The Four Ws of Incentive Planning...Who, Why, When and What

There are many important factors to consider when developing an incentive program. There are, however, core considerations that, like the four Ps of marketing (product, price, place and promotion), must be properly planned in order to insure a successful incentive program. They are the who (participants), why (goals), when (timing) and what (program structure).

These four incentive program development factors form the incentive engine that when fueled by the right rewards will put you on the road to success.

Who…Deciding "who" should participate in an incentive program is one of the first important steps. In a sales incentive program, be sure to consider the entire

channel. The best participant is one who, when motivated, can most directly impact the program goals. This may not be your client’s sales force. Good questions to ask your client are "where are things not happening in your distribution channel?" "Where is the bottleneck?" Chances are the answer will point to "who" should be participating.

Other factors that determine "Who" should participate include:

• Accessibility – Is the information available to contact participants directly or do you have to contact participants indirectly through other channel partners or direct mail? Indirect contact may require several months and cost additional funds that might be better spent focusing on participants further up the marketing channel.
  

• Budget – The amount of money budgeted for an incentive program may ultimately decide who participates. For example, you have determined your client has a budget of $100,000 dollars. Your client also says that the participants who can most directly have an impact on their goals is the store manager. There are, however, 1,000 store managers.
  
  This means your per participant budget is only $100. To include store managers, you would need to look at developing rules using a contest structure or sweepstakes versus a true incentive. The other option would be to move up the channel and target your dollars at a smaller participant group where you can get a greater bang for your incentive buck.
  

• Company policy – Many companies have policies that prevent employees from participating or limit their involvement. You need to find out early in the process if there are any limitations to participation or the types of awards that can be offered to your target audience.

Why...The foundation of success for any incentive program is set when you establish the right goals. Goals that are realistic, measurable and attainable serve as the cornerstones for achieving the results your client desires.

Realistic – Unrealistic goals only yield the realism of failure. An example of an unrealistic goal is a sales manager setting a goal of a 10% increase over the previous year when the company has never achieved more than a 3-5% increase and the market is declining.

Measurable – Goals must be measurable. Participants must be provided clear and understandable objectives. For example, increase sales is not a goal. Increase sales 10% is a goal.

Attainable – Goals may be realistic, but not attainable. A sales manager may set an across-the-board goal for the company of a 10% increase over the previous year. That then becomes everyone’s goals. However, that goal may be realistic for the company, but for many individual participants, it is unattainable.

Another important consideration in identifying goals is to keep the number of goals to a minimum. It’s like the old cooking axiom, too many cooks spoil the broth only in this case it is too many goals spoil the program. The incentive program should focus attention and effort on the top two or at most three sales/revenue objectives of your client. If you’re looking at more than three goals, you will water down the motivational impact of all goals and thereby reduce the program’s success potential.

Finally, an important but often overlooked factor in identifying goals is to get sales management and senior management buy-in. Launching a program targeted to achieve goals that the sales manager(s) don’t agree to is a sure recipe for failure.

When…When to run a program more often than not depends on the goals of the program. Incentive programs implemented to drive annual performance will typically kickoff at the beginning of a calendar or fiscal year. Other goals that drive the decision of "when" to implement an incentive include the following:

• Invigorate sales during peak period in sales cycle

• Invigorate sales during a sales slump

• Reinforce the launch of a new product
  or product line

• Reinforce a consumer or customer advertising/promotion effort

• Defend against competition

Factors that may conflict with an incentive program should also be considered when looking at the timing of the program. Find out what other marketing, sales promotion and advertising efforts are planned for the time period that the incentive program will be running. If there are other major company efforts, they may compete for your participants’ time and attention and have an adverse effect on the incentive program. It may be worth delaying a launch to insure the incentive program receives the maximum amount of attention.

What… Of course, one of the most important steps in building a successful incentive program is developing a rules structure that targets the goals of the program, can be clearly presented and understood by your target audience, and most important, establishes the framework that when combined with the right awards will create a program structure that will appeal to and motivate program participants.

How you actually structure a program more often than not is dictated by the budget. Basically there are two ways to structure and fund an incentive program—open-end budget programs and closed-end budget programs.

Open-end programs include continuity or point-based programs, plateau/step-up programs, goal-based programs or some combination of all three. An open-end program literally means there is no cap or limit to the earning potential of participants. Open-end programs must be structured so that funding is based on incremental sales or purchase performance. It is the purest and most effective incentive application. For participants it means "sell more earn more" or if it is goal-achievement based it is "hit and win."

Closed-end programs address the challenge of a "fixed budget." This means that regardless of how many participants achieve goal or how many units and individual sells, no more than the budgeted amount will be issued in awards.

Contests and sweepstakes form the basis for most closed-end budgets. Closed-end budget programs have the inherent downside of leaving many participants who may have achieved goal, met a personal quota or sold more units than ever before without an award. They can, however, still be highly promoted, provide a motivational bang and yield the performance and results your client demands.

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