How many times have you worked harder when there’s a considerable reward on offer?

Rewards—or incentives as they’re commonly known in sales—are powerful motivators you can use to influence desired behaviors from your sales force.  

Today, businesses in the U.S. now spend a whopping $176 billion on sales incentives. That’s almost double 2016's expenditure.

And with such a significant spend on sellers who meet or exceed performance targets, it's essential you see ROI.  

After all, improving sales behaviors isn't as simple as offering a set commission for every rep.  

Experiencing the benefits of Incentive-based pay requires a personalized, strategic approach of constant iteration. An approach that's both financially responsible, and offers incentives your sales team find especially motivating.

In this guide, we share practical strategies that work for modern teams and cover the terminology. We'll help you cater to the state of sales incentives in 2025, so you can motivate your reps and align your comp strategies with stakeholders’ vision.

First up: What are sales incentives?

Sales incentives are a type of reward given to salespeople to encourage them to meet or exceed performance targets.  

Incentives can be monetary or non-monetary—both are designed to increase staff morale, reduce turnover, and boost sales.

Let’s take a closer look at each incentive type:

• Monetary incentives. Commissions and bonuses tend to be what we think of when considering sales incentives. These monetary incentives appeal to the bulk of your sales force. And when tied to performance goals, they ensure you pay out when reps exceed sales targets.
  

• Non-monetary incentives: As it stands, the majority, or 92% of companies with revenues of $5+ million use at least one form of non-cash incentive, such as flexible working hours or extra paid time off. These non-monetary rewards cater to staff who value experiences or work/life balance. They also tend to have a lower fixed financial outlay for businesses with limited budgets.

Types of sales incentives

There are different types of sales incentives you can offer a sales team. Here’s a detailed breakdown of each and when they tend to be best offered.

Short-term incentives

Short-term sales incentives are what they sound like; rewards given to sales reps when they meet short-term targets. They’re most effective when there’s urgency around a particular goal—like a final push to meet your quarterly goal of $50K when you’re $20K short in the final month, for example.  

Other examples of short-term incentives include:

• Spiffs or spot bonuses

• Contest-based incentives, such as monthly contests

• Recognition-based incentives, such as “highest growth in new accounts wins the incentive”

• Non-cash incentives, such as tickets to events or extra PTO

• Team-based incentives, like when a team achieves a regional goal

• First-to-meet goals (e.g. First five reps to close $10K this month win a reward)

Short-term incentives are great especially if your goal is ambitious and requires hard work to get there. They can also encourage friendly competition.  

You might opt for a spiff if you want to drive a desired behavior associated with an aggressive target or sales challenge with a concrete end date. For example, if you’re pushing to bump up revenue to meet an annual target in the final quarter of the financial year, you could use a spiff to motivate reps to exceed the target.

Another short-term incentive might be better suited to non-time-sensitive goals. If you’ve noticed that rep morale is flagging and they need an extra boost of motivation just before the Christmas break, consider a non-cash incentive, like tickets to a Christmas-themed party or event, to keep morale up.  

That said, over-reliance on short-term incentives can cause burnout. Reps might feel like the goal posts are being changed too often, and short-sighted focus could cloud the overall vision. The mentality can sometimes turn into “Close anything to hit the target, then rinse and repeat next month”, as opposed to more sustainable long-term incentives tied to profitability.  

Long-term incentives

Long-term incentives, on the other hand, are exactly what they sound like. This incentive type encourages reps to take a longer-term view of performance and are used to retain sellers when you want to drive behavior that will take longer than the plan period to achieve. They sometimes have a longer payout period for the business.  

For example, if your organization’s five-year plan is to be the leading vendor in your industry and eventually go public, a long-term incentive could reward them with equity in the business for each year of service. They can cash these in for a much higher return at IPO.

Other examples of long-term incentives include:

• Stock options

• Career advancement opportunities

• Longer term payouts, such as annual profit-sharing schemes

• Retention bonuses  

• Pension contributions  

Long-term incentives are ideal if your goal is to increase staff retention over the long haul. They can also boost employee buy-in; those with a personal stake in your company—either through stock options or profit sharing—might be more intrinsically motivated to achieve targets, even if the reward is delayed.

However, not all employees value delayed gratification. If the reward's too far away, it might feel unreachable and have the opposite effect on motivation.

