Sales bonuses have always played a big role in motivating sales teams. There are a lot of specific bonuses such as commissions, accelerators, etc. but among all the bonuses out there, SPIFFs have a special place.
They're not just about giving extra money for sales; they're about guiding a sales team to meet the company's goals. In this guide, we'll talk about what is a SPIFF in sales, and how they are tools to drive specific outcomes.
What is a SPIFF in Sales?
SPIFFs stand for 'Sales Performance Incentive Fund', however, it is also known as 'Special Purpose Incentive Fund. They are sales bonuses implemented to drive specific outcomes in sales, unlike commissions which are given out on making sales. Hence, SPIFFs are paid on top of the usual sales commissions for a deal. For example, a company may implement a SPIFF to be paid out to a salesperson if they can negotiate an upfront payment with a client. Other such usage examples for SPIFFs are explained further below in this blog.
The best part about SPIFFs is that they can be used in many different ways, depending on what the company needs. They have the power to drive specific short-term goals and drive sales reps' motivation. Want to make sales reps focus more on a newly launched product? Want to encourage multi-year deals? Want to encourage self-generated deals? - All these outcomes can be driven by implementing SPIFFs for them.
How to Use SPIFFs?
Every SPIFF has a clear reason behind it. They are particularly ideal for giving a short-term boost to specific sales goals, making them a valuable tool for addressing immediate business needs. They can be paired with other sales incentives to double down on specific goals while still ensuring that salespersons have enough incentive to focus on sales.
Companies use them for specific reasons:
Guiding Sales Teams: SPIFFs help point salespeople in the right direction. For example, if a company has a new product, SPIFFs can give extra money for every sale of that product, leading salespeople to focus more on selling the newer product.
Meeting Short-Term Goals: Need to hit a target in the next month or quarter? SPIFFs can give that extra push, encouraging salespeople to work harder and meet those targets.
Promoting New Products or Services: When there's a new product, SPIFFs make sure the sales team focuses on it. Controlling the focus of sales teams is one of the major ways in which SPIFFs are used.
Benefits of SPIFFs
Sales goals are far more diverse than 'make more sales'. Companies often come along objectives that they need to fulfill that standard sales commissions simply can't achieve. Hence, 'Special-Purpose' bonuses, i.e. SPIFFs are introduced to push reps towards those goals.
Motivation: At their heart, SPIFFs are about motivation. They give salespeople a clear additional reward for reaching specific goals.
No long-term commitment: SPIFFs are designed to push short-term goals, hence, there is no long-term financial burden on the company, as in the case of sales commissions. Commission plans cannot be changed for every short-term objective that the company needs to fulfill, hence, SPIFFs provide the necessary short-term push.
Healthy Competition: When used in the right way, SPIFFs can create friendly competition among salespeople. Everyone likes being recognized for their hard work, and SPIFFs do just that.
SPIFFs are also excellent for driving energy levels, especially during critical times such as the end of the quarter or during a downturn, providing that extra motivation when it's most needed.
Different Types of SPIFFs
There are many ways to give bonuses to salespeople as any form of motivation can be a bonus. In this guide, we'll focus mainly on money-based bonuses, but non-monetary SPIFFs can also be implemented, serving roughly the same purposes.
Monetary SPIFFs: These are bonuses given in money, also known as cash spiffs. It could be extra cash for every sale or more commission for hitting a target. We will cover these SPIFFs in detail in the sections below.
Non-Monetary SPIFFs: These are rewards that aren't based in money. Think of things like vacation trips, new gadgets, or tickets to events. They're great for rewarding employees, providing recognition, and adding an element of support to otherwise cash-based plans.
Generally, SPIFFs serve as add-ons to the compensation plans themselves. The best practice is to use compensation for the 'quantity' of revenue and SPIFFs to reward the 'quality' of revenue, striking a balance between volume and value.While there are various ways to design SPIFFs, monetary SPIFFs are the primarily used type in the industry. The section below deals with how effective SPIFFs can be designed.
How to Implement a SPIFF Program
Implementing a successful SPIFF program requires careful planning and clear communication. Here's a step-by-step guide to help you create an effective program that motivates your sales team and drives results.
