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Sales Incentives Explained: A Complete Guide for Success

Aditya Singh Rajput
The Content Guy
Published On:
July 12, 2024

Everybody wants their sales reps to not only crush their targets but overachieve them.

You might think, "Hey, I'll just offer bigger bonuses or commissions, and they'll work harder!"

But here's the thing - that might not always be the case. While it might seem intuitive to offer bigger bonuses or commissions to boost results, the psychology behind effective sales incentives is more nuanced than you might think. 

This guide dives into the details of how sales incentives can seriously improve sales performance by making sure everyone is aiming to exceed their targets while keeping spirits high. 

A. The Psychology of Sales Incentives

In an interesting Stanford experiment, students were asked to do a super boring task and then tell others in the waiting room it was fun. Some students were paid $1 to do this, others $20. Surprisingly, the ones who got just $1 ended up expressing and ultimately thinking that the task was more enjoyable than those who got $20.

Weird, right? But there's a psychological reason behind this.

When we do something for a big reward, we tend to think, "I'm only doing this for the money." But when the reward is small, we have to find other reasons why we did it - like actually enjoying the task.

So, how does this apply to your sales team? Well, your reps already have their regular pay and commissions. Those are like the $20 in the experiment - they're good motivators, but they might not make your reps truly love their job or feel deeply committed to it.

To really get the most out of your team, you might want to think about adding some smaller, unexpected perks. These are like the $1 in the experiment - they can actually make people feel more positive about their work overall.

1. Key Components of Effective Sales Incentive Programs

Creating a sales incentive program that truly motivates your team requires careful consideration of several key elements. These components work together to create a balanced approach that drives performance while fostering a positive work environment. Let's explore the crucial aspects that should be incorporated into your sales incentive strategy.

  • Balance of intrinsic and extrinsic motivation: While the standard compensation plan (including commissions) provides extrinsic motivation, effective incentive programs should also foster intrinsic motivation. This means creating an environment where salespeople enjoy their work for its own sake, not just for the financial rewards.
  • Smaller, frequent rewards: Instead of relying solely on large bonuses, incorporate smaller, more frequent rewards. These can help create positive associations with good performance without overshadowing the inherent satisfaction of the work itself.
  • Non-monetary incentives: Include rewards that aren't purely financial, such as recognition, development opportunities, or experiential rewards. These can be more effective at building long-term motivation and job satisfaction.
  • Focus on behaviors, not just outcomes: Reward not just sales results, but also important behaviors and activities that lead to those results. This can help reinforce good habits and processes.
  • Variability and surprise: Include some element of surprise or variability in the incentive program. This can help maintain interest and excitement, preventing the program from becoming monotonous.
  • Timely recognition: Provide rewards and recognition as close to the achievement as possible. This reinforces the connection between performance and reward.
  • Peer recognition: Incorporate opportunities for team members to recognize each other's contributions. This can boost morale and foster a supportive team culture.
  • Avoid overjustification: Be cautious about overusing external rewards for tasks that salespeople might naturally enjoy. This can help prevent the overjustification effect, where external rewards diminish intrinsic motivation.

By incorporating these key components into your sales incentive program, you can create a motivational framework that drives short-term results and contributes to long-term job satisfaction and loyalty among your sales team.

2. Defining Sales Incentives

Sales incentives are powerful tools that go beyond simple rewards. They are strategic instruments designed to align your sales team's efforts with your company's objectives. By offering motivation through monetary rewards, such as bonuses and commissions, you can encourage specific behaviors and outcomes that propel your business forward and help meet your sales goals. 

Let's delve into the core purposes of sales incentives and their potential impact on your bottom line.

four ways a sales incentive program helps organizations

The primary purposes of sales incentives include:

  1. Driving specific sales behaviors
  2. Increasing overall sales performance
  3. Boosting employee engagement and retention
  4. Aligning sales activities with company objectives

When implemented correctly, sales incentives can significantly impact your bottom line. Now that we understand the fundamental purpose and impact of sales incentives, let's explore the various types of incentives you can incorporate into your program.

