Sales Incentives and Unintended Consequences

Do you mind if I include the extended warranty with your purchase? It costs $149, but the final price to you will be the same.

salesperson burning moneyThis sounds like a sales scam – add something in at the last minute to boost the value of the purchase. But in this case, I had already negotiated a 15% discount on top of the 20% Columbus Day sale. And the total we had agreed to pay was written in black and white in front of me. I literally had my credit card in my hand, and now the sales person was throwing in the high-margin warranty for no additional cost.

There could only be one reason – there must be a significant incentive to them to “sell” the warranty. So they threw away $149 of profit for their employer, and gave it to the third party seller of the warranty. [And yes, I know it means that despite haggling for a 35% discount, I had left at least $149 on the table!]. I’m sure that’s not the behavior that the store owner was hoping to create with the warranty program.

Sales incentives are a great way to drive revenue, focus the sales team on high-margin products, or boost purchases of slow-moving inventory. But, if poorly designed, they can also reward the wrong behavior, leading to unintended consequences. In Freakonomics, Steven Levitt and Stephen Dubner delve in to this in great detail. In one instance, they describe a study of childcare centers in Israel.

Daycare motherImagine for a moment that you are the manager of a day-care center. You have a clearly stated policy that children are supposed to be picked up by 4 p.m. But very often parents are late. The result: at day’s end, you have some anxious children and at least one teacher who must wait around for the parents to arrive. What to do?

A pair of economists who heard of this dilemma…. decided to test their solution by conducting a study of ten day-care centers in Haifa, Israel….. For the first four weeks, the economists simply kept track of the number of parents who came late; there were, on average, eight late pickups per week per day-care center. In the fifth week, the fine was enacted. It was announced that any parent arriving more than ten minutes late would pay $3 per child for each incident…

After the fine was enacted, the number of late pickups promptly went up. Before long there were twenty late pickups per week, more than double the original average. The incentive had plainly backfired.”

The authors go on to suggest that the reason for the “unintended consequence” was that the guilt that had driven most parents to pick up their kids on time, was now replaced by the feeling that they were paying for the extended service – and therefore were less inclined to hurry to the school to pick them up. So an effort to motivate people to be on time actually resulted in the opposite.

With these two cautionary tales in mind, how should this impact the way you design your next sales incentive program? Will you be rewarding your team for the right behavior? And will they act the way you expect?

Here’s an approach to limit the risk of pushing your sales team in the wrong direction:

1) Define & quantify the ultimate goal of the incentive (higher revenue, more profitable product mix etc). Then identify metrics which must not be adversely affected (profit margin, overtime spending, absenteeism),

2) Include both the goals and the adverse metrics in the rules

3) Review the contest rules with your sales leaders, or a reliable sales veteran, and ask them how it would drive their behavior. Do they see any trapdoors? Maybe even role-play some situations with them.

4) Monitor the adverse metrics, not just the goals, and be willing and able to amend the contest rules if you see it moving off-track.

Chances are, someone will still find a way to game the system, particularly if the rules are complex. You just want to make sure that’s the exception, not the rule!

[Note: This article was originally published at http://www.DittmanIncentives.com – please visit for more articles on Engagement and Incentives]

Sales Meetings – Snoozapalooza or Motivational Tool?

Portrait Of Sad Business TeamIt’s Day Two of your Sales Meeting. Pete is droning on about his customers in SouthWest II territory. It’s the eighth regional sales presentation of the day. No-one is paying attention (maybe not even Pete…)

You’ve taken your sales team off the street for three days, spent thousands of dollars to fly them to a conference room in Chicago, and now, as you look around the room at everyone surreptitiously emailing or trying not to fall asleep, you realize that it has all been a waste.

But it’s not a waste of time or money. It’s a waste of an opportunity. An opportunity to Engage your front-line team.

So, before you make the same mistake next year, here are some thoughts on how to make the sessions more valuable.

1) Ditch the Sales Reviews. The only people interested in a review of accounts in the Texas panhandle are sales and marketing management. Don’t waste everyone else’s time with them – most of the info is in your CRM, and if it’s not, set up individual Skype sessions with each team member before the meeting.