Start with Clear Goals
Begin by defining exactly what you want your SPIFF program to achieve. Your goals should be specific and measurable, like boosting sales of a new product line or increasing average deal sizes. Set a realistic timeframe for these goals - whether it's a month-long push or a quarterly initiative.
Design a Simple Structure
Keep your SPIFF structure straightforward and easy to understand. Decide on your reward amounts, which are typically monetary but can include other incentives. Set clear achievement criteria so salespeople know exactly what they need to do to earn rewards. If you're using different achievement levels, make them attainable and motivating.
Plan Your Budget Carefully
Before launching your SPIFF, calculate how much you can afford to spend. Consider the maximum payout if everyone hits their targets and include a buffer for unexpected high performance. If needed, set reasonable caps to protect your budget while still keeping the incentive attractive.
Communicate Clearly and Often
Launch your SPIFF program with clear, thorough communication to all sales staff. Create simple documentation that explains the rules and include real examples showing how rewards are calculated. Make sure everyone understands the program's duration and key dates.
Set Up Proper Tracking
Put a system in place to monitor performance effectively. Make progress visible to all participants - this could be through regular updates or a live leaderboard. Focus on tracking metrics that directly relate to your program's goals, and make sure this data is easily accessible to both managers and participants.
Gather Feedback and Adjust
Stay open to input from your sales team throughout the program. Watch closely for any unintended consequences or issues that arise. Be prepared to make quick adjustments if needed, and document what works well (and what doesn't) to improve future programs.
Pay Rewards Promptly
Nothing dampens motivation faster than delayed rewards. Process SPIFF payments quickly after goals are met, and make sure your payment system can handle the additional calculations smoothly. Keep detailed records of all payouts and be transparent about when people can expect their rewards.
Remember, the most effective SPIFF programs maintain a balance between simplicity and impact. By following these steps and staying focused on your goals, you can create a program that energizes your sales team and drives the results your business needs.
23 Effective Sales SPIFF Program Examples for your Business
Let’s take a look at some practical examples and understand ways to utilize SPIFFs and improve the performance of your sales teams.
#1: Product SPIFF
Imagine you're a company that has just launched a new software tool. You want your sales team to prioritize this product over others, at least for the initial launch phase when market penetration is low. This cannot be done through normal base commissions as the older products are easier to sell. This is where a Product SPIFF comes in handy.
Real-life Use Case:
Consider a company like Adobe launching a new graphic design tool. They already have a range of products, but this new tool needs special attention to gain traction in the market.
By introducing this SPIFF, the salesperson earns an extra $500 for selling 10 units of the new product, making it more attractive for them to push this product.
#2: Strategic Account Bonus
Big clients or strategic accounts often bring more revenue and prestige to a company. Closing deals with such accounts can be challenging but highly rewarding.
Real-life Use Case:
Think of a startup that offers cloud storage solutions. Landing a contract with a big corporation like IBM would be a significant win.
With the SPIFF, the salesperson gets an additional $3000 for closing a strategic account, making them more inclined to pursue such high-value deals.
#3: Milestone Bonus
Sales targets are set for a reason. They guide salespeople and give them something to aim for. But what if a salesperson goes above and beyond? A Milestone Bonus rewards such overachievers.
Real-life Use Case:
A car dealership sets a quarterly target of selling 50 cars for each salesperson. One particular salesperson manages to sell 70.
By introducing a Milestone Bonus, the salesperson is encouraged to not just meet but exceed their targets, earning an extra $6000 for their exceptional performance.
#4: Upfront Payments
Cash flow is crucial for businesses, especially startups. Getting customers to pay upfront can significantly improve a company's financial health. An Upfront Payment SPIFF motivates salespeople to negotiate such terms.
Real-life Use Case:
A SaaS company offers monthly and yearly subscription plans. While monthly plans provide steady income, yearly upfront payments can help the company invest in immediate growth opportunities.
By pushing yearly subscriptions, the salesperson can earn significantly more, and the company benefits from immediate cash flow.
#5: Multi-Year Deals
Long-term commitments from customers ensure steady revenue and reduce the cost of sales renewals. Multi-Year Deal SPIFFs reward salespeople for securing longer-term contracts.
