What is a SPIFF in Sales?: Definition, Benefits and Types

This scenario has played itself out many times before, with two salespeople, one product, one market area, and even the same prices. One, however, always seems to make more sales. But it is not necessarily skills, at times it could simply be a matter of motivation.

This is where understanding what is a spiff in sales becomes important, especially for organizations looking to drive short-term sales momentum. If you have ever been puzzled as to why a particular sales campaign always manages to deliver outstanding results, then rest assured that some SPIFF plan must be responsible for this feat.

Let me explain this concept in a realistic manner.

What is a SPIFF in sales?

To get to the essence of what is a spiff in sales, one must first understand the following:

SPIFF stands for Sales Performance Incentive Fund, and it represents a form of short-term motivation aimed at encouraging sales staff to promote certain products or achieve specific goals.

While commissions represent standard compensation that occurs on a consistent basis, SPIFFs represent a more tactical approach that is implemented to achieve certain goals within a limited timeframe.

• As an illustration, this could take the form of selling twenty pieces of a particular product in a week and earning an extra amount of ₹5,000. The goal is clear and specific; hence, there is little room for ambiguity on what must be achieved and the rewards for the same.
• Alternatively, a sales representative could be asked to close five new accounts in ten days to earn the bonus. In this case, not only does it create urgency, but it also challenges the salesperson to concentrate on acquiring new clients within the short period.

In essence, the spiff meaning sales could be defined as follows, a short-term reward meant to spur immediate action.

What are the benefits of sales spiffs?

Now that you know what SPIFF is in sales, the obvious follow-up question would be, Why should we even bother using SPIFFs? Based on my experience and research, SPIFFs are effective because they appeal to urgency and clarity.

How so?

1. They provide a focus

The sales force works under several objectives at a given point in time. A proper SPIFF helps them to concentrate on one single aspect. It enables them to focus on their goal and take a call based on their target.

2. They motivate people immediately

While annual or quarterly targets might be too far for the representatives, SPIFFs provide them with an instant motivation to work hard in order to get rewards. These goals become a source of excitement for them as the incentive appears to be reachable.

3. They enable the promotion of certain products

A company may have the intention of promoting a particular product or entering into some new market. Such an intent can be met through spiff sales programs which make them work towards a single objective.

4. They encourage healthy competition

Incentives that have a time element usually spark a sense of competitiveness in teams. This kind of competition proves to be healthy when executed properly, being goal-oriented instead of stress-oriented. This helps people work hard and at the same time, raise the bar for the whole team.

5. They are flexible and easily applicable

The greatest benefit of using SPIFFs is their simplicity. The point is that it is not necessary to overhaul the existing structure of your compensation system to incorporate them into it. SPIFFs can be introduced fast, tested and improved according to the specific team.

The catch here, though, is that while SPIFFs can be very effective, it isn’t their mere existence that makes them successful.

And now, on to the next topic.

How to implement a SPIFF program

Implementing an effective SPIFF  sales plan will help you increase the efficiency of your team and meet your sales targets in no time. 

1. Start with a clear objective

First, you need to state your objective clearly. You should describe the target group and what needs to be done by when. The more precise your objective is, the easier it will be for your reps to understand it and follow.

Another good tip is to make your objectives readily available for all to see. It would be great if you could integrate them into your CRM so that reps always have access to them. In combination with incentives management, reps will be able to see how close they are to winning the reward and thus be motivated.

2. Select the proper reward

For an incentive plan to be successful, it must be important to your group. While monetary rewards are generally the most effective type of incentive, you may want to try other incentives such as travel, extra vacation days, or experience-based incentives. The essential thing here is to match the incentive to what your employees value.

3. Budget considerations must be clear

SPIFFs should always be introduced in a controlled manner financially. Do not roll out SPIFFs until you have the finances to support them. Ideally, use SPIFFs as an occasional motivator. Use them only when needed for brief periods to hit goals set for the year.

