Tiered Incentives: A Powerful Way to Maximize Sales Performance

How this approach can supercharge your performers

tiered incentives mtc

Getting the most out of your sales team is essential for staying ahead in a competitive business environment. While many organizations turn to incentive programs to motivate their salespeople, not all incentives are created equal. Without the right strategy, your business can wind up pouring money into incentives, but fail to see the corresponding boost in your bottom line. 

Enter the tiered incentive program. By rewarding employees more generously the more they sell, your business can separate so-so performers from superstars, motivate your entire team and spend each incentive dollar more wisely. 

Your first consideration is understanding the mindset of the salespeople in your program. That then drives some simple promotional design changes that can yield dramatic improvements in your business results.  

Understanding How Salespeople Think

To motivate a salesperson, start by thinking like one. Most sales employees are inherently competitive and highly responsive to opportunities to maximize their income. Encouraging strong sales across your organization or channel means motivating each member to perform at their peak. If you give a highly reward-motivated employee multiple hoops to jump through to earn rewards worth $5,000 to $10,000 more, they will learn how to jump through those hoops.

Increasing incentives for higher volumes of sales production can not only boost sales among your team, but loyalty as well. If your sales team knows that your brand is going to be their bread and butter, they'll earn better rewards selling your product line than other lines. That's why it pays to create an incentive structure that your workers will go after with tenacity. 

Driving Sales with Tiers

The overwhelming majority of incentive programs today use "sell one, get one" strategies, with points or reward value assigned to each SKU or product. For example, every time a salesperson sells a unit, they receive points worth $10. If that salesperson sells eight units in a 30-day period, they receive rewards worth $80. But is that really the best they can do?

A tiered program rewards top sellers more richly than low sellers, increasing overall motivation while matching compensation more closely with performance. Your organization can structure these tiers in any way that makes sense for your profit and revenue goals. A few common examples include:

• Higher volume, more valuable rewards. Under a tiered program, your organization can increase the per-unit award based on the total number of units sold. For example, with Tier 1, we reward only $5 of value per unit for the first four units sold. However, if someone reaches Tier 2 and sells between five and nine units, they are paid $8 per unit beyond four. At Tier 3, sales superstars receive $12 starting with the 10th unit. Your top performers will respond by striving to sell more than 10 units, while you won't be shelling out as much to those who sell a minimal amount. 

• Extra incentives for add-ons. For businesses with upsell opportunities, consider rewarding employees who go the extra mile to sell related accessories and products. For example, if you sell mobile phones, implement an incentive structure where Tier 1 includes just a phone sale; Tier 2 includes the phone and up to three add-ons, such as a case or headset; and so on. Not only can you motivate your team to sell, but also increase the average retail ticket size and profit margin, since accessories often have higher margins than base products.  

The ROI of Tiered Incentives 

A tiered program can maximize program ROI by amplifying rewards for the best performers, while reducing the rewards for lower performers. It saves your business thousands of dollars by not rewarding ordinary behavior, so you can spend those dollars on the performers who truly deserve it. At the same time, those superior performers are now more focused on your line, and the results increase significantly.

Tiered incentive program strategies are endless, allowing you to customize your offerings based on your specific sales goals and team. Before implementing a program, consider your business goals, your current incentive structure and what your top performers are selling. By recognizing and rewarding your superstars, you can drive better performance across the board. 

George Kriza is president and CEO of MTC Performance, a leading innovator of sales incentive management solutions for top Fortune 500 and growing middle market companies to more efficiently deliver exciting, effective programs that inspire success and reward results. He has over 30 years' experience in the personal computer and consumer electronics industries. Since founding MTC Performance, he has focused on web-based technologies designed to break new ground in facilitating the success of incentive programs.