What are SPIFF, and can they turbocharge your sales performance?

Apoorv Singh · 7 June, 2021

Introduction

As a sales manager, you have to strategize for the coming sales year.  32% of a sales manager’s time goes into managing people.  So, before the next sales cycle begins, you have to set quotas, targets, and a commission structure in line with your revenue goals. 

As you do this, you want to make sure that everyone is incentivized and motivated before the sales year starts. 

Let’s say you did a great job with the above. But as the year passes, your business circumstances change. 

Initially, you wanted to sell all your products. Now your company has pivoted to a specific product line, and you want to increase the sales of that particular product. You realize that the original commission plan is not helping you achieve your new goals.

Or let’s say, you realize that your customer churn is way more than you initially anticipated - now you have to bake that new reality into your commission structure? How do you now motivate your reps to also arrest the customer churn?

These are some of the situations where a spiff can come to your rescue. 

It's not wise to mess with your core commission structure in the middle of the year. So you can use spiff to help you with the sale without tampering with the core commission structure.

Spiffs need no restructuring of your commission plan. 

Let’s dive into more details.

What is a spiff incentive?

A SPIFF (Sales Performance Incentive Fund), or spif, or spiv is an ad hoc incentive you can use to achieve instant results. 

For example, you are a Saas company. You want to sell 317 subscriptions in Q1.  You announced $700 cash to everyone on the sales team if the target is achieved. 

What’s more -  spiff incentive does not have to be monetary. It can be anything that salespeople feel is worthwhile. As Business Bank of Texas says:

A SPIFF can be cash or something the salespeople really value or think is "spiffy" like a trip, drone, virtual reality headset or other "have to have" gadget as the reward and motivator.

Why do you need spiff incentive in your compensation plan?

Like every incentive, spiff incentive is also a motivation magnet. 

Allotting a portion of your budget to spiffs is a small price to pay to achieve your sales goals. 

But then it begs the question -  is a spiff effective? Does it have the desired ROI? 

Yes, spiffs work and can get you the returns you want. 

Here is why you need a spiff incentive in place:

  • Spiff incentive can earn big bucks for resellers

SPIFF isn't just useful for employee-employer relationships. 

If yours is a reseller firm, you can demand manufacturers pay spiff to employees who make the most sales for their products. 

It is similar to a slotting fee. This could be a smart idea for you since you can save a lot of money on staff incentives and prizes.

  • Spiff incentive helps promote new product or service launch

New product launches are difficult.  34% of sales reps admit they are unmotivated to sell new products, especially when their current product line is performing well. 

Spiffs can help speed up sales after a product launch. 

  • Spiff incentive boosts engagement 

Low morale or disinterest can lead to less productivity. 

Most disengaged employees come from sales. And, it can hurt your profit margins.  The spiff incentive system is effective because it takes advantage of human nature. 

Companies that use incentives regularly see better employee engagement. 

  • To fulfil short term sales needs

Spiffs incentives are designed to help businesses reach their sales targets in a short time. 

A well-designed spiff can be the way to go if your company wants reps to fulfill their sales quotas quickly. 

While creating a spiff can be difficult, there are several steps you can take to ensure that your program is as good as it can be.

How to plan spiff incentives correctly?

Spiff takes less effort and time than other incentives. 

But it should be done correctly. When properly designed and managed, spiff incentives can be extremely useful in improving sales. 

Below are some things you can do to build a good spiff program.

  • Determine your spiff objective

Start with deciding what your spiff reward will be used for. 

While revenue growth is the ultimate goal, your Spiff incentive will serve one of these three purposes: 

Encourage the selling of a new product or strategy, or assist in its go-to-market strategy. Aim for more success with an existing product.

Example: Top 3 reps with the highest sales in the quarter get the spiff. Or whoever sells most of our newest product gets the spiff.

Determining the incentives and exact amount

What are the goals the salespeople are aiming for? 

Is it money? A paid holiday? Is it for a 4-day work week for the next 3 months? A gift card? 

You need to figure out what they are expecting. 

That will be critical in motivating your employees. If they simply have an unclear concept of what the motivation is, they may not put in the effort that you expect from them.

And also tell your reps the specifics of the spiff incentive. 

For example, anyone who closes 20 new accounts will get a $1500 cash prize.

Easy participation in spiff programs

Your spiff incentive program should be easily accessible for the sales team. 

Anyone from your sales team should be able to participate regardless of the hierarchy, seniority, or bias. Also, do not make it overly complex. 

For instance, asking for hard copies of the invoice for the sales, making the reps go through multiple approvals to claim rewards, etc make things difficult for reps. 

You lose motivation points for these roadblocks. Keep your rewards lucrative. Make them an offer they can’t refuse. 

That way, even if the claim process is long, there is no lack of participation.  

  • Decide a timeline

You need to decide your program’s runtime. 

Ideally, spiffs work well in a short time. They're designed to promote sales in the near term.You and your sales team must understand exactly what "short-term" means.

If you want your reps to each bring in 75 leads in Q4, choose that quarter as your timeframe and communicate it to them.

  • Measure its success

You must have a strategy in place to determine whether the program was successful. It is best to have well-defined KPIs right at the start.

Pick the metrics that best meet your sales objectives and use them as a guide for future spiff incentives. 

For example, you announced $1700 to anyone who brings in 60 leads.

Here, you will measure the rep’s performance who brought 60 leads. You will reference his performance before the spiff was announced. 

  • Possible problems with spiff incentive and their solution

Spiff incentive can make reps insincere

It's tempting for salespeople to bend or hide the truth to fulfill targets when they are very passionate about their product. 

They may be anxious to win the spiff incentive. 

Also, sometimes if your sales reps are aware of a spiff incentive, they may decide to wait until the program begins to close deals that could have been closed sooner. 

An easy solution? Don’t let them know it’s coming. 

This way, you can stop them from manipulating the system and losing out on deals they've intentionally delayed closing.

  • Too many spiff incentives can exhaust your budget

Introducing spiffs frequently can have negative effects on profits and cash flow if your business is small. 

Use spiffs only when you need to grow sales to a level where the cost and returns are balanced.

  • Toxic work conditions

Spiff incentives can create a toxic work environment. 

Reason? Spiffs with one winner. 

Employees who are convinced of their loss will withdraw from the competition as a whole. And this type of "all or nothing" mentality can cause conflict within the sales team. 

One way to solve this is to have a prize pool. It means it doesn't matter who wins, everyone gets something. Only that the winner gets the most. 

For instance, you announced a prize pool of $10,000 to the reps who close most deals. The top 3 will get $1000, $700, and $300 respectively. 

The remaining amount gets distributed among all the reps equally.

Spiff up your incentive game

In conclusion, Spiff contests can be a fun side activity while your salespeople compete to be at the top of the company’s sales leaderboard. 

As long as spiffs are used wisely, they can have a visible impact on overall sales. 

If you think bringing spiff to the team would help you increase employee engagement and sales, make sure you plan ahead of time to address any potential issues that we discussed above. 

Make use of spiff. Surprise your reps by not disclosing there is a spiff in play. Then hand it out when least expected. That could work as a huge motivator. 

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