The differences between long-term vs. short-term incentives: a breakdown

Team-based incentives

Team-based incentives, also known as group incentive plans, encourage reps to work together to achieve a shared goal. For example, if your sales team working within a given territory assignment works together to achieve a shared goal of 10% market share growth over the next six months, the reward could be a team vacation.

You can divide teams based on:

• Accounts they’re targeting (e.g. startup vs. enterprise clients)

• Their job role or responsibility (e.g. hunters vs. farmers)

• Geographic territories (e.g. EMEA vs. North America)

With team-based incentives, collective performance is rewarded, but it requires fair territory assignments to work. High performers might also be frustrated if they’re exceeding targets while under performers earn the same reward.  

Despite these challenges, a quarter of revenue leaders in our study said that team-based incentives work for all sales roles. Interestingly, 77% of comp leaders said they only work for certain roles, so it's important to account for nuance here when approaching your team.

Individual-focused incentives

Individual incentives are unique to each sales representative. That is, you can cater to each employee’s goals and vision.  

For example, if one representative is a working parent and another is just starting out their career, you might offer different incentives to these sellers—like extra PTO for the former and variable commission for the latter. Both can be associated with the same action to drive the desired behavior—just the reward for doing so differs based on the individual rep.  

Individual incentives cater to the seller at hand, and due to the potential proliferation of plans, they require granular management and tracking through incentive compensation management (ICM) software.  

This type of sales incentive type also makes budgeting more challenging, especially if there’s a wide mix of monetary and non-monetary rewards in play. Some reps might earn 1% commission on sales over quota while others are offered extra PTO, which then needs updating in your payroll software. So many components mean RevOps or sales comp leaders can easily spend a great deal of manual time administering and configuring comp plans. This presents the need for streamlined, comprehensive sales performance management platforms like Forma.ai.

The top 3 benefits of implementing sales incentives

So why are businesses spending billions on sales incentives every year? Because they offer several compelling benefits. And while there are countless advantages, we've narrowed it down to the top three:

1. Sales incentives improve sales employee retention

Employee turnover has long been a point of contention for sales leaders. In fact, it's been found the average sales team loses a quarter of its workforce every year. Of those who want to leave their jobs, 31% cited a lack of benefits, and 31% said the reason was a lack of bonuses.  

Sales incentives solve this turnover culprit by giving sellers the opportunity to significantly increase their earning potential.  

2. Incentives motivate high-performing teams

Sales reps are notoriously financially driven. Some 74% of agents say their primary career motivation is to earn more money. Sales incentives let them do this, while ensuring that you only commit to a higher payout when performance targets are exceeded. It's a true pay for performance situation.  

3. They're revenue boosters

The saying “you have to spend money to make money” applies to sales compensation planning.  
In fact, a well-structured incentive program has been seen to boost sales productivity by up to 25% because rewards can be directly tied to behaviors. Behaviors that, in turn, increase sales and/or profits.

As an incentive or RevOps leader, a well-designed incentive program also helps with departmental alignment toward top-level company goals. You can add more value to sales and operations planning (S&OP) sessions by accurately forecasting whether you have enough supply to meet demand—and if you’re falling short, share scenario-based models to build a case for incentives that maximize performance without expanding headcount.

Being able to free up your sales compensation team from manual tasks can often be the way to make this unlock this strategic function, similar to what Autodesk was able to do by implementing Forma.ai.

The top 3 challenges of sales incentives

Sales incentive has long been a challenge for RevOps leaders because of:

1. Top-down budget constraints

When stakeholders ask for an estimate of how much your sales comp plans will cost, most RevOps leaders shrug their shoulders and say “I don’t really know.” Without a reliable outlook on what performance will look like and the incentives tied to each goal, it can be difficult to work within budget restraints. Worst case scenario: you learn that rewards aren’t financially viable after reps have already put the work in to achieve the attached goal.  

2. Unfair implementation

Unrealistic sales quotas and uncompetitive pay/benefits are the top reasons why salespeople want to leave their jobs. If you’re using blanket incentives, for example, reps operating in a more challenging territory will have to outperform those in a more lucrative one to earn the same reward.

3. Difficulty tracking the effectiveness of sales incentives

Stakeholders want to know the return on investment for sales incentive plans. Organizations without full-stack sales performance management (SPM) software struggle to track progress towards goals, making it unclear to reps which incentives they’re working towards and how performance is impacted.

