The Ultimate Guide to Sales Incentives: What is a Spiff in Sales?
Every sales leader wants their or team to overachieve and become a revenue-generating machine. But it can be challenging to crack the code of exceeding sales quota.
How do you motivate your team to perform with sales goals continuously increasing?
That’s where a sales spiff can solve your challenge.
What is a spiff in sales? It’s an incentive used to motivate your sales team and increase productivity. And it could be the answer to helping you and your team reach success.
In this blog post, we will discuss the definition of a spiff, why you should use them, the benefits, the disadvantages, how long they should run for, the difference between spiffs and commissions, and how they work. We will also provide an example of a spiff.
What is a spiff in sales?
Spiff stands for Sales Program Incentive Funds. It is a time-bound incentive program that motivates salespeople to sell a product or to overachieve targets.
Spiffs are commonly used for short-term goals such as selling a new product release, achieving a monthly target, or beating a common competitor.
For example, if you want to sell a new product to 100 customers in the first quarter, when a sales rep achieves their target, they would receive a specific incentive. Spiffs can be given as a cash or non-cash reward incentive.
The first use of a spiff system dates back to 1859 when salespeople sold old-fashioned and unused stock. Although it doesn’t hold the same meaning, today is commonly used to motivate sales teams to outperform their goals.
One of the most famous cases of using spiffs was Dell in 2019 when they customized sales spiffs to target businesses that might have been lost to competitors.
Spiffs are a powerful way to motivate your sales team and boost productivity. A spiff can give your team additional momentum toward your targets when done successfully.
What is an example of a spiff?
A typical example of a spiff is a “sales contest.” In this type of spiff, salespeople compete to sell the most products or services within a specific time period. The sales rep who sells the most products receives a prize, such as a cash bonus or non-cash reward.
Here are several examples of when to use a spiff:
- Prospecting an account: Is there a target account challenging to break into or get a response from? Use a spiff to incentivize your sales team to think outside the box when prospecting into the account. Provide an incentive to the sales rep that can successfully break into the account and schedule a meeting.
- Closing deals: Do you have a tough quarter ahead of you and need an extra boost to your deal flow? A spiff can motivate your team to overachieve their goals and close other deals.
- Team spiffs: Having everyone work together can benefit the morale sales team. Use team-based spiffs such as an overall team quota target to incentivize the entire team. This is a great way to foster teamwork and build a great sales culture.
- Beating a competitor: Is there a new competitor stealing your potential customers? Incentive your team to work harder and beat your competitor in deals. Additionally, provide a spiff to sales reps to win back a competitor’s customer.
The benefits of spiffs
Spiffs are an effective way to boost your team’s performance. They can help salespeople focus, improve productivity and increase revenue.
Here are several benefits of spiffs:
1. Motivate your team
Sales is a stressful job that can lead to disengagement and a lack of motivation. A perfectly timed spiff can reinvigorate your sales team and reward them for their hard work. Spiffs can be a great way to motivate your sales team and give them an extra reason to work harder.
2. Improve short-term sales targets
Since spiffs are time-bound, they can be used to improve short-term sales targets. Spiffs can work well if your business has short-term revenue goals it must hit. They can help you generate more revenue and grow your business when planned correctly.
3. Accelerate larger deals
Provide a spiff for specific deals stuck in pipeline or haven’t progressed much in the sales process. You can design a spiff to address these specific deals. Sales reps may not be motivated to navigate a complex deal and prefer to work on smaller deals that will close faster.
4. Support a new product release
Spiffs are a great way to enable salespeople to sell a new product or service that has just launched. You’ll want to gain as much early traction as possible during a new product release. A spiff can be a great motivator to help your sales team achieve its targets.
5. Beat a competitor
Every organization has competitors in their deals, and businesses can’t afford to lose often. A spiff is a great way to reward sales reps who have successfully beaten a competitor or won back a customer. It ensures that your company gains market share while rewarding sales reps.
The disadvantages of spiffs
Spiffs have some disadvantages to consider before implementing them in your business.
