In the second in 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 of products 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.
The study also found that sales incentives appear to generate delayed sales effects. While there is a declining trend prior to 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, located at Northwestern University, Evanston, Ill., is planning to do 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.