To lift profits, a company must inspire its rank and file to greater heights

For Canadian companies struggling against slumping profits, providing incentives for a sales force is a vital marketing tool whose time has come.

Such incentives – most often cash, travel or merchandise rewards – can give that extra push to boosting a brand’s sales in a soft market, or make a new product promotion appear larger than it is.

Golden carrot

Dangling a golden carrot does not mean only handing out huge payouts to big hitters. Super-achievers will always achieve.

To lift profits, a company must inspire its rank and file to exceed their usual performance – overshoot a sales quota, sign new accounts, or sell specified products during promotions.

Sales incentives help them do that by aiming contests of all sizes at underdogs and top dogs alike to reward the greatest number of winners.

Ken Khuner, president of Equinox Financial Group, a subsidiary of Aetna Canada, the insurance and financial services group, argues that, like a lottery, the fun grows with the number of winners.

Many winners

‘The value of prizes is not essential,’ Khuner says. ‘The important thing is people like winning prizes. So we try to produce as many winners as possible.’

Cynthia Giles, a Toronto-based sales manager at Sunquest Incentive Travel, which specializes in group travel incentives, agrees the best programs offer a win-win, not a win-lose situation.

‘Everyone should feel like a winner,’ Giles says. ‘That’s total quality management: your entire sales force working for the company as one team.’

What is more, the timing for sales incentives could not be better.

Pay levels

The recession means cost-conscious companies are freezing or cutting back on pay levels because of a slump in earnings, denting employee morale.

Without incentive perks recognizing and rewarding those who deliver, top performers would make less money given current pay ceilings, and might leave for rival firms.

The phrase ‘sales incentives’ refers to cash awards, but also to merchandise programs in which salespeople who have qualified for an incentive can choose gifts from a catalogue and order them with an ‘award’ or gift certificate.

Other incentives include travel, be it a holiday or an invitation to a company gathering. And the ultimate motivator may well be peer recognition.

Being singled out for achievement in front of his colleagues at sales conventions spurs Keith Howard, a Toronto-based insurance sales agent with Sun Life Assurance Co. of Canada.

For three years running, Howard has come among the company’s top 50 sales agents countrywide, earning an invitation to its prestigious annual gathering.

‘That’s the glory, seeing my name in the lights,’ he says. ‘I’m being recognized as a true professional in my field.’

Peer recognition is especially useful in situations in which salespeople sell an intangible product, such as insurance or financial products, and face a high rejection rate.

‘Incentive programs encourage you to make that extra call, on that extra day, to drum up new business,’ Howard says.

Which incentive program is best for your company will depend on the market you are in, your sales team’s make-up and your budget.

Of course, cash has great value and symbolism for salespeople, especially in hard times. Nothing establishes the connection between effort and desired behavior better than being handed a fat bonus cheque for a job well done.

Yet, many companies are turning away from cash as their sole incentive for a number of reasons.

For starters, a small cash award is quickly forgotten once spent. And only top guns get huge cash awards, excluding others from the hunt for increased sales.

Cash awards

Cash awards are also taxable, and huge ones may well put super-achievers in a higher tax bracket, not to mention possibly giving them a higher total remuneration at the year’s end than that received by a company’s senior management.

What is more, while cash bonuses work well in fostering loyalty, they too often become an expected entitlement, and not an incentive.

Merchandise

For this reason, companies find it easier to withdraw merchandise or travel incentive schemes, compared with cash rewards.

Lastly, decorum requires employees to remain tight-lipped about cash awards, while they can boast all they want about winning a coffee-grinder or a vcr.

Still, cash speaks louder than plane tickets for many, especially in sectors of the economy hardest hit by the recession, such as real estate and the auto trade.

Elli Davis has been the top residential salesperson at Royal LePage, Canada’s leading real estate company, for five years running.

Davis’ incentive program is highly personalized and every year she attends the company’s sales meetings to bask in the glow of achievement.

But for Davis, the biggest reward is getting stock in the company.

‘The annual trip is a bonus,’ she says. ‘I meet my colleagues and it’s good for my referral business. But receiving stock in the company is most important – and it would be nice if my split commission was bigger.’

John Jelenik, sales manager at Ford Motor Co. of Canada, says sun-and-fun as an incentive worked well for the automaker during the high-flying 1980s.

But Jelenik says in the 1990s, no carrot short of cold cash is needed to spur struggling car dealership owners and salespeople.

‘The biggest motivator is knowing if you don’t sell cars, you won’t make money,’ he says. ‘So, the $75 to $100 bonus a salesperson gets on each car sold is an extra.’

Jelenik says Ford can afford little more than small cash awards to salespeople, as each car sold requires an equal $75 to $100 reward to go to the sales manager on the dealership floor.