B. Different Types of Sales Incentives

Sales incentives come in many forms, each with its own unique advantages. Generally, these incentives fall into two main categories: cash and non-cash rewards. A well-rounded sales incentive plan often incorporates a strategic combination of incentives, to cater to different motivations and preferences within your sales team. Let's examine these categories in detail to help you craft an incentive strategy that resonates with your team and drives results.

1. Cash Sales Incentives

Cash incentives remain one of the most straightforward and popular forms of sales incentives. Their immediate tangibility and flexibility make them attractive to many sales professionals. Here are some common types of cash incentives:

  1. Bonuses: These are one-time cash rewards for achieving specific goals or milestones. For example, a sales rep might receive a $1,000 bonus for closing a deal worth over $100,000.
  2. Increased Commission Rates: This incentive involves temporarily or permanently raising the commission percentage for sales reps who exceed their targets. For instance, you might increase commission from 10% to 15% for all sales above 120% of quota.
  3. SPIFFs (Special Performance Incentive Funds): These are short-term incentives designed to boost sales of specific products or services. An example of SPIFF is offering $100 extra for each new customer signed up for your premium SaaS package during a particular month.

Cash rewards provide immediate gratification and allow sales reps the freedom to use the incentive as they see fit, making them a consistently popular choice in sales incentive programs. The key to implementing successful and sustainable cash sales incentive programs is to make the rewards smaller and more frequent.

2. Non-Cash Sales Incentives

Non-cash incentives can often have a more lasting impact and create memorable experiences. Some popular options include:

8 most effective non cash sales incentive ideas for every organization

Travel vouchers

Travel incentives can be highly motivating, offering an experience that many employees might not arrange for themselves. Age and income levels significantly influence preferences for reward travel. As many as 64% of senior employees (51+) strongly favor drivable/short-flight domestic destinations over those requiring long international flights, while 45% of younger respondents (18-30) and those with higher incomes show a greater inclination towards group reward travel experiences.

  • Individual Travel Vouchers: Allowing top performers to choose their own travel experiences.some text
Example: A $2,000 travel voucher for the top seller each quarter.
  • Team Trips: Reward the entire team with a group travel experience to celebrate their collective success.some text
Example: A weekend retreat for the team if they collectively exceed their quarterly target by 20%.
  • Conference Attendance: Combine travel with professional development opportunities by sending top performers to industry conferences.some text
Example: Sending top performers to a major industry conference in an exciting location.

To organize travel incentives for your team, you can get in touch with incentive travel companies such as Cadence Travel, Travel Perk, or BI Worldwide.

Gift cards

These tangible rewards can cater to individual preferences and interests.

  • Retail Gift Cards: Offering flexibility for employees to choose their own rewards by providing gift cards to popular retailers.some text
Example: $500 Amazon gift cards for reps who maintain a 95% customer satisfaction rate.
  • Experience Gift Cards: Provide unique experiences tailored to individual interests by offering gift cards for specific activities or events.some text
Example: Tickets to sporting events or concerts for reaching monthly targets.
  • Tech Gadgets: Encourage sales reps to upgrade their personal technology by offering gift cards for electronics retailers.some text
Example: The latest smartwatch or noise-canceling headphones for the first rep to reach their annual quota.

Tango Card offers a wide range of digital gift cards, while companies like Incentive Concepts, Fountain Gifts, and Gilded Gifts can provide branded merchandise and tech gadgets.

Experience days (e.g., spa treatments, sporting events)

Experience days offer unique, memorable rewards that can create lasting motivation.