Real examples of sales incentives in the wild

Workiva’s “pipeline blitz” spiff

Workiva, similar to many large organizations, makes use of sales spiffs to motivate sellers into improving their pipeline health.  

Business development representatives, and account executives were enrolled into the spiff program. Each had an individual reward with the promise of an even bigger one if collective team targets were hit.  

Here’s Maria Oczko-Canant, Workiva’s Head of Global Sales Planning, Compensation and Performance Analytics, explaining how their successful spiff worked:

What was great about the incentive is that it not only motivated individuals to improve pipeline health—it also led to better overall performance because everyone involved had a shared goal and vision. Plus, Maria’s team had a concrete goal and metric, pipeline health, which was easily measured throughout the spiff's duration.

Creative sales incentive ideas

A unique and innovative approach to sales incentives can attract salespeople who are looking for something novel. Here are some examples of some creative incentives you can implement as a way to motivate reps other than cash or commission:

• Extra PTO to spend how they wish

• Travel or event tickets

• Gift cards for their favorite retailers

• Mentoring with a CEO or industry specialist  

• Access to the C-suite and team to present their ideas/wins

• Charitable donations in their name  

• Access to subscriptions (e.g. free food deliveries or fitness classes)

• Vouchers to redeem on childcare

• “Bucket list” rewards, where the rep gets to fulfill something on their bucket list when they exceed the sales performance target  

Our Sales Compensation Showdown study found that two-thirds of comp leaders and half of revenue leaders find experiential rewards—like president’s clubs—the most impactful for sellers by a long shot. It’s followed by public praise or recognition.

How to design effective sales incentive programs

If you’re ready to launch a new sales incentive program for your organization, here’s a step-by-step guide to walk you through the process.

1. Understand your company’s overarching goals

Sales leaders tend to get frustrated that their incentives aren’t translating into results they can confidently present to stakeholders. This usually happens when incentives aren’t linked to the big picture vision of your organization.  

Say, for example, that leadership has set a vision of expanding into a new market over the coming year. They see success as claiming market share from a competitor… but you’ve defaulted to blanket commission that applies to all reps when they hit 100% quota attainment.  

There’s a fundamental flaw in the plan’s design: it doesn’t map towards the market share goal. Reps are rewarded when they close any deal—not just those within the market you’re trying to conquer.  

Before proceeding any further with your sales incentive plan, arrange a meeting with leadership to get crystal clear on what success looks like. Then you can drill down into the behaviors and rewards that are most aligned with the vision, therefore helping you to present the value of sales incentives to leadership.

2. Gather existing sales performance data

Chances are, you already have the foundation of a sales incentive plan in play. Use this to your advantage by digging into your SPM solution to figure out what has (and hasn’t) been working so far, as well as uncover any hidden biases that are skewing your results.  

Data from your SPM solution can also help determine the effectiveness of your sales quotas, territory assignments, and profitability. For example, if you’ve promised 5% commission on each sale above quota, you could wind up losing money after taking your average customer lifetime value and operating expenses into account.  

Regression/correlation analysis can also assess the link between performance and existing targets. Rather than assuming a short-term SPIFF increased sales in that quarter, you might learn that a regulatory change or competitor outage actually contributed to the improved performance—not the SPIFF itself.  

Don’t just rely on quantitative data at this stage. Ask reps for their input to give them some ownership in the plan’s design. “People value feeling like they have control over these kinds of decisions, as opposed to decisions being made for them,” says Phillip Wiseman, Assistant Professor of Marketing, Texas Tech University, at our NUDGE '24 virtual conference.  

Which rewards are they most motivated by? Do they prefer short- or long-term targets? What quota is reasonable to achieve before they become eligible for incentive-based pay? This helps you design a plan that’s fit for purpose and motivates reps to achieve sales targets.

3. Define desired behaviors, metrics, and quotas

At this stage, you know what stakeholders define as success and the effectiveness of any incentives you’ve implemented to date. Now, use that information to design the core components of your plan:  

• Desired behaviors. What tangible steps do reps need to take to make headway on the company’s overarching goal? Those with a focus on revenue growth might prioritize behaviors like total revenue or new customer acquisition, whereas those who want to boost customer retention might put more emphasis on Net Promoter Score or churn rates.