2) Share Best Practices. You’ve brought together a hugely talented team of sales professionals, so let them teach each other. Give everyone 10 minutes to present on a specific selected topic. Some suggestions – “Three most unusual applications I’ve seen for Product A”; “The most difficult objection I’ve overcome this year, and how”; “What I’ve seen our competitors do to sell against us”.

3) Mix it Up. Whatever you put on the agenda, focus on variety. Limit speakers to 30 minutes each (ask two people to present together if you need an hour to cover the material); mix up the subjects – for the best practices sessions above, sprinkle them throughout the agenda, not just in one half-day segment; and move locations throughout the day.

4) Less Talking, more Doing. Use brainstorming or whiteboard sessions to keep the energy up. Ask a general question, (“What’s the #1 sales tool you don’t have?”) and take 15 minutes to debate it as a group. Show a short promo video from a competitor and open the floor to comments. Bring in the product managers for a lively, unscripted, “Ask the Expert” panel. For larger meetings, use interactive technology such as livecube to increase participation.

5) Build a Bigger Team. This is a great time to forge stronger relationships between the sales team and the product/service/support teams. Don’t allow random groups to form for “team-building” activities – plan ahead and pollinate groups with cross-functional people. A great activity for this is the Marshmallow Challenge, beautifully presented by Tom Wujek in his TED Talk.

6) Outside Thinking. Bring in a speaker to share a different perspective. It doesn’t have to be expensive. Ask a supplier, a channel partner, or a customer, to come in and talk to your team about a subject they are passionate about (just so long as it’s not a sales pitch!). Or reach out to a local professional organization, such as the BMA or the Chamber of Commerce, for volunteers.

7) Shut it Down! Running late is endemic to sales meeting, but also counterproductive. During lunch breaks, before dinner and everywhere in between, your sales team will need to return calls, send a critical email – and take time to network with the corporate team. The more you overrun, the less time they will have, and the more frustrated they will become. Set up a projector or a laptop with a countdown timer, preferably one that flashes or makes sound when the time is elapsed. Put someone in charge to interrupt the speaker when time is up. It may seem rude – but it’s actually the speaker who is rudely stealing time from the other participants.

8) Time to Bond. If the budget allows, include an evening activity that will create a shared experience. It could be a go-cart challenge, a harbor cruise, or a Segway tour of the city. Anything that gives a common subject for people to talk about, and laugh about, long after the sales meeting.

Here’s a quick test. Take a look at the agenda and ask yourself “If I was hiring a new sales person, and showed them the schedule – would they take the job, or run away screaming”! Adding just one or two of these items should increase your chances of engaging the newbies, and the veterans, in your sales team.

[Note: This article was originally published at http://www.DittmanIncentives.com – please visit for more articles on Engagement and Incentives]

Making it Stick. How to Design your Sales Contest so that it Stays in Focus

Gaining Mind Share from Sales RepsIf you’re lucky enough to have a small, direct sales team, then an incentive program isn’t that difficult to communicate. After all, these folks report to you, are paid by you, and spend all day (hopefully) thinking about your products and who to sell them to. But if you’re going to market through indirect channels, you have to work harder to stay “top of mind”.

There are many ways to get more than your fair mind-share of a sales rep or distributor – great products, a responsive inside sales team, or a channel-friendly contract, can all help boost you in becoming the “Emotional Favorite.” But when it comes to sales contests and incentives, it’s a pretty crowded field out there. In my former role with an electronic components manufacturer, it wasn’t uncommon for a Sales Rep to carry a dozen brands, and a Distributor to carry thousands of product lines; and when Q4 came along, every one of those manufacturers was offering a different set of incentives. So how do you stand out from the crowd?

In Made to Stick, Chip Heath & Dan Heath talk about “Why some ideas survive and others die” and distill their philosophy into six key qualities of an idea that sticks; Simplicity, Unexpectedness, Concreteness, Credibility, Emotional, and Stories (and yes, the acronym is “SUCCESS”!). It’s worth reading the full book to truly understand their thought process. But for now, I’ll offer my own thoughts on how to design a sales contest that matches the Make it Stick criteria.

