Sales Compensation vs Incentives – Is There a Difference?
The long and short of it – yes. Sales compensation and sales incentives are often seen as two types of performance-based “rewards” that motivate salespeople to perform at a higher level. Truth is, only one of them does that effectively. The other – sales compensation or, a commission – is best used to anchor salespeople in the sales funnel, so that they understand how their work ties to their income. So, when it comes to sales compensation vs incentives, compensation helps define what your salepeople’s day-to-day role is, but incentives show them how to go beyond that role.
Sales compensation is not an effective tool to motivate sales reps.
The intention of sales compensation models was to drive salespeople to sell more product, increasing the amount of money on their paychecks with a portion of the sale. In reality, sales reps see commission as their take home pay, not the performance-related reward it was intended to be. When sales compensation merges with a reps paycheck and is swallowed up by everyday living expenses, it loses its ability to incentivize teams.
Sales incentives and rewards motivate where commissions can’t.
Sales incentives boost sales motivation simply because it grants sales reps the opportunity to splurge on special purchases with redeemable points, not money. Incentive rewards are a flexible way to award sales reps, and can:
- Give salespeople a better understanding of their sales performance
- Award reps for upselling legacy accounts or earning a certification
- Reward sellers for behaviors that help the company grow
- Be used to improve work and sales cultures
- Be announced at any time to build buzz and excitement
- Be bragged about, guilt-free, in the office without others seeing it as tacky
- Foster friendly competition in the office, and so much more.
Sales incentives aren’t an expected part of a salesperson’s job, therefore they can have a greater impact on seller motivation and drive.
Keep commissions, but consider an incentive program to boost sales motivation, sales performance, and retention.
You don’t have to drop your sales compensation model to have an incentive rewards program. In fact, many companies stack an incentives reward program on top of their commission to drive extra motivation. While sales compensation plans and sales incentives are both necessary to retain high performing sales professionals and bump up revenue, incentives more consistently and effectively drive the very behaviors your company wants to see.