  • Spa Treatments: Offer relaxation and pampering as a reward by providing spa treatment packages.some text
Example: A full day at a luxury spa for the top performer each quarter.
  • Sporting Events: Provide tickets to major sports games as a reward for achieving sales targets.some text
Example: VIP tickets to a local pro sports team game for reaching 150% of the quota.
  • Adventure Activities: Offer thrilling experiences for the adventurous members of your team as a reward for their outstanding performance.some text
Example: A skydiving experience for the first rep to reach their annual target.

Cloud 9 Living now a part of Virgin Experience Days and Tingly offer a wide range of experience day options.

Professional development opportunities

These incentives invest in your employees' growth and career advancement.

  • Industry Certifications: Cover the cost of valuable professional certifications to support your sales team's professional development.some text
Example: Paying for and providing study time for a Certified Sales Professional (CSP) certification.
  • Leadership Training: Offer programs to develop management skills and prepare high-performing reps for leadership roles.some text
Example: Enrollment in a leadership course at a prestigious business school for consistently high performers.
  • Sales Technique Workshops: Provide advanced training in specific sales methodologies to help your team refine their skills.some text
Example: Attendance at a Sandler Training workshop for exceeding quarterly targets.

Sales Assembly offers tailored sales training programs, while Coursera, Udacity provide online courses in various technical and business skills.

Recognition programs (e.g., "Salesperson of the Month")

Public recognition can be a powerful motivator, especially when combined with other incentives.

  • Salesperson of the Month: Highlight top performers regularly to showcase their achievements and motivate others.some text
Example: A dedicated parking spot, a trophy, and a company-wide announcement for the top seller each month.
  • President's Club: Create an elite group for top annual performers to recognize their outstanding contributions.some text
Example: Induction into the President's Club with a special badge, exclusive events, and a luxury trip for those who exceed annual targets by 25% or more.
  • Wall of Fame: Create a visible display of top performers over time to celebrate their success and inspire others.some text
Example: A prominently placed digital display showcasing current and past top performers.

Ambition offers sales gamification and recognition software, while Hoopla provides digital signage solutions for visual recognition.

Additional paid time off

Extra time off can be a highly valued reward, promoting work-life balance.

  • Bonus Vacation Days: Add extra days to the standard vacation allowance as a reward for exceptional performance.some text
Example: An extra day of PTO for every month a rep exceeds their quota.
  • Sabbaticals: Offer extended time off for long-term high performers to recognize their dedication and hard work.some text
Example: A one-month paid sabbatical for sales reps who have consistently exceeded targets for five years.
  • Flexible Working Hours: Allow more flexibility in work schedules as a reward for achieving significant milestones.some text
Example: The option to work four 10-hour days instead of five 8-hour days for a month after hitting a big sales milestone.

PTO Exchange allows employees to convert unused PTO into other benefits, while TimeOff can help manage complex PTO policies.

Tech Gadgets

The latest technology can be an exciting incentive for many sales reps.

  • Latest Smartphones: Offer the newest models as rewards for achieving significant sales milestones.some text
Example: The latest iPhone or high-end Android device for the first rep to reach $1 million in sales.
  • Smart Home Devices: Provide cutting-edge home automation technology as a reward for consistently exceeding targets.some text
Example: A complete smart home setup (smart speakers, thermostats, security cameras) for consistently exceeding targets for six months.
  • High-End Laptops or Tablets: Upgrade work tools as a reward for outstanding performance.some text
Example: A top-of-the-line MacBook Pro or Microsoft Surface for the highest performing rep of the year.


These ongoing rewards can provide continuous motivation and enjoyment.

  • Streaming Services: Offer subscriptions to popular entertainment platforms as a reward for maintaining high customer satisfaction rates.some text
Example: A year of Netflix, Disney+, and Spotify Premium for maintaining a 98% customer satisfaction rate.
  • Meal Kit Services: Provide convenient, gourmet meal options as a reward for exceeding quarterly targets.some text
Example: A six-month subscription to HelloFresh or Blue Apron for exceeding quarterly targets.
  • Wine Clubs: Deliver curated wine selections regularly as a reward for top performers in customer retention.some text
Example: A year-long subscription to a premium wine club for the top performer in customer retention.
  • Book of the Month Clubs: Cater to the readers on your team by offering book club subscriptions as a reward for consistently high performance.some text
Example: A year's subscription to Book of the Month for consistently high performance in demos and presentations.