4. Be Clear

Ensure that everyone is aware of the SPIFF sales program, its objectives, requirements, and timing. Make it clear what you expect, whether that includes leads, demonstrations, or sales. It makes things easier for you when expectations are set and clear.

 5. Evaluate and fine-tune

When the SPIFF is completed, assess its effect on your sales figures. If it has been successful, you can employ it as an example for future marketing campaigns. In case it hasn’t been successful, determine which aspects failed and make the necessary changes.

What are the different types of sales SPIFFs?

SPIFFs vary in their designs. You need to decide on how you want your SPIFF to be designed depending on your objective.

Here are some examples that have worked for me:

Cash SPIFFs

These are among the simplest forms where the salespeople get paid directly a monetary incentive upon meeting the required goals. Cash SPIFFs are effective since they provide instant satisfaction in the sense that they offer real monetary benefit and hence will be accepted by everyone in the group. 

Non-cash SPIFFs

As compared to cash SPIFFs, these forms do not include monetary benefits but other types of rewards such as gifts, travel packages, electronic gadgets and many more. These forms of SPIFFs are flexible in terms of their use as you can customize them according to the likes and preferences of the people within the group. Some firms conduct pre-survey before choosing them.

Tiered SPIFFs

In this case, the reward is dependent on how much one has progressed past the initial set goal in terms of sales performance. As salespeople progress, their incentive increases proportionally thus motivating them to put in a lot of effort throughout the whole process.

Mystery SPIFFs

The mystery element lies in the fact that no one knows the exact prize until the incentive period comes to an end. The element of surprise makes the team curious and excited about the whole process, thus giving a new level of entertainment.

When it comes to spiff sales, the important thing is not only to decide on your SPIFF but also on your objective.

Potential sales SPIFF pitfalls and how to avoid them

Excessive focus on individuals rather than teams

Though incentives to individuals can be beneficial to improving their performances, sometimes these can generate unnecessary rivalry that affects their overall performance. Salespeople will be interested in individual successes at the expense of teamwork.

To prevent this from happening, it is essential to formulate an incentive program that rewards both individual and team success. Incorporating group targets or joint successes in the program can be effective.

Reinforcing the wrong behavior

The advantage with SPIFF programs is their high level of flexibility; however, unless planned well, they could encourage reps to concentrate on the wrong areas. It’s possible that reps will become too focused on earning bonuses rather than providing excellent service to customers.

Prevention of reinforcing the wrong behavior: Make sure to change the products and goals associated with SPIFF programs regularly. Above all, always remember that customer value should be central to your incentive programs.

Sandbagging Sales

While SPIFFs can boost performance quickly, reps may hold back sales until after a period where they know that SPIFFs will be available. This tactic may distort real results.

Avoiding it: Implement SPIFFs at irregular intervals rather than at predictable intervals. Be aware of any abnormal sales behavior during launch periods and discuss it openly.

Overly Complex Program

It is tempting to try to design a SPIFF that incorporates all sorts of conditions and criteria in an effort to create the perfect program. But sometimes, being overly complex means losing focus and clarity, leading to poor engagement and reduced effectiveness.

How to avoid it: Ensure that your SPIFF is simple and clear. Clearly define your goals, guidelines, and incentives, and continually monitor your progress with the help of your team members. A simple program will always be better than a complex one.

Conclusion

What have I learned from my experience? There is always more than one factor that should be taken into account if you want to achieve outstanding results. The first and foremost of these factors is the ability to prompt your salespeople to act now.

While not intended to substitute your compensation system altogether, SPIFFing can help you boost sales by unlocking unexpected bursts of performance.

If you have been exploring what is a spiff in sales and whether it can improve results, the answer is yes, when designed thoughtfully, SPIFFs can create meaningful short-term performance gains. In case you wish to take your business management even further to the extent that salespeople will know not only what actions to undertake but also what risks they run and how much they can earn, JOP Edge can help you.