Several years ago, our company created a sales incentive program for a client in the sanitation products business. Their products were sold in dispensers, so the promotion was designed to motivate their distributor sales network to sell a new touch-free dispenser line. The incentives were well designed and the new products were a hit, so sales went through the roof; actually almost tripling versus the previous incentive program. Those were great results. . .except for one small problem – the client hadn’t forecasted the sales increases, so the factories could in no way keep up with the production. What ensued was a chaotic scramble to ramp up production, provide damage control in the distributor network and calm down angry end users whose products were back-ordered by six months.
What we learned is that incentive planning has to go far deeper than the usual steps that the industry has used for years such as guessing sales numbers, budgeting, and deciding on an “open-ended” or “close-ended” rewards structure. In fact, the right way to look at incentive program design is as a serious exercise in true Return on Investment (ROI) analysis. Anything short of that can leave the sales manager vulnerable to financial and delivery problems.
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