Setting effective sales incentives and pay structures that motivate your sales reps can be the difference between hitting or missing your targets. This is something I wish I knew when I first started building our sales team. After a few years of experience, these are our hard-earned tips and incentives for ensuring the best performance from your sales force.
1. Set a goal — and a stretch goal. Set a goal and a stretch goal. Even after your team hits the goal, the stretch goal will keep the momentum going. Our stretch goal is 20 percent above our goal. Once you reach yours, celebrate with the entire team.
2. Implement commission tiers. We use accelerated commission tiers: the higher the sales, the higher the commission percentage. This encourages sales reps to always strive to bring in one more customer toward the end of the quota period and not to save the deal for the next quota period.
3. Reward your team. Set aside a percentage of new revenue each quarter toward a reward that the entire team gets to vote on, whether it be new company swag, a restaurant outing or new furniture. Incentivize your whole organization to root for and support your sales team.
4. Publicly display the numbers. In sales, it is typically out of sight, out of mind. To keep sales numbers at the top of mind, place sales dashboards on TV monitors around the office. Featuring each sales rep’s progress invites your non-sales teammates to congratulate reps who are doing well or share words of encouragement to those who are falling behind.
5. Throw in bonuses. Build in bonuses attached to specific results. For example, we prefer customers to pay for a year upfront, so we give our sales people a cash bonus for every annual upfront deal they bring in. We also give quarterly bonuses to reward sales reps who have a consecutively exceptional performance record.
6. Pay reps what the customer pays. To discourage use of discounts, our sales reps’ commission is based on what the customer actually pays. If our sales rep gives a customer a free month of service, the sales rep will not receive commission for the free month. If a customer cancels after 3 months, the sales rep only receives 3 months of commission for that sale. By doing this, your sales reps will never oversell, because their commission is also tied to how long the customer continues paying.
7. Pay reps after the customer pays. One of the most important lessons we learned in sales incentives is to pay a sales rep’s commission after the customer has paid. This ensures your sales reps are not pressuring customers to sign a contract that the customer never intends to pay. If a customer pays monthly for their software subscription, you should pay your sales rep monthly commission on that sale. A major benefit of this practice is that it keeps your company’s cash flow healthier.
8. Set up a commission timeline. Our sales reps receive a commission on the customer’s first-year payments. The only way to continue receiving a commission for that customer beyond the first year is if the customer upgrades to a higher paying tier. If the customer upgrades, the sales rep will receive a commission on the additional revenue from the customer for 12 months. We like to align our sales reps with our customers as closely as possible. When the customer is happy and continues upgrading their subscription, the sales rep is rewarded.
9. Be transparent. Finally, make sure your commission and bonus structure is understandable and transparent. Our sales reps can see exactly how their monthly commissions are calculated and they are able to view others’ commissions as well. Plus, reps find it incentivizing to see how the highest performing sales rep reached their large commission checks. Seeing all the deals and how they are calculated makes it real and demonstrates that it is achievable. This transparent system promotes trust and fairness in your organization and lets your sales team know that you believe in merit-based rewards.
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