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Conditions Change - So Should Your Sales Incentives
Quick incentives pop quiz: Faced with a slowing economy, companies looking to gain a competitive advantage should do which of the following?
A. Reduce resources and budget directed at sales incentives.
B. Increase resources and budget directed at sales incentives.
If you answered "A," you are probably not a regular reader of this online newsletter. You're also, according to employee recognition expert Bob Dawson (www.businessgroupinc.com), most likely among the many business executives who have a very limited view of what a well planned sales incentive program can accomplish.
"Companies who have not planned their incentive programs properly are the companies that find themselves cutting incentive budgets during a downturn," says Dawson. "The rationale for belt tightening comes from the perception that incentive programs are really about the awards, whether trips, merchandise, or gift cards. Programs that are designed to motivate with awards always fall into this 'trap.' The logic says cut the awards budget because either it does not look good to be giving out these awards during tough times, or the CFO demands budgets be cut and this is one that is deemed as a perk and an expense."
Counterintuitive as it might seem to those who view incentives as budget busters, Dawson says that a slowdown is actually the ideal time to wield incentives as a powerful tool for increasing market share. The key is to properly plan programs that take into account anticipated business conditions and what the company's shifting business goals will be. "If you are managing your incentive investment properly, you should have planned for the downturn long (three to four months) before it started to take effect," Dawson says. "There are ways to plot where your sales will be based on the tracking of economic indicators for your business. Using that data, as well as the monthly or even weekly data that is being collected through your incentive program, adjustments in your incentive rules structure need to be made to reflect the changes in your marketplace."
These changes, Dawson explains, should be a part of any incentive plan from the earliest planning stages. He equates such program adjustments to the way individual investors handle their 401(k) programs or other financial investments. "If your incentive program was your retirement account," Dawson wonders, "would you just let the money sit in the same funds if they were trending down? I hope not."
Dawson acknowledges that increasing sales during an economic downturn is a particularly tough proposition, even with the most thoughtfully planned incentive program. So what program adjustments can be made to maximize results in such a tough selling climate? Dawson offers the following possible changes:
- Maintain customers at projected levels that are at or even below projected sales levels from the beginning of the incentive program.
- Add incentive points for bringing in customer suggestions on areas that you can implement to improve customer loyalty.
- Add incentive points for customer education about your products or services, including in-person presentations, Webinars, and self-training materials. Be sure these are all about "what is in this for me" from the customer's view. The idea is not to try to sell, but to educate.
- Add incentives to your sales program that bring an "Incentive in a Box" to your customers to use for their customers. In other words, bring (and fund) your customers a ready-to-go incentive program that they can brand with their name, to be used to help them during tough economic times.
Dawson's overall message with regard to incentive planning could be summarized in two words: "Think ahead." Because today's economic slump could very well give way to tomorrow's boom tomorrow. Either way, companies need to be prepared, and to create sales incentive programs with the flexibility to adapt, no matter what conditions appear on the horizon.
"A big part of this is to plan for the 'Best, Most Likely, and Worst Case scenarios,'" Dawson says. "You will always have situations where your sales team may be seeing different outcomes than what you and your sales team expected when you set the incentive objectives. This does not mean you automatically adjust sales targets to be sure people qualify. It means you are treating this incentive program for what it is, a business management tool and an investment that is designed to create a measurable return on investment. If approached in that fashion, the changes that need to be made are very clear to see."
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