• Associated metrics. How will you track each rep’s progress to achieving that goal? Tie measurable key performance indicators (KPIs) to each one—this will inform your quotas. Using the example of increasing customer retention: your goal might be to reduce churn by 5% over the next six months.

• Quotas. What targets do reps have to meet before they become eligible for extra incentives? In the example above, they might have to have a churn rate of <2%. Any extra percentage earns them another 1% in commission.  

• “It’s really key to make sure that in an activity-based plan that it’s not just about doing X, it’s about seeing the result that comes from it.” —Rick Butler, VP of global sales compensation at ServiceNow

Pro tip: Reps with a longer sales cycle should have multiple activity-based incentives to keep them motivated throughout the entire process—like 1% commission when a proposal is sent, another 1% when their contract is signed, and so on.  

4. Plan the finer details of the sales incentive plan

Next, think about the finer details of how you’ll roll out the new sales incentive package. This includes factors such as on-target earnings (OTE)—the total amount you’d like each rep to earn if they meet performance targets.

Competitive OTE benchmarks differ for every organization, industry, and individual. For example, new graduates might prefer a pay mix ratio with stable salary and a less variable compensation, whereas experienced high performers might be willing to forgo a stable salary with the opportunity to significantly top up their earnings through incentives.

Also think about when reps will have their incentives paid out. Is it feasible to payout 2% commission to a rep when they sign a contract if the client is on Net 30 payment terms? This situation could cause cash flow issues—a challenge that’s mitigated by either delaying or staggering the payout in-line with the sales cycle.  

Finally, consider how you can get buy-in for the new program. The following behavioral science principles are rooted in psychology and play on human bias:

• Implement sales comp leaderboards. Loss aversion is a powerful motivator that could give reps extra encouragement to unlock incentives. “Social comparisons are very important motivators,” explains Nick Lee, Professor at Warwick Business School. “People want to improve their performance so they can avoid last place.” Most ICM solutions have leaderboards to implement this in real-time without too much extra administrative legwork.

• Play on loss aversion. Instead of telling reps what they’ll achieve when they exceed a quota, explain what they’re at risk of losing by not doing so. For example, if reps are rewarded with concert tickets when they hit 100% quota attainment, get them to think how it might feel when they see clips from other attendees on social media.  

• Remove pay caps. “The best sales talent will not settle for a capped salary,” says Justin Lane, sales performance management leader and consultant. “If you’re a founder or manager and you want the most motivating commission structure possible, check the ego at the door.”

5. Run simulations and launch a pilot project

It’s easy to go full steam ahead amidst the excitement of a new incentive plan. However, the most effective plans are a result of trial and error. It’s unlikely that you’ll land on the best solution after your first attempt—that’s completely normal.  

The challenge, however, is that frequent adjustments to your sales incentives can dampen the excitement your reps have for the new plan. It can also cause confusion: is it worth putting their all into meeting a specific quota if the reward changes once they do so?  

Simulations are the best way to identify the potential outcome of your incentive pay plan before they’re implemented. Monte Carlo simulations, for example, simulate 10,000 potential outcomes for your new incentive plan variables. It gives each variable a probability distribution, then aggregates the results to find the most likely outcome—like how much you’d spend and the likely impact on sales performance.  

Once your simulations indicate a feasible plan, launch a pilot project with a small test group of reps to begin gathering data about your incentive plan. This doesn’t have to add months onto implementation—our data shows that a third of sales comp leaders is the optimal time to survey reps to gauge satisfaction with the new plan.

Your goal with the survey is to uncover answers to questions like:

• Is the plan easy for reps to understand?

• Do the incentives reward staff to hit quota?

• Are the incentives tied to an action that drives results for the business?

• Is the associated quota fair and achievable?

• Is the pay ratio between base salary and variable compensation fair?

Just be sure to communicate your new plan clearly to avoid any disgruntled reps who are frustrated when their compensation package is changed unexpectedly.

6. Implement and refine your sales incentive programs

Positive feedback from the test pilot and optimistic simulations give you the confidence to initiate a full rollout of the new sales incentive program. A full-stack SPM solution like Forma.ai can help you gather data and make adjustments to refine the plan.  

So, what exactly should you look for when evaluating the effectiveness of your sales incentives? Quota attainment is a good starting point. You don’t want to make incentives too easy to unlock—this could harm profitability and have the opposite effect on motivation. At the same time, quotas that are too difficult to attain make rewards less likely to obtain.

