How Do I Create an Effective Incentive Plan for Our Sales and Marketing Team?

Hi, I need help preparing a framework and incentive plan for our sales and marketing team. Please share inputs on:

- What should be covered in the incentive plan/policy
- Percentage of incentive given to salespersons and marketing personnel based on designation level targets
- Should the incentive percentage be different for repeat business and new business
- Our product is a water purifier. We are manufacturing, and employees in the sales and marketing team are working in the corporate office.
- Anything else

Dear Muthu Lakshmi,

The point-wise replies to your questions are as below:

What should be covered in the incentive plan/policy?

An incentive is an additional payment (or other remuneration) to employees as a means of increasing output. A sales incentive is paid to salespeople when they significantly exceed their targets.

Percentage of incentive given to the salesperson and marketing person based on designation level targets

This is a company-specific question, and we, the members of this forum, are external parties. Hence, we cannot comment on it. However, the simple rule is the higher the target exceeded, the higher the incentive.

Should the incentive % be different for repeat business & new business?

Yes, the percentage of the sales incentive may vary for repeat business and new business. This is because to get new business, the salespersons have to navigate uncharted waters. In contrast, repeat business comes from existing customers. The salespeople know their needs, their psychology, and may build a rapport with the person concerned.

Other points

Fixing the percentage for sales incentives is always a challenge. If the target is too low, everybody becomes eligible to get the incentive. If the target is too high, the salespersons may think it is unattainable and may not even put in their efforts to get them. Therefore, a person who decides on the incentives must know his people and the market very well.

Additionally, while designing the sales incentive policy, please ensure that the salespersons' conveyance allowance or transport allowance is paid on time. If the salespersons doubt the company's timely clearance of these allowances, they may lose their steam, and even if you make a policy on incentives, it could be rendered ineffective.

Thanks,

Dinesh Divekar

The percentage of incentives and the target thereof are left to your choice. I wish to add a few aspects to be kept in mind at the time of designing the scheme.

Consider Different Schemes for Seasons

1. Two different schemes may be considered - one for peak (summer: April-June) seasons and the other for off-seasons.

Include After Sales Service Teams

2. It may be important to include the 'After Sales Service Teams' (and AMC) as well. This team is crucial in enhancing your brand value in the market and among consumers by reducing downtime to negligible levels. Additionally, it should include Inventory/stores, QC, R&D, and logistics personnel.

Hierarchy Considerations

3. The hierarchy may start from middle-level management, say from Manager downwards.

Buy-Back Options

4. An attractive buy-back option with considerable discounts could work wonders. If not already in place, consider devising one to boost sales/turnover by retaining repeat customers.

Payment Options

5. In addition to outright sale, leasing, and hiring, the option of deferred payment under EMI should also be considered to capture a significant market share. Introducing this scheme, when feasible, can aid growth by modifying the incentive scheme.