Real-life Use Case:
A cybersecurity firm offers annual licenses for its software. A three-year contract not only ensures a longer commitment but also reduces the chances of the client switching to a competitor.
Securing longer-term contracts can significantly boost a salesperson's earnings, making it a win-win for both the salesperson and the company.
#6: Adoption/Usage SPIFF
For many products, especially software, just selling isn't enough. Actual usage by customers ensures renewals and reduces churn. This SPIFF encourages salespeople to not just sell but ensure customers use the product.
Real-life Use Case:
A company selling project management tools wants to ensure that teams are actively using their platform, which would likely lead to renewals and upsells.
By ensuring that teams are actively using the tool, the salesperson can earn an additional bonus, and the company benefits from satisfied customers.
#7: Customer/Partner Referral
Referrals are a goldmine in sales. A recommendation from a trusted source can significantly shorten the sales cycle. This SPIFF encourages salespeople to tap into their networks and get warm leads.
Real-life Use Case:
A cloud services company wants to expand its clientele. Instead of cold calling, they decide to leverage the networks of their salespeople and existing clients.
By bringing in warm leads through referrals, the salesperson can earn an additional bonus, and the company benefits from easier sales conversions.
#8: Deal Size
Bigger deals mean more revenue. This SPIFF motivates salespeople to aim higher and close larger deals.
Real-life Use Case:
A furniture supplier wants to secure contracts with larger offices. Instead of selling to small offices, they incentivize salespeople to target corporate offices and big businesses.
By targeting and closing bigger deals, the salesperson can significantly boost their earnings, and the company enjoys larger contracts.
#9: Self-Generated Deal
Initiative and proactiveness are valuable traits in sales. This SPIFF rewards salespeople who don't just rely on inbound leads but go out and create opportunities themselves.
Real-life Use Case:
A digital marketing agency wants to expand its client base. Instead of waiting for clients to come to them, they reward salespeople who actively seek out and close new business.
By taking the initiative and bringing in new business on their own, the salesperson can earn a substantial bonus, and the company benefits from expanded clientele.
#10: Year-over-Year Increment
Consistent growth is vital for any business. This SPIFF rewards salespeople who not only maintain their performance but show improvement year after year.
Real-life Use Case:
A health supplement company wants to see growth in its product sales every year. They decide to reward salespeople who surpass their previous year's performance.
By achieving a 10% growth compared to the previous year, the salesperson earns an additional bonus, motivating them to keep pushing boundaries.
#11: Customer Advocacy
Happy customers are the best brand ambassadors. This SPIFF encourages salespeople to gather positive testimonials and case studies, which can be powerful sales tools.
Real-life Use Case:
A software development platform wants to showcase its success stories. They incentivize salespeople to collect positive feedback and detailed case studies from satisfied clients.
By collecting valuable testimonials, the salesperson not only earns an additional bonus but also provides the company with powerful marketing material.
#12: Product Combo
Sometimes, selling products in combination can provide more value to the customer and increase the deal size. This SPIFF rewards salespeople for such bundled sales.
Real-life Use Case:
A tech store wants to promote the sale of laptops along with software packages. They offer a SPIFF for every combo sale.
By promoting and selling product combos, the salesperson can boost their earnings, and customers get a better overall package.
#13: Training & Certification (MBO)
A well-informed salesperson can sell better. This SPIFF encourages salespeople to upskill by completing training and certifications.
Real-life Use Case:
A cybersecurity firm rolls out a new product. They offer a SPIFF to salespeople who complete a certification course related to the new product.
By investing time in training, the salesperson not only becomes better equipped to sell but also earns an additional bonus.
#14: Reverse SPIFFs
While it's essential to close deals, it's equally important to maintain profitability. This SPIFF is a bit different – it reduces commissions if salespeople offer too high discounts, ensuring they prioritize the company's bottom line.
Real-life Use Case:
A luxury watch brand doesn't want to dilute its brand value by offering high discounts. They introduce a Reverse SPIFF to discourage excessive discounting.
By introducing a Reverse SPIFF, salespeople are more cautious about offering high discounts, ensuring the brand's value is maintained.
