Traditional cash rewards are not always enough to motivate sales teams – incentives schemes that offer peer recognition can have a greater impact on sales performance. By Gary Eastwood
In Glengarry Glen Ross, the 1992 movie about selling real estate, actor Alec Baldwin steals the show with a six-minute appearance as a sales motivator brought in to help the struggling sales team.
“We’re adding a little something to this month’s sales contest,” his character “Blake” tells the team. “As you all know, first prize is a Cadillac Eldorado. Anybody interested in second prize? Well, it’s a set of steak knives. Oh, and third prize is â¦ you’re fired.”
Although the scene is played for humour, it is a situation that will make sales professionals everywhere wince in recognition.
In the cut-throat world of business, where sales targets are everything, motivational tools and incentives are used to push individuals that “extra mile”. The trick is knowing how and when to use them.
The most commonly used incentive tools are commission and bonuses, typically paid on top of a basic salary. These can be based on sales volumes or on sales that meet a specific business objective – such as attracting a coveted customer or selling a new product line.
However, these rewards are increasingly viewed by staff as a standard part of the overall remuneration package, and there are doubts about whether they still offer any motivational impact.
“Bonuses and commissions do have a motivational effect, but it’s very short-lived. The money goes into the pay packet and is immediately spent on everyday things, such as groceries and bills,” says Mike Davies, director of performance improvement at motivational consultant BI.
Caroline Meehan, sales and marketing director at Marriott Individual Incentives (MII) – which offers a range of travel and leisure vouchers for use as staff incentives – agrees: “As a sales director, I don’t consider bonuses and commission to be incentives, but part of the basic package. Incentives, on the other hand, are about pushing people to give that extra 10%. Sales staff expect commission, but incentives should be about rewarding extra effort and performance.”
While measuring the direct impact of an incentive campaign on the bottom line is often clouded by a number of factors, most agree that they can have a real impact. Anecdotal claims of doubling sales in a given period are rare, incentives can more realistically increase sales incrementally, help to create an environment that reduces staff churn, or be used to motivate staff during a new product push.
The motivational power of incentive schemes lies in the fact that they play on the competitive nature of the sales individual, acting as a very tangible and visible recognition of success.
As a result, sales professionals are prepared to push performance levels in order to gain the recognition of their peers and management.
“People who are attracted to a sales environment are naturally competitive, so not only do they like to be winners, they like to be seen by others as winners. So tangible and visible incentives are very valuable tools for affecting their performance – things like attendance at a ‘recognition’ event like an annual sales conference, the use of a Ferrari for a month, or even owning the latest iPod,” explains Rik Burrage, managing director at Grass Roots.
Davies agrees/ “Incentives, such as luxury goods and weekends away have a much stronger, ongoing motivational effect than commission and bonuses. They also have that ‘brag value’ – people are not likely to tell their colleagues how much is going into their pay packet, but they will brag about a three-day trip to Dubai they’ve just won.”
The key point is that incentives are offered as an alternative to cash. Research shows that, given the choice, most sales professionals will choose money when offered a choice of reward but, paradoxically, it is non-cash alternatives that have a much stronger impact on their performance.
“People will always choose money when given the choice, but ‘guilt-ridden’ incentives – those that an individual couldn’t normally justify spending money on – are much more effective in motivating sales teams. Rather than the logical part of the brain making the choice of ‘money’, these rewards act on the emotional side of the brain, and so exert a much more powerful influence,” says Davies.
An experiment performed by Mazda in the US, described by Davies, compared cash with non-cash rewards. A poll of 6,000 sales staff had shown that the majority would prefer a cash reward, so – to determine the motivational value of such a reward – the company set up rival schemes to compare the impact of cash and non-cash incentives.
Half of its 900 dealerships were enrolled in a cash-based incentive paying out around $75 (&£43) per sale, while the other half were offered a points-based incentive offering merchandise or travel rewards. Surprisingly, the cash group only increased sales performance by 2.13% above objective, compared to 15.7% for the non-cash group.
However, simply offering a non-cash “carrot” does not guarantee results. Incentive schemes need to be carefully structured so that they are tailored to the environment and individual, reward the right people and do not alienate less successful sales staff.
Sue Wright, managing director at staff motivation consultancy NKD Group, explains: “On most sales teams, people know that there are only three of the highest achievers that could possibly win the big annual prize. So in a sales force of 1,000, there’s no incentive for the other 997. A successful incentive campaign should make everyone feel that they have a chance of winning something.”
Jeremy Garbett, joint managing director at business performance agency Jack Morton, agrees: “In terms of the best way to motivate, companies should consider utilising both large and small rewards during the course of the year. High year-end targets appear all the more achievable if there is a series of rewarded steps helping incentivise staff along the way. It can also be beneficial to offer incentives to the ‘most improved’ sales staff, rather than just the top achievers. In this way you can encourage the more ‘middling’ staff, who often make up the bulk of the team.”
Points make prizes
Another factor ensuring “buy in” is to make sure that the prizes are interesting to the whole team – not everyone is motivated by the thought of winning a golf lesson with a seasoned pro. A “shopping list” or “points-make-prizes” approach can be more effective, whereby staff can either simply choose, or redeem points against a list of different rewards.
For example, a campaign run by staff incentives company Unmissable for VIP Computers offers monthly prizes throughout the year, including a London break for two, a year’s subscription to Sky Plus, shark diving, a year’s supply of beer, a supercar racing day and a weekend at the Golf Academy at Gleneagles.
Maintaining interest during more prolonged campaigns is also key to success. Communication is vital, and electronic technology offers a cheap and easy way to maintain excitement – and therefore motivation – levels.
“Websites and text messages can let people know how they’re getting on, who their competitors are, and keep them interested during a campaign. Regular text messages such as ‘Well done you’re in the lead’ or ‘Try harder, you’re currently third’ are particularly effective,” explains Burrage. “Likewise, ‘teaser’ campaigns can maintain interest levels, whereby the destination of a mystery prize trip is revealed over a period of time.”
In the end, though, all incentives and rewards boil down to the fact that they are a visible and tangible acknowledgement of an individual’s efforts by the management and peers.
“It’s a shame that ‘thank you’ is not standard practice, but a reward is a demonstration of that. A voucher has ‘trophy’ value, so it should be presented in front of the team with a ‘well done’. Or, if a long-serving member is rewarded with a plasma TV after five years of service, don’t just leave them to choose it on a website and have it delivered to their home – get the team together and make sure the boss says something to acknowledge their efforts,” advises Meehan.
Sometimes sales professionals just want to be appreciated.