Full-stack SPM solutions like Forma.ai make it easy to track the distribution of quota attainment.  

This distribution indicates that quotas are set fairly and are motivating for reps, as seen below:  

Per our study, a quarter of comp leaders and 43% of revenue leaders said this type of quota attainment testing should be done bi-annually. “We use the data to plan for next year,” says Samantha Jozwik, sales analytics and compensation manager for Intermedia.

“We’re analyzing what’s working with our plan and what’s not. This helps us identify any gaps and consider if there is something that we need to change structurally or what we can do with other departments (i.e., Marketing) to improve.”

How technology enhances sales incentive management

Long gone are the days of tracking incentives and sales performance in an Excel spreadsheet. With SPM and ICM tools like those found in Forma.ai, you can ditch the complex formulas and manual calculations—instead opting for an automated system that will do it for you.

What’s unique about Forma.ai is that it unifies the design, execution, and optimization of enterprise sales compensation to make the end-to-end process 4x faster. It offers:

• A library of rule templates to build out incentive plans with a standardized data model—without getting boogied down by the tech specs of plan design.

• Territory and quota planning to ensure fair and equitable opportunities.

• Predictive modeling and simulations to evaluate likely outcomes of your new incentive plans before an official rollout.

• Real-time sales performance monitoring, including sales leaderboards and custom reporting dashboards to show the value of sales comp to leadership.

• Integrations with 600+ tools, including ERP and business intelligence software.

Clothing retailer Harry Rosen is just one sales organization already relying on Forma.ai to manage sales incentives. Its VP of store operations Alan Whitfield shared:

"We needed a platform that could manage all of the information that we have from multiple sources: departments, categories, advisor sales, etc., and [it had to] really slice and dice that information into the right outputs.  

“A major goal was to improve transparency, accuracy, and visibility to regain credibility in paying people correctly and on time, every time… We [also] needed a way to help [sellers] understand how to change their behaviors to align better with their desired outcomes.”

The team at Harry Rosen implemented Forma.ai to achieve these goals with its AI-powered SPM platform. Alan says its easy-to-navigate interface was a huge win: “Forma's ability to handle complex calculations and package the information into a user-friendly app was game-changing. It gave our associates visibility and control over their earnings.”

Alan’s team subsequently ran 23 different contests and SPIFFs across a two-month period. Forma.ai delivered—it let the team manage 80 different compensation plans for ~400 different sales reps, advisors, and leaders.  

"Forma.ai is perfect for performance-based sales organizations that want to drive behaviors that lead to revenue. It’s essential for organizations looking to incentivize activities that improve client experiences and drive sales."

—Alan Whitfield, VP of store operations, Harry Rosen

Launch sales incentive plans with demonstrable ROI using Forma.ai

Well-designed sales incentives have the potential to significantly impact productivity and revenue, without committing to the expense of a growing team with fixed salaries. They keep reps motivated by offering unique experiences and monetary rewards—which is important especially if you’re pushing towards hefty long-term goals.  

Forma.ai has everything you need to design, deploy, and optimize sales incentive programs. The AI-powered SPM solution is already trusted by global enterprises like Stryker TrustPilot, and boasts a G2 rating of 4.8 out of 5 stars—so you’re in good hands when using it as the foundation to optimize every dollar of incentive spend.

Frequently asked questions about sales incentives  

What are sales incentives?

Sales incentives are a type of reward given to sales reps when they exceed a specific target. They can be cash (e.g. commission or bonuses) or non-cash (e.g. event tickets, extra PTO, or stock option). Both are manufactured to motivate sales reps to meet organizational goals.  

How are sales incentive programs measured?

Sales incentive programs combine qualitative and quantitative data to measure effectiveness. This can include metrics such as sales volume, quota attainment, and customer retention alongside feedback from reps. You can find this data in a full-stack sales performance management solution like Forma.ai.

What are common mistakes in designing sales incentives?

• Neglecting data and making adjustments based on gut instinct

• Lack of alignment between sales and leadership

• Over-reliance on short-term incentives or SPIFFs

• Implementing a plan without input from your sales reps  

• Choosing incentives that don’t drive desired behaviors

• Lack of transparency for reps who become confused on how to calculate their OTE