#15: Fast Start Bonus
The beginning of a quarter or fiscal year is crucial. A strong start can set the tone for the rest of the period. This SPIFF rewards salespeople who hit the ground running.
Real-life Use Case:
A publishing house wants to ensure that their new book releases get strong initial sales. They offer a bonus for salespeople who achieve a certain percentage of their quota in the first month.
By achieving a significant portion of their quota early on, the salesperson not only sets a positive pace but also earns an additional bonus.
#16: Renewal SPIFF
Retaining existing customers is often more cost-effective than acquiring new ones. This SPIFF rewards salespeople for ensuring customers renew their contracts, emphasizing customer loyalty.
Real-life Use Case:
A software-as-a-service (SaaS) company knows the value of customer retention. They offer a bonus for salespeople who secure renewals, especially for long-term contracts.
By focusing on renewals, the salesperson ensures a steady stream of revenue for the company and earns a handsome bonus for their efforts.
#17: Cross-Selling SPIFF
Existing customers can be introduced to other products or services, increasing the overall deal value. This SPIFF rewards salespeople who effectively cross-sell.
Real-life Use Case:
A gym, apart from its regular memberships, offers specialized fitness classes and diet consultation. They introduce a SPIFF to encourage salespeople to promote these additional services to existing members.
By promoting additional services to existing members, the salesperson can significantly boost their earnings, and members get a more holistic fitness solution.
#18: Bundling SPIFF
Bundling products or services can increase the overall deal size and provide more comprehensive solutions to customers. This SPIFF rewards salespeople for promoting bundled offers.
Real-life Use Case:
A tech store offers a laptop, mouse, keyboard, and headphones as a bundle. The idea is to provide a complete setup for customers, especially those working from home.
By promoting the bundled offer, the salesperson can earn a significant bonus, and customers get a complete package at a better price.
#19: Expedited Deal Closure
Time-sensitive deals or promotions can create urgency and speed up the sales process. This SPIFF rewards salespeople who close deals within a specific timeframe.
Real-life Use Case:
A travel agency offers early bird discounts for summer vacation packages. They introduce a SPIFF for salespeople who secure bookings within the first two weeks of the promotion.
By focusing on early bookings, the salesperson can earn an additional bonus, and the travel agency ensures a steady influx of customers well before the peak season.
#20: New Market SPIFF
Breaking into a new market or demographic can be challenging but rewarding. This SPIFF offers additional incentives for sales made in a specific new segment.
Real-life Use Case:
A skincare brand, popular among women, wants to introduce products for men. They offer a SPIFF to salespeople who promote and sell these new products to male customers.
By targeting and selling to the new demographic, the salesperson can significantly boost their earnings, and the brand expands its customer base.
#21: Reactivation SPIFF
Re-engaging dormant accounts or customers who haven't purchased in a while can be a goldmine. This SPIFF rewards salespeople who focus on reactivation.
Real-life Use Case:
A magazine subscription service notices that many past subscribers haven't renewed in over a year. They introduce a SPIFF for salespeople who can bring these subscribers back.
By focusing on reactivating past subscribers, the salesperson can earn a substantial bonus, and the magazine regains its readership.
#22: High Margin Product SPIFF
Some products offer higher profit margins than others. By incentivizing salespeople to focus on these products, companies can boost their profitability.
Real-life Use Case:
An electronics store identifies that certain premium headphones offer a higher profit margin compared to other products. They introduce a SPIFF to promote the sale of these headphones.
By promoting and selling high-margin products, the salesperson can significantly boost their earnings, and the store enjoys higher profitability.
#23: Contract Extension SPIFF
Extending existing contracts ensures a longer revenue stream and strengthens customer relationships. This SPIFF rewards salespeople for getting customers to commit for a longer period.
Real-life Use Case:
A cloud storage provider wants to ensure long-term commitments from its clients. They offer a SPIFF for salespeople who can get clients to extend their existing contracts.
By focusing on contract extensions, the salesperson ensures a steady revenue stream for the company and earns a handsome bonus for their efforts.