  • Simplicity. The rules of the contest should be straightforward. Hit a target, earn a reward. Maybe hit a second plateau and get a better reward. That’s it. I once encountered an incentive program that applied different point values to different products; gave each region and each sales person a different sales target; and split the contest into three phases, with emphasis on different behaviors in each. Did the sales person understand how to get their reward? No. Did it impact their behavior? No chance!
  • Unexpectedness. Add a kicker or two, at random intervals, to remind the team that they are in a contest. And do it publicly. At the sales meeting, call up the rep who has booked the most POs on a Wednesday afternoon, and give them a year’s supply of coffee (and I mean physically give them a Keurig machine and 12 boxes of k-cups). Next Wednesday, when your sales team stop at Starbucks, who are they going to think of?
  • Concreteness. The reward should be tangible and visible. It should be something you can show easily in promotional materials, and something that the sales team can envision. Travel incentives are particularly strong for this, since the participants will imagine themselves on the beach or climbing the Eiffel Tower. Cash sounds nice, but – unless it’s delivered in 100 dollar bills in a briefcase – it will never seem real, and will end up being used to pay bills and quickly be forgotten.
  • Credibility. Make the criteria clear, and deliver the rewards fully and on time. The first time you decide to cap the rewards because a team member “sold more than you expected,” you’ll lose the momentum. And if you’ve structured the rules properly, the achievement will more than pay for the reward anyway.
  • Emotional. Sales professionals are competitive by nature. Use LeaderBoards to show how they compare to their colleagues. Better yet, include a team reward by region, so they are also competing as a group.  This will amplify management participation at the Regional and Corporate  level.
  • Stories.  Tell them how to be successful. Share stories of how the top performers achieved their goals, and talk about the times when difficult customers were finally converted. And show photos and videos of previous winners, so that they can start to experience  what it’s like to be a Winner.

When you design your next sales contest, it’s tempting to dust off last year’s program. But by thinking through these six success factors, you stand a better chance of rising above the noise, and creating a sales incentive that really makes a difference.

[Note: This article was originally published at http://www.DittmanIncentives.com – please visit for more articles on Engagement and Incentives]

Marketing and Workplace Engagement – Two Sides of the Same Coin

BMA14Workplace Engagement was one of the three overarching themes of the BMA14 Conference in Chicago last week – which was surprising, since the Business Marketing Association (BMA) is dedicated to promotion and education of Business-to-Business Marketing, not Human Capital.

Time and again, speakers referred to defining and promoting brand values and brand image internally to strengthen employee engagement. Two other themes – everything is mobile, and bringing emotion into the marketing message – also align with current employee engagement trends.

Employee Engagement

A range of speakers demonstrated different approaches to brand-aligned engagement within their organizations.

USG, a building products manufacturer, described their program to use the rollout of a new brand as an employee engagement opportunity during the economic downturn. Jim Metcalf, Chairman and CEO, described their inclusive process. A few days before the brand launch, USG brought together employees from all levels of the company at the USA Olympic Training Camp in Colorado Springs; after two days of brand-focused workshops and training with Olympians, they returned to their business units, fully energized to act as new Brand Ambassadors. In Metcalf’s opinion “The brand starts and ends in the corner office” and should be foundational to the growth of the  company.

AON’s Andrew Miller described how they are leveraging their brand sponsorship of Manchester United to promote well-being in the workplace. Miller defined well-being as Physical + Emotional + Social + Financial, and cited an AON Hewitt study that a 1% increase in employee engagement predicts a 0.6% increase in sales.

“Ignite Employee Passion” was the entreaty from Betsy Henning of Aha, as she shared examples of companies using CSR and volunteering as an engagement tool. HP’s “Matter to a Million” program gave each of their employees a $25 credit to spend on a micro-finance project on Kiva. Within 6 months, 30% of their employees had used the credit, with a total spend of $2.8 M. Betsy also cited Patagonia, 3M and Levis as companies that used social causes and volunteering to connect to employees’ personal values, reinforcing the brand loyalty of their teams.

Everything is Mobile

The new CMO of Facebook, Gary Briggs, emphasized the growing ubiquity of mobile. The average smartphone user in the US checks their device 150 times per day; the number of visits each day to Facebook from a mobile device recently exceeded the visits from desktop. Mark Zuckerberg has implemented a “Mobile Team = Every Team” philosophy, and now expects all new feature ideas to be pitched as a mobile tool, not desktop-based.