Non-cash incentives can be particularly effective in fostering a positive company culture and creating talking points among team members.

C. Designing an Effective Sales Incentive Program

Creating a successful sales incentive program requires careful planning and execution. Here's a step-by-step approach to designing your program:

  1. Set Clear Objectives: Begin by identifying specific, measurable goals that align with your overall company strategy. Consider both short-term and long-term objectives to create a balanced program.
  2. Understand Your Team: Take the time to assess your team's demographics, individual preferences, and career aspirations. Gather feedback on previous incentive programs to understand what has worked well in the past.
  3. Structure the Incentive Program: Based on your objectives and team insights, choose appropriate incentive types and set achievable yet challenging targets. Determine the timeframe for your program and ensure fairness and transparency in its structure.
  4. Implement the Program: Clear communication is key to successful implementation. Use visual aids like leaderboards and progress trackers to keep your team engaged and informed.
  5. Monitor and Analyze: Utilize sales performance management tools to track progress and regularly review the program's effectiveness. Don't forget to gather feedback from participants throughout the process.
  6. Adjust and Improve: Be prepared to modify your program based on results and feedback. Continuously seek ways to keep the program fresh and engaging for your team.

D. Best Practices for SaaS Sales Incentives

When designing incentives for a SaaS sales team, consider these best practices:

  • Focus on Customer Success: In the SaaS world, long-term customer relationships are crucial. Incentivize behaviors that lead to customer satisfaction and retention, not just initial sales.
  • Encourage Team Collaboration: Include team-based incentives to foster a collaborative environment and recognize efforts that contribute to overall sales success.
  • Balance Short-term and Long-term Goals: Mix quick-win incentives with rewards for achieving long-term objectives to maintain motivation throughout the sales cycle.
  • Personalize Incentives: Offer a choice of rewards and consider tiered incentive structures based on performance levels to cater to individual preferences.
  • Keep It Simple: Ensure your incentive structure is easy to understand and track. Complexity can lead to confusion and decreased engagement.
  • Leverage Technology: Use CRM and sales performance management software to automate tracking and payouts where possible, making the process more efficient and transparent.
  • Align with Company Culture: Ensure your incentives reflect company values and consider including non-sales metrics like customer satisfaction scores.

E. Specific Incentive Ideas for SaaS Sales Teams

Here are some tailored incentive ideas for SaaS sales teams:

  1. Performance-Based Incentives: Offer tiered commission structures for exceeding targets or bonuses for closing deals above a certain value.
  2. Customer Success Incentives: Reward high customer satisfaction scores or successful customer onboarding to emphasize the importance of long-term customer relationships.
  3. Team-Based Incentives: Provide group rewards for achieving team targets or recognition for collaborative wins to foster a team-oriented culture.
  4. Personal Development Incentives: Offer training courses, conference attendance, or mentoring sessions with executives to support career growth.
  5. Lifestyle Incentives: Consider flexible working hours, wellness program subscriptions, or home office equipment upgrades to support work-life balance.

F. Implementing and Managing a Sales Incentive Program

Successful implementation involves more than just launching the program. Here's how to effectively manage your sales incentive program:

The three step process of implementing and tracking a sales incentive program.

  1. Launch: Hold a kick-off meeting to introduce the program, provide detailed documentation, and offer training on any new tools or processes.
  2. Ongoing Management: Conduct regular check-ins with team members, provide transparent reporting on progress and payouts, and celebrate wins and milestones.
  3. Evaluation and Iteration: Perform quarterly reviews of program effectiveness, conduct annual comprehensive analyses, and continuously gather feedback for improvement.

