Sales bonuses have always played a big role in motivating sales teams.
Among all the bonuses out there, SPIFFs have a special place. They're not just about giving extra money for sales; they're about guiding a sales team to meet the company's goals. In this guide, we'll talk about what is SPIFF in sales, why they matter, and how to use them correctly.
In simple terms, they are bonuses given to salespeople for meeting certain goals. Unlike regular commissions that are given for all sales, SPIFFs are given for specific tasks. This could be for selling a new product, reaching out to new customers, or getting old ones back.
The best part about SPIFFs is that they can be used in many different ways, depending on what the company needs.
SPIFFs stand for 'Special Purpose Incentive Fund,' a term that accurately reflects their nature as targeted, purpose-driven bonuses.
Every SPIFF has a clear reason behind it. They are particularly ideal for giving a short-term boost to specific sales goals, making them a valuable tool for addressing immediate business needs.
Companies use them for specific reasons:
In the fast-paced world of sales, there's always a need to keep moving. SPIFFs help do just that.
There are many ways to give bonuses to salespeople. In this guide, we'll focus mainly on money-based bonuses, but it's good to know about other types too.
While there are various ways to design SPIFFs, our focus here is primarily on the monetary ones since those are the most effective ones.
Making a good SPIFF program is about more than just giving out money. It needs careful planning.
Let’s take a look at some practical examples and understand ways to utilize SPIFFs and improve the performance of your sales teams.
Imagine you're a company that has just launched a new software tool. You want your sales team to prioritize this product over others, at least for the initial launch phase. This is where a Product SPIFF comes in handy.
Consider a company like Adobe launching a new graphic design tool. They already have a range of products, but this new tool needs special attention to gain traction in the market.
By introducing this SPIFF, the salesperson earns an extra $500 for selling 10 units of the new product, making it more attractive for them to push this product.
Big clients or strategic accounts often bring more revenue and prestige to a company. Closing deals with such accounts can be challenging but highly rewarding.
Think of a startup that offers cloud storage solutions. Landing a contract with a big corporation like IBM would be a significant win.
With the SPIFF, the salesperson gets an additional $3000 for closing a strategic account, making them more inclined to pursue such high-value deals.
Sales targets are set for a reason. They guide salespeople and give them something to aim for. But what if a salesperson goes above and beyond? A Milestone Bonus rewards such overachievers.
A car dealership sets a quarterly target of selling 50 cars for each salesperson. One particular salesperson manages to sell 70.
By introducing a Milestone Bonus, the salesperson is encouraged to not just meet but exceed their targets, earning an extra $6000 for their exceptional performance.
Cash flow is crucial for businesses, especially startups. Getting customers to pay upfront can significantly improve a company's financial health. An Upfront Payment SPIFF motivates salespeople to negotiate such terms.
A SaaS company offers monthly and yearly subscription plans. While monthly plans provide steady income, yearly upfront payments can help the company invest in immediate growth opportunities.
By pushing yearly subscriptions, the salesperson can earn significantly more, and the company benefits from immediate cash flow.
Long-term commitments from customers ensure steady revenue and reduce the cost of sales renewals. Multi-Year Deal SPIFFs reward salespeople for securing longer-term contracts.
A cybersecurity firm offers annual licenses for its software. A three-year contract not only ensures a longer commitment but also reduces the chances of the client switching to a competitor.
Securing longer-term contracts can significantly boost a salesperson's earnings, making it a win-win for both the salesperson and the company.
For many products, especially software, just selling isn't enough. Actual usage by customers ensures renewals and reduces churn. This SPIFF encourages salespeople to not just sell but ensure customers use the product.
A company selling project management tools wants to ensure that teams are actively using their platform, which would likely lead to renewals and upsells.
By ensuring that teams are actively using the tool, the salesperson can earn an additional bonus, and the company benefits from satisfied customers.
Referrals are a goldmine in sales. A recommendation from a trusted source can significantly shorten the sales cycle. This SPIFF encourages salespeople to tap into their networks and get warm leads.
A cloud services company wants to expand its clientele. Instead of cold calling, they decide to leverage the networks of their salespeople and existing clients.
By bringing in warm leads through referrals, the salesperson can earn an additional bonus, and the company benefits from easier sales conversions.
Bigger deals mean more revenue. This SPIFF motivates salespeople to aim higher and close larger deals.
A furniture supplier wants to secure contracts with larger offices. Instead of selling to small offices, they incentivize salespeople to target corporate offices and big businesses.
By targeting and closing bigger deals, the salesperson can significantly boost their earnings, and the company enjoys larger contracts.
Initiative and proactiveness are valuable traits in sales. This SPIFF rewards salespeople who don't just rely on inbound leads but go out and create opportunities themselves.
A digital marketing agency wants to expand its client base. Instead of waiting for clients to come to them, they reward salespeople who actively seek out and close new business.
By taking the initiative and bringing in new business on their own, the salesperson can earn a substantial bonus, and the company benefits from expanded clientele.
Consistent growth is vital for any business. This SPIFF rewards salespeople who not only maintain their performance but show improvement year after year.
