Sales Incentive Structure

Sales Incentive Structure: 9 Top Sales Incentive Plan Design Tips

Any company that uses outbound client acquisition channels needs to have incentive programs and sales incentive systems. They promote specific behaviors, which, if improperly designed, might result in undesirable outcomes and conflicting interests. Creating a comprehensive sales incentive plan that encourages positive company-wide behavior is art with huge benefits.

To be successful, a sales incentive structure necessitates a great deal of thinking and attention to detail. It can mean the difference between a highly motivated and productive sales staff and a disengaged and unmotivated staff.

Sales Incentive Structure: Best Practices

There is no one-size-fits-all approach to creating an incentive plan for your company, but following these best practices can help you avoid the most common pitfalls and errors.

  1. Make certain that all stakeholders are included

Too many companies approach sales compensation planning entirely from the top down, which is a mistake. By involving all stakeholders from the beginning, you can minimize misalignment, misunderstandings, and administrative bottlenecks later on.

Sales compensation analysts and sales are sometimes left out of the conversation. Make sure that everyone involved in the process is included in the planning if you want your incentives to enhance productivity across the organization.

  1. Involve your salespeople in the discussion

The majority of sales representatives believe their sales incentive structure must be customized to their specific needs. Some company owners may dismiss the concept because it appears to be an impossible effort for a major corporation, but simply asking for input can go a long way toward making representatives feel more accountable.

  1. Create several incentive plans for various roles.

This one has previously been discussed, but it deserves to be at the top of the list because it is essential for an effective sales compensation plan. Varied roles have different effects on the sales process, and this varies with companies.

  1. Analyze your past data to see if there are any opportunities

Look for instances where acute or external challenges temporarily affected sales, as well as seasonal periods of low sales, while evaluating historical sales data. All of these are opportunities to improve performance by adjusting your compensable factors.

Analyzing your historical data might assist you in identifying chances for short-term bonuses and accelerators to help close the gap during these times.

The tools that firms employ are one of the main reasons they have trouble analyzing their data. Advanced sales compensation automation systems can provide far more detailed and accurate data.

  1. Create variable incentive plans with compensable factors

Compensable factors have an impact on total compensation for all employees in the organization, yet they’re easy to overlook when creating incentive plans. When establishing how the variable part of compensation is distributed, consider factors such as experience, track record, and tenure at the organization.

Your strategy should still be built around location, area, and market saturation. However, the more you customize incentive structures to each salesperson’s performance and potential, the more engaged and motivated they will be.

  1. Benchmark your incentive structure against the industry

Benchmarking is a crucial aspect of the incentive plan design process, and it’s also part of your job to keep costs down. However, far too many people go into benchmarking with the wrong mindset.

Keep quotas and commissions within reach of your salespeople unless you want a dissatisfied sales team. Instead, find out what the typical sales compensation is in your industry and then outperform it as quickly as feasible. You’ll increase sales and decrease churn, resulting in longer-term advantages.

  1. Consider non-monetary benefits

Money does not drive everyone, particularly lower and average salespeople. And, as often as you may want to manage them out, improving their performance is more efficient.

Work incentives such as family dinners, vacation discounts, gym memberships, and health and wellness benefits can be valuable additions to your sales incentive package. Stock options and other bonus benefits can be the icing on the cake for your top achievers, and they may even come with tax advantages for your company.

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  1. Perform a compensation risk analysis

Even if they conduct a financial risk analysis as part of their planning process, many large firms do not attach the correct risk to their incentive compensation plans. Perform a compensation risk study using historical and industry data before committing to anything — or better yet, hire an accountant to do it for you.

  1. Make the incentive plan apparent to your sales team

People will be more likely to respond to the incentive plan and deliver the desired results if they have a better understanding of it. Furthermore, the better sales representatives grasp the plan, the less likely they are to have a disagreement.

Representatives are unconcerned about how the plan works. They are only concerned about making money and avoiding being duped. Trying to keep things hidden or prevent them from making money is also counterproductive to the business.

To help salespeople understand how to maximize their earning potential, use frameworks like SMART targets. Allow salespeople to see real-time statistics on their commissions and what they need to do to meet their quota or earn a bonus before their next payday. There is no such thing as a sales rep who takes advantage of a sales compensation plan; there is only a plan that is badly designed.


There isn’t such a thing as the “ideal” sales incentive structure. Incentivizing your staff is a continuous, organic process that necessitates a thorough understanding of finance, mathematics, and behavioral psychology. Optimizing sales incentives becomes a major growth lever for larger firms aiming to maximize and extract the most growth out of a saturated market.

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