way to achieve this.
Recognition awards
Recognition awards are a simple but impactful way to make employees feel valued and help them find meaning in their work.
Public or private recognition and awards for exceeding expectations can go a long way in improving employee morale and job satisfaction.
It can be as simple as a thank you to a frontline worker in a company meeting, or delivering a top achiever award to the salesperson who sold the most in a month.
In most instances, recognizing employees is cost-free. And it can have a big impact: one study found that sending letters of appreciation to workers commending them for their hard work resulted in positive impacts on subjective wellbeing, belonging, intrinsic motivation, and a reduction in absence rates even months later.
Tangible prizes
Offering tangible prizes like gadgets, nice meals, or entertainment tickets can be an effective way to motivate employees without relying on direct monetary rewards. The most common way to incorporate prizes into a sales incentive structure is by including them as a reward in a SPIF campaign.
Including a tangible gift along with kind words of recognition or a small monetary incentive can make employees feel valued twice over – once when they receive the gift and recognition, and later when they’re enjoying the gift itself.
While tangible prizes are often cost effective, we conducted a survey in 2023 that showed employees vastly prefer money: 65% of surveyed employees across every sector from manufacturing to IT cited money as their top choice. Meanwhile, less than 3% want a tangible gift like branded company swag.
Career progression and development
Companies can also motivate employees by offering opportunities to earn a promotion. A study found that 94% of employees would stay at their company longer if it invested in their career development. This approach can be useful if you’re looking to retain your best in-house sales reps for the long haul.
Alternatively, employers who aren’t in a place to promote can offer sales reps opportunities to level up their skills via courses, workshops, or trade conferences.
These initiatives can increase the employee’s value to the company while fostering a more skilled and committed workforce.
Investing in career development has been proven to create a more engaged and loyal employee base with 34% higher retention rates for companies that offer access to employee training and development.
Wellness and lifestyle incentives
Wellness and lifestyle incentives, such as free gym memberships, corporate wellness programs, flexible working hours, and remote work options can also improve employee well-being and job satisfaction.
These incentives address employees' holistic needs, promote a healthy work-life balance, and reduce chronic absenteeism. One study found employee wellness programs encourage two out of every five workers to work harder and perform better.
Key differences between commissions vs SPIFs
There’s considerable overlap between sales incentives, SPIFs, and commissions. It’s easy to conflate the three.
‘Sales incentives’ is an umbrella term for any reward, monetary or non-monetary, given to salespeople for hitting certain goals. Commissions and SPIFs both fall under this category.
Commissions are a steady, reliable, permanent part of a salesperson’s compensation. With commissions, higher sales always translate to higher earnings.
SPIFs, on the other hand, are short-term incentive strategies designed to achieve specific, time-bound goals. They offer more flexibility and variety in both structure and rewards.
Unlike commissions, SPIF rewards can range from cash bonuses and gift cards to trips and public recognition. And, while commissions motivate individual performance, SPIFs can be structured to reward collaboration and group achievements.
Both incentive types have their place in a sales incentives strategy. Commissions will motivate your sales reps year-round. SPIFs will give them the extra push they need to meet end-of-quarter targets and close more deals during slow months.
Because SPIFs are time-bound and can include non-monetary incentives, they’re typically more cost-efficient than always-on commissions.
It’s also common to add a SPIF program to an incentive program that already includes commissions.
Let’s say an extended warranty company wants to motivate its frontline sales associates to sell more cell phone protection plans. Their standard model pays a 5% commission to reps for each warranty sold, but they want to encourage even more sales during the holiday season. The company could implement SPIF programs with different rules to drive progress toward specific goals.
| Sales incentive campaign goal | Campaign structure |
|---|---|
| Volume | For every 10 warranties sold in a month, the associate receives a $200 bonus. |
| Big-ticket item sales | Selling a warranty on any item priced over $500 earns an additional $60 Spiff. |
| New product sales | The company is launching coverage for smart home devices. Each smart home warranty sold earns a $100 Spiff for the first month of the program. |
| Team collaboration | The team that sells the most warranties (as a percentage of eligible sales) over the three-month period wins a catered lunch. And every team member gets a $50 Amazon gift card. |
This strategy motivates sales associates in multiple ways:
The base commission ensures ongoing warranty sales.
The volume Spiff encourages consistent effort each month.
The big-ticket Spiff focuses attention on more profitable items.
The new product Spiff drives adoption of the latest offering.
The team challenge fosters collaboration and friendly competition.
By layering Spiffs over the standard commission structure, the company can drive specific behaviors while maintaining long-term motivation for warranty sales.