SPIFFs, while powerful, are not without their challenges. Here's a look at some common pitfalls and how to sidestep them:
🔹 Distraction Risk:
While SPIFFs are beneficial, there's a downside. If there are too many SPIFFs, or if they are more rewarding than the core compensation plan, they can distract from the primary goal of meeting sales quotas. It's crucial to balance the attractiveness of SPIFFs with the overarching objectives of the sales team.
SOLUTION: To mitigate the distraction risk of SPIFFs, focus on aligning them closely with core sales objectives and limit their number to avoid overwhelming the sales team. Additionally, ensure that the total potential earnings from SPIFFs do not exceed a certain percentage of the core compensation, maintaining the primary focus on meeting sales quotas.
🔹 Overemphasis on Certain Products:
While SPIFFs can drive focus towards specific products or services, there's a risk that other equally important offerings get neglected.
SOLUTION: Rotate your SPIFFs periodically, ensuring that all products get their time in the spotlight. Also, keep a balanced commission structure so that non-SPIFF products are still attractive to sell.
🔹 Unhealthy Competition:
While friendly competition can motivate, too much can lead to a toxic work environment where team members undercut each other.
SOLUTION: Promote team-based SPIFFs or milestones where the entire team benefits from collective achievements. Regularly communicate the importance of teamwork and collaboration.
🔹 Budget Overruns:
Generous SPIFFs can sometimes lead to budgetary challenges, especially if the sales team performs exceptionally well.
SOLUTION: Set a cap or maximum payout for SPIFFs. While you want to reward outstanding performance, it's essential to keep the company's financial health in check.
Now, let's discuss how to measure the success of your SPIFFs.
Measuring the Success of SPIFFs
Understanding the effectiveness of your SPIFFs is paramount. Here's a more detailed look at how you can measure their success:
🔹 Objective Setting:
Before introducing a SPIFF, document your primary goal.
Example: if your goal is to boost sales of a new product by 20% in the next month, this clear target will serve as a benchmark to evaluate the SPIFF's success later.
🔹 Sales Growth:
Maintain monthly sales records. When you implement a SPIFF, compare the sales figures of the SPIFF month with the previous month.
Example: If sales in April (pre-SPIFF) were 100 units and sales in May (during SPIFF) were 130 units, that's a 30% increase, indicating the SPIFF's positive influence.
🔹 Product-Specific Sales:
If your SPIFF targets a specific product, segregate its sales data.
Example: If you sold 50 units of Product A in March and 80 units during the SPIFF in April, that's a 60% increase in sales for Product A.
🔹 Return on Investment (ROI):
Calculate the total cost of the SPIFF and subtract it from the additional revenue generated during the SPIFF period.
Example: If the SPIFF cost $500 and generated an additional $1500 in sales, the ROI would be (($1500 - $500) / $500) x 100 = 200%.
🔹 Participation Rate:
Track the number of salespeople participating in the SPIFF versus the total number in your team.
Example: If 20 out of 25 salespeople participate in the SPIFF, the participation rate is 80%.
🔹 Cost of Acquisition:
Calculate the cost spent on the SPIFF for each new customer acquired.
Example: If the SPIFF cost $1000 and you acquired 50 new customers during its run, the cost of acquisition per customer through the SPIFF is $20.
🔹 Customer Retention:
For SPIFFs aimed at renewals or long-term contracts, monitor the number of customers retained post-SPIFF.
Example: If 90 out of 100 customers renew their contracts after a renewal-focused SPIFF, that's a 90% retention rate.
🔹 Feedback from Sales Team:
Organize feedback sessions or surveys with your sales team post-SPIFF. Their on-ground experience will provide qualitative insights.
By incorporating these actionable steps and practical examples, businesses can gain a clearer understanding of their SPIFFs' effectiveness and make data-driven decisions for future campaigns.
Wrapping up
SPIFFs, when implemented thoughtfully, can be a game-changer for your sales team and your business. Over 90% of top performing companies are actively investing time and resource in designing incentive programs to reward their sales teams and motivate them to achieve and exceed their sales quotas. SPIFFs offer a unique way to motivate your team, drive specific behaviors, and achieve both short-term and long-term goals.
However, like any tool, the key lies in how you use it. By understanding the potential pitfalls and measuring the success of your SPIFFs, you can fine-tune your approach, ensuring maximum benefit for both your salespeople and your organization.