A health supplement company wants to see growth in its product sales every year. They decide to reward salespeople who surpass their previous year's performance.
By achieving a 10% growth compared to the previous year, the salesperson earns an additional bonus, motivating them to keep pushing boundaries.
Happy customers are the best brand ambassadors. This SPIFF encourages salespeople to gather positive testimonials and case studies, which can be powerful sales tools.
A software development platform wants to showcase its success stories. They incentivize salespeople to collect positive feedback and detailed case studies from satisfied clients.
By collecting valuable testimonials, the salesperson not only earns an additional bonus but also provides the company with powerful marketing material.
Sometimes, selling products in combination can provide more value to the customer and increase the deal size. This SPIFF rewards salespeople for such bundled sales.
A tech store wants to promote the sale of laptops along with software packages. They offer a SPIFF for every combo sale.
By promoting and selling product combos, the salesperson can boost their earnings, and customers get a better overall package.
A well-informed salesperson can sell better. This SPIFF encourages salespeople to upskill by completing training and certifications.
A cybersecurity firm rolls out a new product. They offer a SPIFF to salespeople who complete a certification course related to the new product.
By investing time in training, the salesperson not only becomes better equipped to sell but also earns an additional bonus.
While it's essential to close deals, it's equally important to maintain profitability. This SPIFF is a bit different – it reduces commissions if salespeople offer too high discounts, ensuring they prioritize the company's bottom line.
A luxury watch brand doesn't want to dilute its brand value by offering high discounts. They introduce a Reverse SPIFF to discourage excessive discounting.
By introducing a Reverse SPIFF, salespeople are more cautious about offering high discounts, ensuring the brand's value is maintained.
The beginning of a quarter or fiscal year is crucial. A strong start can set the tone for the rest of the period. This SPIFF rewards salespeople who hit the ground running.
A publishing house wants to ensure that their new book releases get strong initial sales. They offer a bonus for salespeople who achieve a certain percentage of their quota in the first month.
By achieving a significant portion of their quota early on, the salesperson not only sets a positive pace but also earns an additional bonus.
Retaining existing customers is often more cost-effective than acquiring new ones. This SPIFF rewards salespeople for ensuring customers renew their contracts, emphasizing customer loyalty.
A software-as-a-service (SaaS) company knows the value of customer retention. They offer a bonus for salespeople who secure renewals, especially for long-term contracts.
By focusing on renewals, the salesperson ensures a steady stream of revenue for the company and earns a handsome bonus for their efforts.
Existing customers can be introduced to other products or services, increasing the overall deal value. This SPIFF rewards salespeople who effectively cross-sell.
A gym, apart from its regular memberships, offers specialized fitness classes and diet consultation. They introduce a SPIFF to encourage salespeople to promote these additional services to existing members.
By promoting additional services to existing members, the salesperson can significantly boost their earnings, and members get a more holistic fitness solution.
Bundling products or services can increase the overall deal size and provide more comprehensive solutions to customers. This SPIFF rewards salespeople for promoting bundled offers.
A tech store offers a laptop, mouse, keyboard, and headphones as a bundle. The idea is to provide a complete setup for customers, especially those working from home.
By promoting the bundled offer, the salesperson can earn a significant bonus, and customers get a complete package at a better price.
Time-sensitive deals or promotions can create urgency and speed up the sales process. This SPIFF rewards salespeople who close deals within a specific timeframe.
A travel agency offers early bird discounts for summer vacation packages. They introduce a SPIFF for salespeople who secure bookings within the first two weeks of the promotion.
By focusing on early bookings, the salesperson can earn an additional bonus, and the travel agency ensures a steady influx of customers well before the peak season.
Breaking into a new market or demographic can be challenging but rewarding. This SPIFF offers additional incentives for sales made in a specific new segment.
A skincare brand, popular among women, wants to introduce products for men. They offer a SPIFF to salespeople who promote and sell these new products to male customers.
By targeting and selling to the new demographic, the salesperson can significantly boost their earnings, and the brand expands its customer base.
Re-engaging dormant accounts or customers who haven't purchased in a while can be a goldmine. This SPIFF rewards salespeople who focus on reactivation.
A magazine subscription service notices that many past subscribers haven't renewed in over a year. They introduce a SPIFF for salespeople who can bring these subscribers back.
By focusing on reactivating past subscribers, the salesperson can earn a substantial bonus, and the magazine regains its readership.
Some products offer higher profit margins than others. By incentivizing salespeople to focus on these products, companies can boost their profitability.
An electronics store identifies that certain premium headphones offer a higher profit margin compared to other products. They introduce a SPIFF to promote the sale of these headphones.
By promoting and selling high-margin products, the salesperson can significantly boost their earnings, and the store enjoys higher profitability.
Extending existing contracts ensures a longer revenue stream and strengthens customer relationships. This SPIFF rewards salespeople for getting customers to commit for a longer period.
A cloud storage provider wants to ensure long-term commitments from its clients. They offer a SPIFF for salespeople who can get clients to extend their existing contracts.
By focusing on contract extensions, the salesperson ensures a steady revenue stream for the company and earns a handsome bonus for their efforts.