How sales incentive programs can motivate your sales team
Sales incentives work. Their effectiveness is supported by several psychological theories, many clinical studies, and quantifiable results.
The incentive theory of motivation shows that behavior is mostly driven by external rewards rather than internal ambition or pressure. When it comes to sales, well-designed incentive programs can significantly influence employee behavior, encouraging them to put in extra effort to achieve sales targets.
Here’s a look at how companies have used sales incentives to increase sales, employee retention, and productivity.
More sales
When employees see a direct link between their performance and their compensation, they put in extra effort to meet or exceed sales targets. SparkPlug, a platform that rewards frontline workers, has seen the effectiveness of well-implemented incentives programs first-hand.
"Some of our customers have seen up to 5000% ROI on their investment in SPIFs and incentives,” said SparkPlug co-founder Jake Levin.
An effective sales program also creates a positive feedback loop. As employees achieve their targets and earn rewards, they become more engaged and motivated.
In fact, sales incentives can be more profitable than launching a consumer promotion.
One study found offering incentives to sales reps increased profits more than offering rebates on purchases to customers.
Increased employee retention
Sales incentive programs can significantly improve employee retention rates. SparkPlug’s incentive programs led to a 76% increase in overall employee satisfaction and a 33% reduction in employee turnover.
Reduced turnover provides several benefits:
Decreased hiring and training costs
Retention of institutional knowledge
Improved teamwork and productivity
When employees directly benefit from the company's growth, they're more likely to remain committed to their role and the organization's goals.
Improved sales team performance
Team-based incentives promote a healthy, positive level of peer pressure, leading to stronger sales. When one large retailer incentivized select teams with bonuses, every $100 spent resulted in $380 in new sales, netting a 210% return on investment.
SPIF programs can also help teams overcome sales plateaus. When sales teams become complacent or struggle to beat their numbers from last quarter, a sales incentive program can provide the extra motivation needed to break through and close more deals.
Sales incentives can also improve team dynamics by encouraging:
Knowledge sharing between team members
Intra-team competition, leading to higher performance
Ambitious goal-setting to reach the next incentive tier
10 ideas for sales incentives
There are a number of different ways to incentivize your team to do their best work.
Bear in mind that what works for one team may not work for another: the right sales incentive depends on your team's preferences and needs.
Physical gifts
Rewards aren’t a new concept. Since 1898, psychologists like Edward Thorndike have popularized principles like the Law of Effect, which theorizes that rewards strengthen desired behaviors.
Positive reinforcement strengthens the association between effort and reward, and increases the frequency of the rewarded behavior.
Conduct surveys at the start of the business quarter to learn what your sales representatives are interested in, whether it be electronics, kitchen gadgets, or artisan snacks. Think beyond standard branded swag.
Gift cards
Gift cards follow the same principles as physical gifts, but with an added benefit: recipients can choose the gift they want most.
In some instances, gift cards can be more motivational than cash rewards. One 2023 study found gift cards can increase performance more than cash rewards for the following reasons:
Hedonistic nature: Gift cards are more likely to be used to bring pleasure, while cash is more likely to be used for utilitarian purposes. As a result, gift cards are more likely to actually feel like a reward, since recipients are more likely to use them for something strictly fun rather than something like rent or groceries.
Novelty: Researchers found novelty is strongly associated with increased motivation.
Discrete framing: Cash incentives are cognitively framed with salary, while gift cards aren’t. In short, gift cards feel special.
While gift cards can be uniquely motivational when compared to cash in some instances, they can also fall flat.
Giving every employee the same gift card isn’t likely to go over well. People’s preferences vary. You’re more likely to please everyone when you give employees the opportunity to pick their own gift card.
Tremendous offers recipients more than 2,000+ incentive options, from Amazon and DoorDash gift cards to charitable donations.
When you send sales incentives with Tremendous, you don’t have to worry about saddling recipients with a gift card they won’t even use. Instead, you can let them pick what they actually want.
Employee recognition
When it comes to achieving goals, psychologists have identified four types of motivation:
Extrinsic motivation, which comes from receiving an external reward or gift for completing a goal.
Intrinsic motivation, which comes from the personal enjoyment of striving for and achieving a goal.
Introjected motivation, which comes from the desire to maintain a certain self-image from completing a goal.
Identified motivation, which comes from finding a goal personally important or meaningful.
Employee recognition is a type of sales incentive that capitalizes on all four motivation types. It allows salespeople to reap both internal and external rewards for positive performance, which can explain why employees who receive recognition are 20 times as likely to be engaged at work.