G. Potential Challenges and Solutions

Be prepared to address common challenges in sales incentive programs:

1. Overemphasis on Short-term Results

Focusing too heavily on short-term incentives can lead to a neglect of long-term goals and customer relationships. Sales reps may prioritize quick wins over sustainable growth, which can harm the company's reputation and future success. 

To mitigate this, balance short-term incentives with long-term customer success metrics, such as customer lifetime value or retention rates. This encourages sales reps to consider the bigger picture and nurture lasting customer relationships.

2. Complexity and Confusion

Overly complex incentive structures can lead to confusion and disengagement among sales reps. If the program is difficult to understand or the criteria for earning rewards are unclear, reps may become frustrated or lose motivation. 

To address this, simplify the program structure and improve communication. Clearly outline the requirements for earning incentives, provide regular updates on progress, and ensure that the program is easy to comprehend for all participants.

3. Lack of Engagement

If the incentives offered don't align with the interests and motivations of your sales team, engagement may suffer. Generic rewards or those that don't reflect the team's preferences can lead to a lack of enthusiasm and participation. 

To combat this, personalize incentives based on individual preferences and regularly refresh the program to maintain interest. Gather feedback from your sales team to understand what types of rewards they value most and adapt the program accordingly.

4. Unfairness or Perceived Bias

If the criteria for earning incentives are not applied consistently or transparently, sales reps may perceive the program as unfair or biased. This can lead to resentment, demotivation, and a breakdown in trust between reps and management. 

Ensure that the program has transparent criteria and that all team members have an equal opportunity to earn rewards. Regularly communicate the reasoning behind incentive decisions and be open to feedback and concerns from your team.

5. Budget Constraints

Implementing a comprehensive sales incentive program can be costly, especially if it relies heavily on monetary rewards. Limited budgets may restrict the scope and effectiveness of the program, leading to disappointment among sales reps. To work within budget constraints, utilize a mix of monetary and non-monetary incentives. 

Incorporate low-cost but highly valued rewards, such as recognition, professional development opportunities, or additional paid time off. This allows you to create a well-rounded program that engages reps without overextending the budget.

Understanding these common challenges and implementing targeted solutions will help you create a sales incentive program that effectively motivates your team, drives performance, and aligns with your company's goals and values. Regular monitoring, evaluation, and adjustment will help ensure that the program remains relevant and impactful over time.

H. Sales Incentive Strategies for SaaS Sales Roles

In a typical SaaS sales team, you'll often find different roles with distinct responsibilities. Customizing incentives for each role can lead to more effective motivation and better-aligned performance. Here's how you might approach this for common SaaS sales roles:

1. Sales Development Representatives (SDRs)

Primary focus: Lead generation and qualification

Top Sales Development Representative KPIs:

  • Number of qualified leads generated
  • Lead-to-opportunity conversion rate
  • Number of demos or discovery calls booked
  • Lead quality score

Customized incentives:

  • Bonus for exceeding monthly qualified lead targets
  • Rewards for booking a certain number of demos or discovery calls
  • Recognition for consistently high lead quality (measured by conversion rates)
  • Gamification: Points system for various prospecting activities (calls, emails, social touches)

Example: Implement a tiered reward system where SDRs earn points for each qualified lead. At certain point thresholds, they can choose rewards like extra PTO, lunch with an executive, or professional development opportunities.

Free to download land and expand sales compensation plan for SDRs

2. Account Executives (AEs)

Primary focus: Closing deals and managing the sales cycle

Top Account Executive KPIs:

  • Closed won deals
  • Revenue generated
  • Average deal size
  • Sales cycle length
  • Win rate

Customized incentives:

  • Traditional commission structure based on closed deals
  • Accelerators for exceeding quarterly targets
  • Bonuses for upselling or cross-selling additional products/features
  • Rewards for maintaining high customer satisfaction scores post-sale

Example: Offer a "deal accelerator" where AEs earn higher commission rates for deals closed within a shorter sales cycle, encouraging efficiency and faster revenue recognition.