🔔 Must read: How can we motivate and incentivize our sales team to achieve their targets and goals?
SPIFFs, while powerful, are not without their challenges. Here's a look at some common pitfalls and how to sidestep them:
While SPIFFs are beneficial, there's a downside. If there are too many SPIFFs, or if they are more rewarding than the core compensation plan, they can distract from the primary goal of meeting sales quotas. It's crucial to balance the attractiveness of SPIFFs with the overarching objectives of the sales team.
While SPIFFs can drive focus towards specific products or services, there's a risk that other equally important offerings get neglected.
While friendly competition can motivate, too much can lead to a toxic work environment where team members undercut each other.
Generous SPIFFs can sometimes lead to budgetary challenges, especially if the sales team performs exceptionally well.
🔔 Must read: The Invisible Costs - Sales Commission Overpayments & Clawbacks
Now, let's discuss how to measure the success of your SPIFFs.
Understanding the effectiveness of your SPIFFs is paramount. Here's a more detailed look at how you can measure their success:
Before introducing a SPIFF, document your primary goal.
Maintain monthly sales records. When you implement a SPIFF, compare the sales figures of the SPIFF month with the previous month.
If your SPIFF targets a specific product, segregate its sales data.
Calculate the total cost of the SPIFF and subtract it from the additional revenue generated during the SPIFF period.
Track the number of salespeople participating in the SPIFF versus the total number in your team.
Calculate the cost spent on the SPIFF for each new customer acquired.
For SPIFFs aimed at renewals or long-term contracts, monitor the number of customers retained post-SPIFF.
Organize feedback sessions or surveys with your sales team post-SPIFF. Their on-ground experience will provide qualitative insights.
By incorporating these actionable steps and practical examples, businesses can gain a clearer understanding of their SPIFFs' effectiveness and make data-driven decisions for future campaigns.
SPIFFs, when implemented thoughtfully, can be a game-changer for your sales team and your business. Over 90% of top performing companies are actively investing time and resource in designing incentive programs to reward their sales teams and motivate them to achieve and exceed their sales quotas. SPIFFs offer a unique way to motivate your team, drive specific behaviors, and achieve both short-term and long-term goals.
However, like any tool, the key lies in how you use it. By understanding the potential pitfalls and measuring the success of your SPIFFs, you can fine-tune your approach, ensuring maximum benefit for both your salespeople and your organization.
For those considering implementing SPIFFs, remember the importance of clarity, fairness, and timeliness. And for those already using them, regular review and adjustment can help keep your SPIFF program fresh and effective.
SPIFFs offer a flexible and powerful way to incentivize and reward. So, consider the insights and examples shared in this guide, and think about how SPIFFs can fit into your sales compensation strategy. After all, a motivated sales team is a successful sales team.
In the realm of sales compensation, especially for SaaS businesses, managing and optimizing SPIFFs can be a daunting task. However, tools like Visdum are designed to make this process smoother and more efficient.
Visdum is a sales commission software tailored specifically for SaaS companies. Its primary goal is to ensure that sales commissions are timely, accurate, and transparent, eliminating the common challenges faced by sales, finance, and RevOps teams.
With seamless integrations with CRM, HRIS, and Billing Systems, Visdum ensures that your data is not only secure but also easily accessible. The platform emphasizes enterprise-grade data protection, so businesses can trust their data with Visdum.
For those looking to automate their sales compensation processes, especially in the SaaS domain, Visdum offers a comprehensive solution that can save time, reduce errors, and enhance transparency.
Learn more about Visdum and its features here.
SPIFFs, which stands for "Sales Performance Incentive Funding Formula," can be paid out in various ways. Some common methods include:
The chosen payout method often depends on the sales team's structure, the organization's goals, and the nature of the product or service being sold.
No, a spiff is not a regular commission. A commission is typically a percentage of the sale amount that a salesperson earns on every sale they make. A spiff, on the other hand, is a special incentive or bonus paid out for achieving specific goals or targets set by the company.
Yes, a spiff is a type of bonus paid to salespeople. It is an incentive offered in addition to their regular compensation (base salary and commissions) to motivate them to focus on specific objectives or products.
No, spiffs are not illegal. They are a common and legal practice in the sales industry. However, companies must ensure that their spiff programs comply with relevant labor laws and regulations regarding compensation and incentives.
The term "SPIFF" stands for "Special Incentive Funds" or "Special Performance Incentive for Field Force." It is called a SPIFF because it is a special incentive offered to motivate the sales force or field team to achieve specific goals or targets set by the company.
No, spiffs are generally not taxed at a higher rate than regular income. They are considered supplemental wages or bonuses and are taxed at the same rate as an employee's regular income. However, employers may be required to withhold additional taxes on spiffs depending on the amount and the local tax regulations.
Another term commonly used for SPIFF is "spot bonus" or "spot incentive." These terms refer to the same concept of a special, one-time bonus offered to salespeople for achieving a specific goal or target.
Both spellings, "SPIF" and "SPIFF," are used interchangeably to refer to the same concept of a special incentive or bonus for salespeople. However, the more commonly used spelling is "SPIFF," which stands for "Special Performance Incentive for Field Force.