What may be surprising, however, is that the most effective employee recognition does not include a physical reward. Instead, Gallup research has found that, according to employees, the most impactful recognition comes directly from managers (28%) and high-level leaders or CEOs (24%). When asked which types of recognition were the most memorable, employees say:
Public recognition or acknowledgment via an award, certificate, or commendation
Private recognition from a boss, peer, or customer
Receiving or obtaining recognition for a high level of achievement through evaluations or reviews
Promotions or increases in scope of work or responsibility to show trust
Monetary rewards, such as a trip, prize, or pay increase
Experience-based rewards
Like gift cards, experience-based rewards work well as a sales incentive because they benefit from the novelty effect. Plus, they’re purely hedonistic rather than utilitarian.
But they also have an added benefit: employees who win are more likely to discuss their experience with coworkers, which can motivate others to strive to win sales contests in the future.
Professional development courses, coaching, and conferences
Human beings have several basic requirements to succeed in their personal and professional lives. American psychologist Abraham Maslow demonstrated this in Maslow’s Hierarchy of Needs, a motivational theory that suggests humans build upon basic physiological and safety needs to strive toward their ultimate potential.
In particular, he points out esteem and self-actualization needs.
Enter: professional development courses, coaching opportunities, and conferences.
These incentives allow salespeople to achieve a sense of personal achievement and mastery of a skill, as well as achieve higher status among their peers, boosting their self-esteem.
Professional development opportunities also cater to innate self-actualization needs, helping sales reps seek personal growth and self-fulfillment opportunities.
Likewise, offering complimentary professional development courses as an incentive for positive performance is a perk that benefits both employees and employers.
Salespeople have a chance to enhance their career development without paying for a coach, and employers can turbocharge their sales team with new skills that give them an edge over the competition.
Concerts and sporting event tickets
Concerts, sporting events, and other group activities help fuel camaraderie among team members that facilitates easier, more frequent collaboration on the sales floor and a better company culture.
Plus, these sales incentives cater to another innate human need: social belonging.
Social belonging is the basic emotional need for interpersonal relationships and community.
Just two in 10 U.S. employees say they feel connected to their organization’s culture. Offering sales teams a reward that fosters belonging in addition to acknowledging their achievements can help to meet this fundamental emotional need.
Charitable donations
Offering charitable donations as a sales incentive creates a link between individual and company values.
Studies show that when people donate to charitable causes, it activates reward pathways that release “feel-good neurotransmitters” like oxytocin and endorphins, boost self-esteem, and even lower stress hormones. Researchers call it “helpers high.”
These positive feelings can last for several weeks. Similar to the Law of Effect, once these pathways are activated, team members are more likely to repeat positive behaviors—like improving sales performance—to achieve that helper’s high again.
To make charitable donations a more attractive sales incentive, allow team members to select where the reward funds will go. This way, salespeople can support a cause that’s personally meaningful to them.
Wellness stipends and experiences
As it stands, 77% of employees report experiencing work-related stress in the last month, with another 31% reporting feeling emotionally exhausted due to work. Amid the high-stress environment of the sales floor, workplace stress often compounds for salespeople.
This can explain why 92% of employees say it’s very or somewhat important to them to work for an organization that values their emotional and psychological well-being. Wellness stipends and experiences can help, acting as sales incentives that demonstrate a commitment to better health.
Wellness stipends and healthy lifestyle experiences can take several shapes depending on your budget, including:
Monthly fitness memberships
Weekly workout classes
Biweekly chiropractor visits
Spa and massage packages
Meal delivery services
Mental health support
Travel stipends
While 80% of American adults plan to travel this year, 42% say price or value for money may be a limiting factor. Offering travel stipends as a sales incentive helps alleviate this concern.
Before rolling out incentive travel, reach out to various providers — like tour groups, charters, and even smaller cruise lines — to forge strategic partnerships.
This allows you to negotiate cheaper-than-public rates for your employees. If that’s not possible, you can also allocate a certain stipend to be gifted towards travel.
More PTO
In our 2023 study, surveyed American workers cited more PTO as one of their preferred employee rewards.
Employees in our survey ranked additional PTO higher than experiential rewards, including team dinners, wine tastings, or other curated events.
In the same way employees prefer to choose their own gift card, employees want to decide for themselves how they spend their free time.
For more sales incentive ideas, check out our list.
Tips for creating a sales incentive plan
There is no one-size-fits-all approach that will work for all companies. Use these building blocks to create a sales incentive plan that delivers results for your organization type and your employee’s preferences.
Clearly define your business objectives
Consider questions like:
What are your company-wide goals?
What targets are you aiming to hit?
What key performance indicators (KPIs) will signal success?
These questions will help to inform the type of incentive plan that makes the most sense for your current priorities.
