I would like to introduce a new series to the Young Entrepreneur Blog: Entrepreneur University. The goal of Entrepreneur University is to bring some expert advice from people who have been through the ups and downs of running their own business and can provide some insight for the rest of us.

This week’s advice comes courtesy of Andy Marken. Andy is the brains behind Marken Communications,  a full-service marketing and communications company. Andy’s advice is on how to create a sales incentive program for your small business.

As any small company grows, attracting and retaining quality staff is one of the biggest challenges entrepreneurs face. This is particularly the case with getting good salespeople on board. Here are Andy’s dos and don’ts:

Sales Incentive Dos

Getting Started

1. Clearly define the objectives before starting a program.
2. Pre-test the market for the product before the sales incentive program starts.
3. Keep the program simple.
4. Have a complete plan.
5. Gear it to marketing plans.
6. Tie in the program with the company’s over-all theme and objectives.
7. Tie in the promotion with advertising, p.o.p., and other merchandising supports.
8. Promote the program well in advance.
9. Make the campaign two to three months long.
10. Devise a program that is personalized for your company and product.
11. Leave room for flexibility in the program for additional awards along the way.
12. Allocate sufficient funds for proper promotion of the contest or incentive program.
13. Be specific as to the aims of the incentive program.
14. Communicate and stimulate with all means possible — mail, telephone, newsletters, ad specialties, etc.

Appeal to Rank and File

1. Tailor the program to fit the group participating.
2. Categorize dealers by sales potential, so they compete with others of like size.
3. Run a program for company or supplier sales people to coincide with dealer and distributor programs. One will sell the other.
4. Promote the program to all dealers and/or sales reps and, if possible, to their families.
5. Make the incentive program easily understood by those that it is intended to motivate — the most successful are often extremely simple.
6. Make the program fair to both sides: the company trying to make a profit, and the salesperson trying to make a living.
7. Offer an award that is commensurable in value to the assigned task.

Don’t Kid Them on Value

1. Offer a choice of several prizes.
2. Make sure the items are top quality; avoid misrepresentation of value of merchandise.
3. Offer incentives only for performance over a base or average.
4. Make incentives cumulative so salesmen will save for bigger prizes.
5. Keep in mind: money awards alone are difficult to promote and spark enthusiasm for.
6. Take the “pulse” of the sales force to ascertain if the incentive plans really do motivate the extra effort.

Follow-Up

1. Set up a follow-through program (mailers, etc.) to sustain the program.
2. Recognize winners with an announcement to all participants.

Sales Incentive Don’ts

1. Don’t make it too long-range.
2. Don’t set goals too high.
3. Don’t create too much administration.
4. Don’t use contests in which only top performers are winners. This may result in committing yourself to a group of prizes regardless of results.
5. Don’t use gift prizes as a substitute for personal income.
6. Don’t fail to plan ahead thoroughly and carry through completely. If it’s a cash bonus or commission, pay promptly and extend recognition. If a trip, have every detail as perfect as possible and carefully mix solid business with pleasure. Extend recognition via press releases, company publications, etc.
7. Don’t change incentive plan in mid-stream — carry through to the end.
8. Don’t allow exceptions. Rules must apply to all involved.
9. Don’t make the plan complex. Everyone involved should know clearly what is expected and how to get there.
10. Don’t use only your company’s own products as awards. It limits the appeal and appears as if you’re only trying to save money.
11. Don’t offer trip prizes to places where the winners would be uncomfortable — below their ideas of “a nice place” or way above, where partners would feel ill at ease and not properly dressed.
12. Don’t offer prizes of questionable quality or with an unjustifiable price tag.
13. Don’t let your own interest and enthusiasm wane as the program progresses.
14. Don’t wait until the last minute to tell your dealers.
15. Don’t make a big splash at announcement time and fail to follow-up. Standings reports and promotional follow-up mailings are a must.
16. Don’t run a contest any longer than 90 days.
17. Don’t set bases so high that salesmen feel they don’t have a chance to win.
18. Don’t limit incentives to sales or sales volume only. Include incentives for other work such as displays, ads, new accounts, etc.
19. Don’t be dazzled by “get rich quick” dealer loaders. They can come back to haunt you. A dealer with a load of year-old merchandise isn’t always too receptive to new requests for orders.

Evan Carmichael

Evan Carmichael
YoungEntrepreneur.com Blog Manager

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