In this article, I am going to outline who to target an incentive at to ensure it is successful.
It might seem blindingly obvious that a sales incentive needs to target the right people – but many people get it wrong?
These errors can come in at a number of levels including:
- The actual businesses involved (this will be covered in another article)
- The role of the people within that business
- High performers vs low performers
The role of the people within that business
Firstly it is important to decide if you want to increase sales in or sales out or both.
This is most easily demonstrated through an example. In the Professional Hair Care industry where they would like salons and barbers to sell their shampoos, conditioners and styling products to their customers.
Stage 1 is always going to be to get the Salon owner to buy some stock (you can’t sell what you don’t have). But as many companies find, if the salon fails to then sell it to their customers then you will struggle to get any further purchases. In fact as they are the owner, as long as they know the product will sell, the additional profits will be one of the most powerful motivators.
In a salon, the main person who sells these products to a customer is the stylist who is cutting their hair. Stylists don’t consider themselves as sales people so will often resist pushing product for various reasons which is why this sales cycle breaks down – so logically, you need to incentivise the stylist to sell through.
Example solution for Wella
For every box of 100 products bought, the salon owner received 100 scratchcards to give out to the stylists when they sold product.
Each card showed 2 halves of a prize – if they matched then they could claim that prize – if not, they could split the card to match other halves they earned or by swapping with other stylists.
The pack also included information on what they could win and why their customers would benefit from using professional products.
Result – 3 months product sold in 3 weeks AND the product sold through as was reflected by re orders after the incentive ended
This was a fairly one dimensional example but for example, it is common in automotive for the incentive to be targeted at the Dealer Principal, The Sales / After Sales Manager or even the wrong department i.e. accessories via the parts and service department despite the fact the easiest time to sell an accessory is at the time the customer is specifying and buying their product so a sales person will have far more influence than anyone in parts.
Interestingly in this case the easiest way to help the sales person to sell that accessory is to have it on the demonstrator – that is often the case of the Dealer Principal / Sales Director so there are certainly good reasons to engage them as well.
Think about when a customer will decide to buy what you want them to and who has the greatest level of influence
Example automotive trade parts
I recently looked at the trade parts programme for a major automotive programme where they were looking to sell more genuine parts through independent garages. The secret to success is to educate the garage owners and receptionists to offer genuine parts as an option to customers (or a default if they are really confident) on the basis that the product will perform better for the customer. From the garages perspective they also earn higher profits (if a genuine part is double the price and the margin is the same then their overall profit on the job will be higher) but also they are much more likely to get the right product first time by choosing genuine parts which saves them huge amounts of time and money.
The client’s solution was:
- Special price on key trade parts for the Garage Owner
- Lavish events for Parts Managers where the top performers will earn places based on increased parts sales
- Quarterly low value incentive for parts counter staff based on sales of key products
The special price has little value to the garage owner as they generally pass this on to the customer and it reinforces that the base price was possibly too high in the first place.
The lavish events does very little to actually engage and motivate anyone within the independent garage or the parts receptionists who actually have the direct relationship with them – in other words, they are spending hundreds of thousands in rewarding the wrong people.
High performers vs low performers
The Pareto principle (also known as the 80/20 rule, states that, for many events, roughly 80% of the effects come from 20% of the causes – in other words, 80% of your sales will come via 20% of sales people.
The reason for this is simple – if I took 2 sales people and 1 always priced a car in terms of pounds per month and even took me through the benefits of genuine finance / personal leasing options whilst the other gave a total cash price – who would sell more finance? Some sales people just get it whilst others simply accept orders.
On this basis, traditional thinking is to focus on those top performer and incentivise them to sell more, right?
Whilst this seems logical and may form part of your sales strategy just think about this.
A top sales person already understands and is doing what you are asking them to do – as such they are already successful and earning well. To get them to increase sales, they are going to have to work extra hours or work harder to sell more cars and therefore close more finance deals. If the reward is great enough, then they will do that for a short period and once they have achieved that reward then they will stop again. Also as a successful Sales Exec can be earning £40-60,000 so what is an attractive reward to them is likely to be much more expensive than what is attractive to someone earning £10-20,000.
Now let ‘s look at the 4/5ths of the sales team who don’t currently do so well. In their case they generally aren’t that confident selling a car and therefore feel that adding finance to the mix will simply add an additional obstacle to their success.
Now imagine that we help them to understand how and why they should be positioning that finance sale and offer them a reward for doing it once. If the reward is sufficient then they will give it a try – and often succeed.
We now repeat that cycle a number of times and the Sales Executive has got into the habit of positioning sales in terms of pounds per month and as a result becomes much more successful at selling cars and finance – we have converted them from an 80%er to a 20%er.
Now let’s look at the difference between the 2 scenarios:
For top performers, if they increase their effort by 20% then you are likely to see a 16% increase in overall sales (20% of 80%) for the period of the incentive (or less if they achieve early).
There will also be a high reward cost because they need that if they are going to work 20% harder than they do for £60,000 then they will need to see an equivalent of much more than pro rata £12,000 (20% of current earnings) to engage that effort – and there are no long term benefits.
For below average performers, we have got them to shift their behaviour so they are always selling to maximum effect – we have shifted them from being the 80% who only achieve 20% of sales to the ones who achieve 80% if sales – in other words, they have increased their sales by 400%.
We aren’t getting them to work harder but smarter and because of their low base income, the cost of motivating them to achieve it is likely to be nearer to £2,000 (10% of current earnings) and whilst the £12k top performers funds an extra 20% this £2000 funds a 4 times more sales so your return is much higher.
Example sale person A sells 100 and B sells 20 – the incentive increases A by 20% i.e. 120 at £12k so additional sales cost £600 each, increases B from 20 to 100 at £2000 so additional 80 sales cost £25 each.
Plus the real benefits of this second approach is that those sales people will carry on selling more cars and finance even when you take the incentive changes because you have changed their behaviour.
By targeting the correct individuals, incentives can always be funded many times over by the profits generated – yet many aren’t because of 10 common mistakes that you will discover.
These strategies have been developed over 30+ years with some of the world’s leading brands and have been applied successfully in industries as diverse as: automotive, financial services, health and beauty, charity, housing, IT, Communications, Education and more demonstrates that these strategies work and deliver ROI in virtually any organisation large or small.
If you cannot spare the time to read numerous articles and you’re interested in exploring these strategies and how they might apply to your business, I invite you to book a FREE Sales Strategy Review with me.
It’s a 30-minute conversation over the phone, during which I’ll learn all about your business, what you’re looking to achieve and then provide you personalised feedback so you can get started increasing sales.
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Tim Peniston-Bird