Compensation: Round-the-Clock Incentives
Some salespeople have been with you for years, others only months. Is it possible to motivate both camps? Peripheral Outlet, in Ada, Okla., has incentives for the year, quarter, month, week, and day, and even for the hour. "I have a bonus plan in place at all times," says Jeff Thompson, president of the $24-million direct marketer of Macintosh-computer memory products.
Why go crazy? Peripheral Outlet employs eight salespeople and is hiring two more. While some of Thompson's best performers thrive by working toward quarterly and yearly goals, others respond better to daily stimuli. "I'm that way," Thompson professes. "I'll say, 'What are today's sales, profits? I've got 12 hours, and if I just do this, I can make this extra money." So he has established bonus programs to suit his longtime steady producers and the more antsy new-comers.
The most effective of his sales contests are the simplest. They reinforce the value of staying in touch with customers. For example, when Thompson -- who serves as both sales and purchasing chief -- can get a great price on a computer-memory part, he buys a large quantity and runs a two-day "overstock" contest. "I might say, 'For each of so many lots you sell over this price, you get to put your name in the hat to win a hundred-dollar bill." It's an extra little push to get salespeople to tell old clients, as well as cold prospects, about the latest bargain.
Thompson explains, "The salesperson can say, 'I know you haven't bought from us before, but here's why you should today."
Many of the bonuses are tied to gross profit rather than sales volume. On certain days, for example, the person who contributes most to the gross profit wins an extra $100 or even $500. But Thompson understands the salespeople perform a difficult juggling act. They need to offer attractive prices to the customers without marring the bottom line. To make that easier for the salespeople, he posts a large chart that lists the costs of popular items, and of course, the sales reps can check the computer for product costs.
Thompson is careful to complete one contest before starting another. Still, with such a range of incentives, a company risks confusing its sales force -- or, heaven forbid, being overly generous. Thompson admits, "Sometimes I wonder if we do bonuses too often. I don't think so. I want to have rewards for both types of salesperson." And with his company's net income up 35% in 1994, he can afford to share the wealth.