For example, spiffs can create tension among salespeople if they feel they are not receiving fair compensation. If spiffs are not well-designed, they can decrease morale and motivation instead of increasing it.
1. Prevent sandbagging sales
If sales reps are aware of upcoming spiffs, they can sandbag sales to close during the upcoming period to get an extra incentive. To avoid sandbagging, it’s important to ensure spiffs are time-bound and unexpected.
2. Prevent unhealthy competition
Sales teams can get very competitive as each rep wants to be seen as the top performer. Spiffs can create hostile competition and tension amongst team members instead of collaboration when done poorly. This is why you need strict guidelines on how the spiff is structured and get buy-in from everyone on the team.
3. Budget constraints
If spiffs go accordingly to plan, you’ll celebrate successfully hitting sales targets. But that also means you’ll have to pay up the incentives to the team, which can be costly. Ensure you have well-managed incentive programs that don’t break the bank and go over budget.
How to run an effective SPIFF?
Sales spiffs work by providing an additional incentive for achieving specific goals.
Here’s how to effectively run a spiff program.
1. Define clear goals
The goal of a spiff can be meeting a specific sales goal, selling a new product, closing deals, or booking meetings. Be clear with your sales teams on the goal of the spiff and how it relates to their overall sales quota.
For example, if each sales rep has a goal of selling 50 new customers and one rep sells 75, they can receive a spiff for each additional new customer above their sales targets.
2. Show how sales reps can achieve those goals
Sales reps are motivated by their compensation plan and will try to find the path of least resistance to hitting their goals.
Walk through the spiff program with your sales reps and show how they can achieve those goals. Ensure that they understand the requirements so that nobody breaks the rules.
3. Define the spiff participants
Spiff programs don’t need to be for everyone. Additionally, sales reps don’t need to follow the same spiff if they have different responsibilities.
You can define the participants based on job function or region.
For example, if you have Sales Development Reps (SDRs) focused on booking meetings, they can be incentivized based on pipeline. At the same time, Account Executives who close deals can be incentivized by new customers.
4. Set a timeline
Ensure you have a clear timeline on how long the spiff program will last.
They can relate to short-term goals such as a monthly or quarterly quota. A spiff program should have a start and end date.
5. Finalize budget
Spiff programs can get expensive if the budget isn’t managed correctly. Ensure you have enough budget, whether cash or non-cash prizes, to allocate for incentives.
6. Track and measure results
Sales spiffs aren’t guaranteed wins. You should consistently track and measure performance to see if it is making an impact on your goals.
If not, assess what’s going wrong and see what you can optimize.
How long should spiffs run for?
When implementing spiffs, you should consider how long they will run.
Spiffs that last too long can create a feeling of entitlement among your sales team and decrease motivation. Spiffs that are too short may not give sales reps enough time to accomplish their new goals.
There isn’t an ideal duration for a spiff. But these programs can run anywhere between a few days and weeks to a month or quarter.
They should be designed for short-term goals, and your sales reps need a clear understanding of the timeframe.
Difference between spiffs and commissions
What is the difference between spiffs and commissions?
Commissions are a percentage of a rep’s total sales compensation plan, while spiffs are typically paid in addition to commissions. Commission percentages vary across industries and companies.
The average sales commission is about 40% incentive pay with a 60% fixed salary. At the same time, sales spiffs can be any set amount.
Spiffs can take numerous forms. The most common are cash, non-cash, and experiences. It’s good practice to get to know your team and understand what motivates them.
Here are several ideas for non-cash spiffs:
- Gifts and merchandise
- Gift cards
- Travel and entertainment
- Food and finding
- Team Activities
- Power and Access
Final thoughts on sales spiffs
Sales spiffs are a great way to boost productivity and generate more revenue. They help your sales team keep their eyes on the prize and achieve their targets.
If you’re thinking of creating a spiff program, there are several things to consider before implementing one within your company. Be mindful of the advantages and disadvantages, and ensure you set the proper timeline.
Lastly, have fun with spiffs because they are a great way to boost morale and engagement.
We hope this blog post has provided helpful information about spiffs and how they work.
