Five Elements of a Successful Sales Bonus Program
1. Never Set Bonus Limits
Bonus limits should never be set (or at least not communicated to employees) because these ceilings only limit the productivity and ambition of sales associates. Once a limit is reached, the motivation to exceed that production goal diminishes, thus negating the effects of the sales bonus program.
2. Vary the Type of Bonus Awarded
Sales bonuses should be meaningful to sales associates, while being practical for the company. Sometimes bonuses that are varied in amount, type, and frequency elicit more favorable responses from sales associates, thus increasing productivity and overall employee satisfaction. This is especially true for companies that utilize seasonal, part-time, or contingent workers and cannot easily calculate and/or reward traditional bonuses.
3. Explicitly Link the Bonus to the Desired Action
A sales bonus must be explicitly linked to the desired behavior that resulted in the positive outcome, and the bonus must be awarded as soon as possible after a goal is achieved. If sales associates are unsure how or why they receive sales bonuses, they may not successfully repeat the actions necessary to earn future bonuses.
4. Implement a Plan that Encourages Individual and Team Achievements
A sales bonus program should reward individual and team sales achievements because programs that encourage both individual and team-based accomplishments have many advantages. A team-based incentive strategy increases teamwork, cooperation, flexibility to change, and information sharing, which promotes growth and development among sales teams. Furthermore, an individual-based incentive strategy promotes healthy competition and increases innovation and creativity necessary to continually exceed customer expectations and remain competitive in the market.
5. Focus on Company Abilities and Needs Rather than Competitors
A successful sales bonus program should be tailored to the company’s needs, capabilities, and financial positioning. Although a company should not ignore industry trends in sales compensation plans and bonus programs, a sales bonus program should not be designed specifically to eliminate turnover. Instead, it should be designed to encourage and motivate sales associates to perform well, while indirectly discouraging resignation.