Consider the following scenario: The senior sales management team at a mid-size company is pushing its sales team to drastically increase sales revenue for the final quarter of the year as they expand into a new market. To generate enthusiasm, the senior sales manager announced a potentially rewarding incentive plan for 4th quarter sales, though without explaining the details. At the end-of-year sales meeting, the salespeople who had met or surpassed their quota for the quarter were “rewarded” with a new Keurig coffee machine and a gift certificate to Starbucks. The sales team was not only left disillusioned with the outcome of the incentive package, but probably also made a mental note to distrust any future announcements of alleged compensation, incentives, and perks aimed at boosting sales revenue.
Unfortunately, many business leaders and sales managers do not truly understand the vital role that incentives and compensation can play in motivating a sales team. According to a 2021 Hubspot study, more than 40 percent of surveyed sales leaders missed revenue targets in 2020. Though this might have been attributed to the disruptions caused by COVID, another study found that 91 percent of sales teams were expected to miss quota in 2023.
Designing and implementing effective and instrumental compensation plans and incentives is one of the absolute best ways to motivate your team and scale sales. In this short article, we explain the connection between a motivated sales team and increased productivity, and outline a few strategies for motivating your sales team through incentives and compensation.
The Importance of Incentives and Compensation in Scaling Scales and Increasing Customer Loyalty
Salespeople are human beings, and like all humans, we do things that are advantageous for ourselves and our situation in life. An effective sales compensation and incentive project understands this basic motivation of human nature, and uses this motivational factor to encourage individual salespeople to boost their sales revenue. Beyond that, however, properly designed incentives and compensation are able to capture the intersection of what's best for the company, what's best for the salesperson, and also what is best for the client.
One of the biggest failures in the world of sales is that salespeople are incentivized to close deals at any and all cost, often at the expense of overlooking the future needs and wellbeing of the customer. If a salesperson is attempting to close a sale when he or she knows that what they are offering might not be the best solution for the customer, this obviously has serious repercussions for maintaining customer loyalty over the long run.
Recent data suggests that loyal customers are generally willing to spend 67 percent more than new buyers. Furthermore, increasing customer retention rates by just 5 percent can lead to a 25 percent to 95 percent increase in profits. If your sales team is focuses solely on generating an immediate sale to the detriment of maintaining long-term customer satisfaction and loyalty, the temporary boost in sales (or the meeting of a certain quarterly sales quota) might be misleading. As we´ve shown above, the best incentives and compensation plans are those that integrate what is best for the salesperson, the company, and the client or customer.
Bad deals for the customer ultimately result in a bad deal for the company. Even if a certain salesperson is meeting quota, if these sales are ultimately driving away customers and reducing customer loyalty, these sales actually act like a tax on the company. Incentives and compensation, then, should most certainly be focused on how sales are driving increased brand loyalty or helping to cement long-term client constancy.
The Connection between a Motivated Sales Team and Increased Productivity
There is no shortage of statistics and studies that prove that motivated employees are almost always going to boost their workplace productivity levels. When it comes to sales teams, well-designed incentives and compensation is one of the best ways to motivate a team and individual salespeople. Unfortunately, and despite the wealth of evidence showing how sales compensation and incentives can be a stimulus for more productivity for the team, a recent Bloomberg study found that employee engagement was at historically low levels with the majority of workers not highly engaged and thus harming productivity levels.
Motivation is a multiplier in the sense that it makes it easier for people to do their jobs. Salespeople are generally going to be successful at their job when they feel good about doing the work. Motivation essentially is about creating the conditions wherein a person can feel positive about their actions on the job, as well as creating expectations regarding the results of certain actions in the workplace. In this sense:
Motivation = The Expectation or the Prediction of Success.
When designed optimally, incentives and compensation for salespeople allows a clarity regarding how they can improve their standing in the company, their own financial/economic rewards, as well as opportunities for further personal and professional growth. In the best case scenario, incentives and compensation should also be designed in ways wherein salespeople feel convinced about the integrity of what they are offering to the customer as well as being aligned with the long-term success and stability of the company. This arrangement offers the best possibilities for mutual benefit between the customer, the salesperson, and the company wherein increased productivity keeps the salesperson motivated, generates long-term customer loyalty, and increases revenue and sales that help the company achieve its growth targets.
Individual and Team-Based Incentives and Compensation
Obviously, incentives and compensation can be both personal/individual and team-based. In both situations, it is important to understand that sales teams and individuals are motivated by a mixture of a fear of loss and the opportunity to gain something. This is the famous carrot and stick dichotomy. The best run sales teams are able to walk the fine line between both of these opposite motivational factors.
In the case of individual incentives and compensation for the salesperson, it is important to understand that most people who are drawn into the world of sales have financial motivations for being there. Most salespeople view themselves as high achievers and believe that they have the ability to control their own destiny. Given these characteristics and personality traits of most salespeople, individual incentive and compensation obviously need to be designed in a way that rewards behavior that that leads to sales and good sales behavior which leads to long-term deals and increased customer satisfaction/loyalty. Ideally, as stated above, these compensation and incentives need to be focused on rewarding good deals for the company, a good purchase for the customer, and a good deal for the salesperson.
In the case of team-based incentives and compensation, regular (often weekly) public meetings with the sales team is one of the best ways to increase motivation and a healthy sense of competition. In every workplace environment, it is important for salespeople to look good in front of our peers. When individual quota targets are publicly revealed and discussed amongst the sales team, this creates an increased motivation for salespeople to put in the extra work to land the sales and deals that push them to the top of the class.
It is important that this competition not be toxic or predatory, but rather create a healthy sense of pressure that comes with clearly knowing what everybody on the team's quotas are and where they are in their accomplishment of those quotas. What really moves sales meetings forward and what helps salespeople accomplish their quotas and keeps them motivated are team-based incentives and compensation that helps the team prioritize the most important deals that exist at the intersection of what's best for the company, the customer, and the salesperson.
Conclusion
A motivated sales team is perhaps the most important factor in helping to find customers, drive sales revenue, and help the company sustain long-term growth. Designing and implementing individual and team-based incentives and compensation is an essential part of motivating your sales team and thus increasing productivity that benefits both the company, the customer, and the salesperson. Reach out to us today so we can help you grow!
