If you hold sales contests, don't follow the crowd on structuring awards.
Most companies compensate sales contest participants based on the total number of products or services sold. Sell
20 cars, earn a 4 percent bonus. Sell 30 cars, earn a 5 percent bonus, etc.
But don't overlook other ways you can structure sales contests that reward sales staff fairly and ensure that your company receives the most for its incentive dollars.
Here's one way to dangle a bigger performance-improving carrot in front of salespeople: Base your incentive rewards on incremental sales increases.
How it works: Employees who post the largest percentage gain in sales volume (or dollars of products sold) over the previous contest period are the winners.
Example: Kevin sold 18 cars in the previous contest but sold 24 cars this time. Megan sold 30 cars in the previous contest but only 31 this time. Kevin reaped a larger percentage increase in sales, so he earns the bigger reward.
Advantages of such a sales program: Salespeople don't feel they're in an uphill battle against one or two people who routinely win. Top performers can't coast to victory without significantly improving their output. The money you pay for rewards increases with the results.
Potential downside: You lack the security of knowing your incentive-rewards budget in advance. But any increase in incremental sales should finance the expense. (Companies typically spend 5 to 10 percent of incremental sales gains on incentive programs.)
Lean toward noncash awards
Surprisingly, studies say salespeople favor noncash awards over bonuses.
According to an Incentive Federation survey, 60 percent of owners and managers say employees view bonuses as part of their total pay package, yet they consider merchandise awards as special forms of recognition. Sixty-eight percent said bonuses could actually show a negative impact if they aren't paid in a certain year or they aren't big enough.
Final tip: Don't assume sales contests increase profits; run an ROI analysis on all sales contests.
Calculate your incentive budget
You can find a 10-step incentive program outline, plus an interactive Web tool that helps you calculate an incentive budget for your program, at the American Express Incentive Services site, www.aeis.com/getting_started. html.