For example, if you need to offload inventory fast, a SPIF program may make sense for your organization. On the other hand, if you’re struggling after several quarters of low revenue, a more long-term incentive structure, like a commission-based plan, might have the biggest impact.
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, and 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 tends to hurt more than it helps.
From the aforementioned study by Salimi and della Torre:
Interestingly, when both individual and collective [incentive] schemes are adopted, their association with firm innovation is significant but negative, indicating that the adoption of multiple pay incentives may be detrimental to SMEs’ innovation."
Salimi and della Toro
University of Trento & University of Bergamo researchers
To avoid confusing or overwhelming employees, keep the incentive program simple and straightforward.
Incentive type
When deciding which incentives to include in your SPIF program or larger incentive strategy, there are a couple of avenues you can take to identify what appeals most to your frontline workers.
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. The people who prefer cash can opt for a direct deposit or a Venmo payout, while the people who want free food delivery or a gift can pick a DoorDash or an Amazon gift card, for example.
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 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.
Design a flexible incentive plan that can adapt
Continuously evaluate your plan's performance and metrics. Be prepared to refine the plan over time to ensure it delivers the intended results.
For example, if your company launches a new product, you might adjust your incentive structure to temporarily offer larger rewards for new item sales. Once the new line is established, you can readjust the incentives back to a more balanced structure across all products.
Conduct surveys or interviews to gain valuable feedback
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.
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.
Tools and platforms for sales incentives
Managing and distributing sales incentives manually for large teams is impractical. It's time-consuming, error-prone, and hard to scale up.
Just picture the mountain of spreadsheets, endless data entry, and headaches that come with tracking who's earned what manually. That’s to say nothing of the time it takes to actually distribute the rewards. It amounts to hours or even days of administrative work that could otherwise be spent actually driving sales.
There are tools that make the whole process a lot smoother and faster. The following platforms help brands and store managers create sales incentive campaigns and send rewards to many employees quickly.
Tremendous
Tremendous makes sending sales incentives easy and fast. Our platform lets companies reward frontline workers with digital incentives instantly, whether you're sending to ten employees or 10,000.
We offer over 2,000 reward options across 200+ countries, so you can reward your international workforce, too.
The Tremendous dashboard also shows users everything they’ve sent and spent in one place, so tracking and reporting on sales incentives is a breeze.
Tremendous is free to use, and there are no fees for sending rewards.
SellPro
SellPro works with brands to gamify and incentivize product education for salespeople. Reps earn points, badges, and rewards for completing training courses. In turn, they’re better prepared to pitch customers and better equipped to achieve their KPIs.
Beyond sales incentives, the SellPro mobile app gives employees a streamlined view of key product info to help them while on the floor.
SparkPlug
SparkPlug enables brands and managers to quickly launch limited-time incentives programs for frontline teams. It also allows brands to track ROI and refine their incentive strategy via the sales analytics dashboard.
Plus, Sparkplug allows users to create customized sales contests and rewards that are tailored to specific products, teams, or individual sales goals.
The platform’s seamless rewards system is powered by Tremendous, enabling managers to distribute instant digital payouts to employees who meet their sales targets.
Common pitfalls to avoid
Sales incentives are extremely popular for a reason. They work when they’re implemented properly. Here are the two biggest traps companies fall into when launching a sales incentive program, and how to avoid them.
Overcomplicating the incentive structure
Your sales incentive plan should be simple to explain. When the criteria for earning rewards are too complex or involve numerous variables, team members often struggle to understand how to achieve their goals. This can lead to frustration and a lack of engagement with the program.
To avoid this, keep the incentive structure simple, straightforward, and transparent. Simplified incentive structures not only make it easier for employees to stay motivated, but also allow management to track progress and make adjustments more efficiently.
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 can change over time, so it’s essential to assess and review your incentives.
We recommend doing this quarterly. Without regular reviews, the program may fail to align with current objectives or address employee preferences.
These are just two examples of potential pitfalls to consider when designing a sales incentive program. For an in-depth look at how to ensure your sales incentive program is fair and ethical, check out our complete list of mistakes to avoid.
Conclusion
Sales incentives and SPIFs are essential strategies for driving sales performance and fostering a motivated, engaged workforce. In the vast majority of instances, a little goes a long way. A small reward of $50-$100 for meeting sales targets, along with a few words of recognition, can empower employees to do their best work.
If you’re interested in launching a sales incentive program for your sales reps or frontline workers, chat with our team. We’ve helped companies like AllState and Cargill incentivize and reward their teams for hitting sales targets and demonstrating long-term company loyalty.
FAQs
Published August 21, 2024
Updated August 21, 2024
