In the first of a series of studies on incentives, the Forum for People Performance Management and Measurement concluded what the industry has been touting all along: Sales incentive programs deliver tangible, bottom-line results.
In An Exploratory Study of Sales Incentive Programs, researchers conducted a case study on a Midwestern financial services company that employs 1,300 sales agents and discovered that the sales incentive program delivered a 12 percent return on investment.
The research — which focused on one product sold by the sales representatives — found that sales nearly doubled on the “incentivized” product. Specifically, the incremental margin of sales was $180,000, while the cost of the incentive program was about $164,000, resulting in a 12 percent ROI.
The study also found that sales incentives appear to generate delayed sales effects. While there is a declining trend before the incentive period, possibly indicative of a “holding back” of sales until the incentive period, sales remain at a level higher than baseline sales during the post-contest phase.
The Forum for People Performance Management and Measurement at Northwestern University, Evanston, Ill., is planning a series of studies over the next three years to investigate the value and importance of employee incentives. For more information, go to www.performanceforum.org.