And the car dealer owner gets incentives as well, such as cash to cover the cost of advertising a new car model during a particular promotion period, or help financing the stocking of certain models during lean months.

What is more, customers buying new cars qualify for an immediate $1,000 rebate.

Jelenik says that, as with all incentive programs, there must be enough profit left over for the company after the promotion is complete to make the effort worthwhile.

Next down from cash on the pyramid of incentives is travel – group or individual – offered to salespeople or dealers.

An annual trip, probably to a sales meeting at an exotic resort, is something managers who do not control a company’s purse-strings can arrange as a reward to performers, especially if senior management is asked along.

Trips

Giles, who specializes in arranging group travel incentives at Sunquest Incentive Travel, says salespeople who are spending less money these days as they work off excess debt, value custom-tailored trips offered by their employers.

‘A holiday is a welcome rest, a few days away from the desk, and something a salesperson might not have in usual circumstances,’ she says.

Travel incentives have differing uses.

For example, the 116-strong sales team at Rhone Poulenc, the Montreal-based pharmaceutical company, last year employed a Caribbean cruise after it exceeded a pre-set sales quota to management’s delight.

Magdi Moussa, Rhone Poulenc’s national sales director, says taking the team to sea worked well because the company had just merged with pharmaceutical rival Rorer, and the cruise helped merge two sales teams into one close-knit unit.

Good time

‘Travel incentives work well in balance with cash bonuses,’ Moussa says. ‘People travel with colleagues. They have fun, and a team spirit, all which makes for a good time.’

Its merger now complete, Rhone Poulenc has this year divided its national sales force into districts, and asked each to exceed its pre-set quota before all salespeople on each team qualify for the annual trip.

The lesson here is Rhone Poulenc clearly spelt out its objectives before embarking each year on an incentive program – this year to increase sales – which is a must for every effort.

Having defined its objectives, Rhone Poulenc could then establish specific tasks its sales force would need to complete during a qualifying period, and the targets to be met to exceed usual levels of performance.

Reasonable targets

The trick is to make those targets reasonable ones, because employees will always judge how much effort will be required of them against the attractiveness of the reward, or payoff, on offer.

And the cost of group travel is high, anywhere from $3,000 to $4,000 a person for a three-day trip.

The attraction? Sunquest Incentive Travel earlier this year booked u.s. singing stars, The Pointer Sisters, for an appearance at a business conference in Acapulco. Another company had a masquerade ball arranged for them in Vienna.

Says Giles: ‘The client had tears in their eyes when 20-foot gilded doors swung open for them in the Hapsburg Castle, and they were invited in to dinner by white-gloved staff. People were in awe.’

Providing red-carpet treatment is a must, says David Reid, vice-president of life and investment products at Aetna Canada.

Sure, the insurance company would rather avoid the premium cost. But its competitors offer the same vip service on their conferences. Besides, Aetna needs to sell itself well to its customer base to keep up sales.

‘Our conferences cannot be drab,’ Reid says.

‘Agents attend a number of gatherings, so it is crucial they return home after ours, and say Aetna’s was the best they have been on,’ he says.

‘That way, through group pressure, other agents will make an effort to qualify for our next Aetna conference.’

Agents earn points on the Aetna Canada insurance business they write at the rate of one point for each $1 of settled commissions during a pre-set period.

As part of a number of promotions, agents can redeem accumulated points for merchandise – from cameras and cd players to draws for cars.

Important in any merchandise incentive program is the offering of quality goods, as salespeople will naturally prefer an expensive ballpoint pen over a cheap one.

So, for example, Aetna’s current ‘Catch the Feeling’ contest offers agents a Braun coffee-maker once 19,000 points have been amassed, or a Sony Handycam in return for 80,000 points.

Aetna Canada offers a number of promotions each year, many running in succession to show off new products.

The company sends out monthly statements to participating insurance brokers, informing them how many points they have accumulated so far.

A colorful newsletter, detailing promotions and prizes on offer, goes along with the statement.

Clear communication of an incentive plan is crucial because no matter how much is spent to publicize a promotion, if a sales force does not fully understand the objectives and targets a company has set for it, it will make no great effort to achieve them.

The climax of Aetna’s promotion program is its 1992 ‘Big Wheel’ conference in Monte Carlo, to be held Aug. 29 to Sept. 3.

Its 100 top salespeople have qualified to attend this vip gathering, and the five best among them will have joined the Platinum Club.

Membership in this club offers them first-class round-trip travel to Monte Carlo, and the chance to win a Mercedes Benz 190E once there.

But do winning custom-designed trips motivate salespeople to work harder?

To an extent, says Phil Howe, an insurance salesman with Equinox Financial Group, who will attend Aetna’s vip gathering in Monte Carlo.

Howe welcomes the trip, but the biggest incentive for him is looking after his clients with whatever product, from Aetna or someone else, that serves their needs.