For those considering implementing SPIFFs, remember the importance of clarity, fairness, and timeliness. And for those already using them, regular review and adjustment can help keep your SPIFF program fresh and effective.
SPIFFs offer a flexible and powerful way to incentivize and reward. So, consider the insights and examples shared in this guide, and think about how SPIFFs can fit into your sales compensation strategy. After all, a motivated sales team is a successful sales team.
Simplify SPIFFs with Sales Compensation Software: Visdum
In the realm of sales compensation, especially for SaaS businesses, managing and optimizing SPIFFs can be a daunting task. However, tools like Visdum are designed to make this process smoother and more efficient.
Visdum is a sales commission software tailored specifically for SaaS companies. Its primary goal is to ensure that sales commissions are timely, accurate, and transparent, eliminating the common challenges faced by sales, finance, and RevOps teams.
Seamless Integration: Connect and sync with CRM data sources while ensuring data integrity and real-time updates.
No-Code Plan Designer: Craft compensation plans that align with your business needs without the need for coding expertise.
Real-Time Computation: Run and view commission calculations across any rep, plan, and pay period instantly.
With seamless integrations with CRM, HRIS, and Billing Systems, Visdum ensures that your data is not only secure but also easily accessible. The platform emphasizes enterprise-grade data protection, so businesses can trust their data with Visdum.
For those looking to automate their sales compensation processes, especially in the SaaS domain, Visdum offers a comprehensive solution that can save time, reduce errors, and enhance transparency.
SPIFFs, which stands for "Sales Performance Incentive Funding Formula," can be paid out in various ways. Some common methods include:
Flat Rate: A fixed amount is awarded for achieving a specific sales goal or target.
Percentage of Sale: A certain percentage of the sale is given as an incentive.
Tiered Structure: Different levels of incentives are provided for reaching different tiers of sales targets. For instance, a higher incentive is given for surpassing a higher sales goal.
Bonuses: Lump-sum bonuses for meeting or exceeding certain sales objectives within a defined period.
Contests: SPIFFs can also be structured as contests with rewards for top performers or those who achieve certain milestones within a set timeframe.
The chosen payout method often depends on the sales team's structure, the organization's goals, and the nature of the product or service being sold.
Is a spiff a commission?
No, a spiff is not a regular commission. A commission is typically a percentage of the sale amount that a salesperson earns on every sale they make. A spiff, on the other hand, is a special incentive or bonus paid out for achieving specific goals or targets set by the company.
Is a spiff a bonus?
Yes, a spiff is a type of bonus paid to salespeople. It is an incentive offered in addition to their regular compensation (base salary and commissions) to motivate them to focus on specific objectives or products.
Are spiffs illegal?
No, spiffs are not illegal. They are a common and legal practice in the sales industry. However, companies must ensure that their spiff programs comply with relevant labor laws and regulations regarding compensation and incentives.
Why is a bonus called a SPIFF?
The term "SPIFF" stands for "Special Incentive Funds" or "Special Performance Incentive for Field Force." It is called a SPIFF because it is a special incentive offered to motivate the sales force or field team to achieve specific goals or targets set by the company.
Are spiffs taxed higher?
No, spiffs are generally not taxed at a higher rate than regular income. They are considered supplemental wages or bonuses and are taxed at the same rate as an employee's regular income. However, employers may be required to withhold additional taxes on spiffs depending on the amount and the local tax regulations.
What is another term for SPIFF?
Another term commonly used for SPIFF is "spot bonus" or "spot incentive." These terms refer to the same concept of a special, one-time bonus offered to salespeople for achieving a specific goal or target.
Is it SPIF or SPIFF?
Both spellings, "SPIF" and "SPIFF," are used interchangeably to refer to the same concept of a special incentive or bonus for salespeople. However, the more commonly used spelling is "SPIFF," which stands for "Special Performance Incentive for Field Force.
How to calculate SPIFF?
Calculating SPIFFs depends on your program's goals and structure. The most common method is to set a fixed bonus amount for achieving specific targets. For example, you might offer $100 for each sale of a new product, or 2% extra commission for deals above a certain value.
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