Considering when a potential customer is thinking about your product (or incentive program), Briggs highlighted the positioning of several brands; Coke, who want to be in front of a customer “at the moment of thirst”, Google at the “moment of search” and now Facebook at the “moment of the moment”. He asked the question – what is your company’s “moment”, when you need to be in front of your internal or external customer.

Emotion in the Message

Are we sharing our brand message via every possible social, digital and traditional channel? Are we tracking likes, follows, shares and comments? As everyone becomes more focused on data and delivery channels, many marketers are losing sight of the message itself. Teresa Poggenpohl of Accenture and Tim Washer of Cisco were amongst the speakers who reminded us that emotion and humor are still critical elements in delivering a memorable and compelling message. “Connecting” is still a personal, emotional event, despite the ease with which social connections can be made online.

Gary Vaynerchuck, author of “The Thank You Economy” gave a passionate and energetic keynote, showing the potential of one-to-one connections through social media. Although social platforms encourage mass communication across broad networks, Gary emphasized the value of using these channels to connect with one person at a time. He gave the example of a prospect for his consulting business who tweeted frequently about the St.Louis Cardinals; Gary engaged directly with him over their shared love of baseball which – over time – lead to a face-to-face discussion and a multi-million dollar contract.

Engagement is Marketing

Throughout the BMA14 Conference, mixed in with the discussions of advertising metrics, sales strategy, and social media, it was clear that the basic drivers of brand marketing are closely aligned with the goals of improved employee engagement. Connecting employees to the brand values, creating an emotional appeal, and leveraging the utility of mobile devices, are all key to a successful employee engagement program.

[Note: This article was originally published at http://www.DittmanIncentives.com – please visit for more articles on Engagement and Incentives]

Packaging is Worth a Thousand Words

Tonx ships freshly roasted coffee beans to your door. I recently signed up for a sample, and before I even brewed the first cup, I knew it was going to be good quality. How? The packaging.

Tonx Shipment

First of all, the coffee itself was in a sexy-looking silver airtight package that you could imagine being on the International Space Station.

It also came with three small but perfectly-formed pieces of card.

1) Greetings Fellow Coffee Achiever! The implied message – “You’re a smart person. And you’re part of a club“. It goes on to tell you how excited they are about the beans they have just shipped you.

2) The Beans. An evocative description of the origins of the beans (with a photo on the other side).

Tonx coffee brew graphic“The San Ignacio Cooperative is made up hundreds of producers near Puntina Punco in the Sandia Valley of Peru. With exceptional soil and great shade, mostly Caturra and Typica coffee varieties make up the crop. With farms averaging 2.5 hectares, most of the farmers pick their own coffee before hand-crank pulping and fermenting in concrete tanks. Some even have channels for density sorting after washing the coffee. While the cooperative offers centralized drying for the smallholder producers, the majority dry their own on covered beds. San Ignacio is a complex, balanced cup, and performs great across many brew methods. A fragrance of clove and cinnamon paves the way for a creamy cup with flavors of milk chocolate, red delicious apple, and toasted walnut.”

3) The Brew.  An eye-catching graphic with seven ways to create that cup of coffee – and on the back some “Brew Basics” for those who are looking for guidance.

So here’s the thing. Before I even brewed the first cup, I was hooked. I knew it was a quality product, created by people who care, with a story behind it. And I knew I wanted to sign up for their bi-weekly subscription plan.

Of course, the coffee was delicious, once I finally stopped taking photos of the packaging long enough to grind the beans and put it in the french press.

So, if you love good coffee, if you love good product design or you love good marketing, Tonx is a must-try (and for me,that’s a trifecta!).

 

Do Loyalty Programs Work?

McKinsey recently published a study suggesting that the amount invested in loyalty programs doesn’t pay off in terms of growth or profitability [Making Loyalty Pay:Six Lessons From the Innovators]. Surprising? Not really. As I thought about all of the programs I’ve signed up for…and how many cards are sitting unused in a drawer somewhere…it started to make sense.

blog_thumb3From airlines to coffee-shops and every purchase level in between, we are bombarded with offers of loyalty programs. They range from a “10th item free” punchcard to elaborate points-based reward programs, and sometimes come with a range of perks and discounts. But do they all really drive loyalty, or do some equate to a complicated discount? If it’s just a discount, there’s a risk:  that kind of “loyalty” only lasts so long before the perceived value of the brand is deflated.