‘All I ask of a company is give me the products to serve my client’s needs, and pay me fairly,’ he says.

Howe says he will be part of the draw for a Mercedes Benz 190E at the Monte Carlo gathering, but he expresses little enthusiasm about the prize.

Problem

His attitude underlines a problem for those staging incentive schemes: a salesperson making, for example, $25,000 a year will not be greatly stirred by receiving a $50 toaster.

Likewise, a top gun earning incentives amounting to $20,000 annually, on top of his base salary, will similarly not salivate at the prospect of a new car.

At the same time, David Lawless, another Equinox broker on his way to Monte Carlo, says he would prefer that Aetna continue staging its gatherings, rather than end them and offer him cash rewards instead.

Lawless has been to the company’s gatherings for many years running, and enjoys renewing old acquaintances each time.

Old friends

‘It’s just great to get together with old friends,’ he says.

Of course, super-achievers such as Lawless do not consider a trip the end of a sales effort, but only a continuation of their overall career.

They use the conference to learn more about a company – its products, customers, suppliers, anything that gives them an edge over their competition back home.

Howard says a Sun Life gathering involves up to eight hours a day of brainstorming and education, sandwiched between an early morning dip in the swimming pool and black-tie dinner at eight.

‘I’m spending three days with absolute professionals, and I’m learning a lot from them,’ he says.

But increasingly cost-conscious companies are passing up tropical destinations and travelling, instead, closer to home for shorter periods.

Flexibility

As with all incentive programs, flexibility in timing and budget is necessary in responding to cyclical business pressures such as the current recession.

Las Vegas, Nev., Scottsdale, Ariz., and places in Florida are favored destinations these days as they can be reached by cheaper, non-stop flights.

And certain Caribbean resort destinations, such as ocean cruises, offer all-inclusive packages that save people from paying extra for entertainment or tips.

Merchandise

After travel, the next most popular incentive is merchandise, offered from a catalogue to salespeople as pats on the back for improved performance.

Toronto-based LIKE Incentives offers a tailor-made catalogue incentive program to companies.

Salespeople accumulate points based on their level of performance. They then redeem those points to buy merchandise chosen from like’s catalogue.

Every month, the client sends like a summary of points for each salesperson, which is put into a computer. Orders are then made through the client’s office, and like ships the merchandise anywhere in Canada directly to the salespeople.

Extended impact

Ian Knight, president of like, says merchandise presented to salespeople ‘is not only satisfying at the moment of presentation, but every use of an item reinforces the sense of loyalty in the company and its sales team, which was created by the original presentation.’

For the client company, Knight says it need never touch any merchandise or keep an inventory on hand. All that is handled by like.

Tim Blair, a Toronto-based marketing manager at Allstate Insurance, applauds the merchandise system.

‘Cash awards only do if they’re large enough,’ Blair says. ‘Merchandise is something you have around the house, so you remember it.’

He says there are occasional hitches in getting merchandise to salespeople.

But the company plans to install a 1-800 telephone number, at its own expense, to handle calls from agents wanting to know how many points they have in the bank and when they might expect their ordered merchandise.

Blair says agents can redeem their points at any time during the year, but many withhold them until the year-end when higher-quality goods are added to the catalogue.

At any rate, merchandise incentive programs remain flexible enough to allow payment of rewards on a weekly, monthly, quarterly and annual basis.

Merchandise and travel incentives play a large role at Amway of Canada, part of the world’s second-largest door-to-door sales operation.

Because of Amway’s recruitment program – in which distributor ‘A’ enlists distributors ‘B,’ ‘C’ and ‘D,’ each of whom enlists three more distributors to work under them, and so on – the real incentive is for a new recruit to quickly enlist distributors channelling new orders up to them, rather than simply going out and peddling soap and cosmetic products.

Roy Messier, a Toronto-based direct distributor with Amway, says people who have a certain number of salespeople under them win prizes from company products, cars and trips to ‘leadership incentive conferences’ in, for example, Hawaii, Thailand or Venezuela.

‘Bonuses do not go to those with the highest sales, but rather to those with the highest number of distributors under them,’ Messier says.

Who are the main users of sales force incentives?

According to the New York-based Incentive Magazine, insurance companies make greatest use, followed by toiletries and cosmetic companies, and auto parts and tire-makers.

Survey

A survey by the magazine also reveals travel and merchandise incentives are preferred by corporations after, and often in combination with, cash.

What is new in sales force incentives?

Companies are encouraging sales teams to compete with one another for private suites to watch baseball or football games at Toronto’s SkyDome or B.C. Place in Vancouver.

And some sales forces are deciding their awards might go to members of a community, for example, hockey sticks and skates to a neighborhood hockey team.

The result, as always, is that everyone feels good and a team develops a positive spirit of its own.

And from that, senior management can look forward to increased sales and profits.