Free to download compensation plan template for AEs.

3. Account Managers (AMs)

Primary focus: Onboarding, retention, and expansion

Top Account Manager KPIs:

  • Customer retention rate
  • Net Revenue Retention (NRR)
  • Customer Lifetime Value (CLTV)
  • Customer Satisfaction Score (CSAT) or Net Promoter Score (NPS)
  • Expansion revenue

Customized incentives:

  • Bonuses tied to customer retention rates
  • Rewards for successful upsells or expansions within existing accounts
  • Recognition for high customer satisfaction scores or NPS improvements
  • Incentives for timely and successful customer onboarding

Example: Implement a quarterly bonus structure based on a combination of retention rate, expansion revenue, and customer satisfaction scores, encouraging a holistic approach to customer success.

Free to download compensation plan template for AMs

By picking different rewards that fit well with each role within the sales team, you can make sure everyone feels valued and motivated to do their best.

Incorporating Technology and Analytics into Sales Incentives

Incorporating technology and analytics into your sales incentive strategies can significantly enhance their effectiveness and efficiency. A sales compensation management tool like Visdum that integrates with CRM and invoicing platforms offers several advantages:

  1. Data centralization and accuracy:
    • Eliminates manual data entry errors
    • Provides a single source of truth for sales performance
    • Enables real-time tracking of sales activities and results
  2. Improved visibility and transparency:
    • Allows sales reps to see their progress towards goals
    • Helps managers identify top performers and those needing support
    • Facilitates fair and consistent application of incentives
  3. Efficient administration:
    • Automates calculations of commissions and bonuses
    • Reduces time spent on administrative tasks
    • Minimizes disputes over payouts
  4. Data-driven decision making:
    • Provides insights into which incentives are most effective
    • Allows for quick adjustments to incentive structures based on results
    • Helps identify trends and patterns in sales performance

When we bring these tech-savvy approaches into play, it means that incentives truly speak to our sales team’s needs and desires - pushing them toward greater motivation and productivity.


Sales incentives are super important for keeping sales teams motivated and performing well. By tailoring these incentives, using tech smartly, and trying out new strategies, companies can really boost their sales game. But it's also crucial to steer clear of common mistakes and keep a close eye on how the program is doing if you want to keep growing.

To make your sales incentive program work its best, concentrate on setting straightforward goals, being open in your communication, and giving feedback regularly. With the right alignment between what motivates your team and your company's objectives while tracking important metrics closely, businesses can foster a winning culture that leads to better results over time.

Frequently Asked Questions

What Makes a Sales Incentive Program Successful?

A successful sales incentive program motivates the team, rewards them fairly, aligns with company objectives, adapts based on feedback and data, and fosters open communication and a positive culture.

How Often Should Sales Incentive Programs Be Updated?

Well, it's important to keep them up-to-date so they work well and match the ever-changing sales process and what's happening in the market. How often this happens can depend on what your company needs and how quickly things change where you sell stuff. At a minimum, taking a look at these programs once every year is a good idea, especially if there have been big shifts in how things are sold, changes in the market or new goals within your company. By checking in regularly with your sales team for their input, you can spot ways to make these incentives better and tweak them as needed.

Can Sales Incentives Work for Remote Sales Teams?

For remote sales teams, incentives are crucial for motivation and focus. With omnichannel sales incentives, virtual rewards, and improved performance tracking, sales leaders can inspire their teams from a distance. Creative virtual rewards and a strong company culture help remote teams succeed and achieve their goals.

How to Ensure Fairness in Sales Incentive Programs?

Ensuring fairness in sales incentive programs is crucial. Clear rules on earning incentives and equal opportunities for all team members are key. Avoid favoritism and unfair advantages by communicating clearly, providing regular feedback, and maintaining inclusivity.

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