I visit Starbucks most days (sometimes twice, when I need “inspiration”). I have attained Gold Level – their highest rank. I swipe my card/app on every visit. By the definition of these programs, I’m “Loyal”. So why is it that, when I’m in Manhattan I will walk 4 or 5 blocks, passing several Starbucks, to reach Gregory’s Coffee? And in Chicago, I make a beeline for an Intelligentsia bar?

Because the Starbucks card isn’t loyalty, it’s a discount. Despite visiting the same store 80% of the time, there is no feeling of special treatment. I have to ask for my identical order each time; there’s no welcome back, no use of my name – although the baristas are all perfectly friendly. Sometimes the coffee is good, sometimes not so much. So my Starbucks “loyalty” is reduced to 1/12 of a free drink – and a refill if I happen to stick around.

At Gregory’s, Intelligentsia and many other independent coffee shops, the product is primary. The coffee is always excellent; the staff are happy, knowledgeable and helpful. And I couldn’t care less that I’m paying an extra 20 cents for the product, or missing my 1/12 discount. If my loyalty were really to Starbucks, wouldn’t I be more inclined to stop at their ubiquitous shops?

McKinsey offers six elements of success for loyalty programs. From smart data usage, to focusing on the most profitable customers, they provide clear business direction on how to optimize the value. But there are two that really ring true for me

Integrate Loyalty into the Full Experience. Although, sadly, the article cites Starbucks as exemplary here, the point is valid. When people have an emotional or experiential attachment to the product or brand, a loyalty program should amplify that attachment – offer genuine and valuable recognition for their affinity to the brand and give reasons to become an informal brand ambassador. Special treatment, invites to exclusive events, access to product designers…. These things generate loyalty. No discount required.

Solve Customer Pain Points. Reward or engender loyalty by making the process easier for your best customers. What are the pet peeves of your frequent customers? And how can you alleviate it just for them? Airlines used to understand this. A high-level frequent flyer gained access to quiet airport lounges and early boarding privileges – alleviating two major grievances when living on the road. But with the advent of credit card memberships, buy-up options and mergers, it now seems that 80% of people “pre-board” a United plane, the lounges are permanently crowded – and so once again we’re left with the “discount” of frequent flyer miles as the main (diminishing) perk.

As with all recognition programs, the key is to understand your goals; really understand your participants’ needs; and then design a program to maximize the value where these two intersect.

[Note: This article was originally published at http://www.DittmanIncentives.com – please visit for more articles on Engagement and Incentives]

5 Ways to #Fail with a Survey

Thanks to Amtrak, I was treated to a great example of how NOT to survey your customers.

A few days ago, a plain white envelope, looking a little bill-like, appeared in my mail box. Normally, I take the time to complete these surveys – call it a professional courtesy from one Marketer to another. But this one left me scratching my head.

Here are the five #fails:

Amtrak customer service survey

1) Too Late. I took the trip on September 25th. The survey arrived on November 5th. Six weeks after the service – how valid will my comments be?

2) Too Long. 55 questions. 3 pages. Seriously? We’re in the Twitter age. You can never assume you have that much attention from a customer.

3) Too Old.  No online option. “Please return in the pre-addressed, postage paid envelope”. Hmm.

4)  Too Many. I received two of them, identical, on the same day. Never a good idea to look disorganized and incompetent at the moment you’re asking for feedback.

5) Too Late (#2). I was booked on the non-stop Acela Express from Newark to Boston, a 4 hr trip. In reality, I had to change at New York, sat on the floor until a seat opened up, was stuck in Connecticut for an hour plus, and finally got to Boston 2.5 hrs late. And the first communication I had from Amtrak was a satisfaction survey. I’m not suggesting that you exclude known bad experiences from your survey. But at least acknowledge the issue before you ask for feedback.

So, there you have it. The 5 things Amtrak should do to fix their survey?

Be timely; Be brief; Be mobile; Be smart; Be…well, smart

What’s the worst survey you’ve seen recently?