What Is a SPIFF in Sales? Complete Guide + Strategy

What is a SPIFF in sales?

Sales Performance Incentive Fund (SPIFF) is a form of incentive or bonus offered to sales reps to encourage them to achieve specific goals or sales targets, usually within a defined period. It is an additional reward over and above the regular commissions and salary. 

During the 1980s, Apple outpaced IBM in retail computer sales by enhancing incentives for sales personnel through "SPIFFs." Initially, SPIFF stood for Sales Person Incentive Forms, where salespeople would fill out a form for each Apple product sold and receive a bonus accordingly. In 2019, Dell EMC introduced the term SPIF (Sales Performance Incentive Fund) for programs aimed at attracting business from competitors. Today, the terms SPIF and SPIFF are commonly used interchangeably across organizations to denote immediate sales bonuses.

Sales SPIFFs are of two types:

Cash SPIFFs are a direct monetary incentive provided to sales professionals, typically in the form of cash bonuses. Unlike non-monetary rewards like gift cards or prizes, cash SPIFFs offer immediate financial gratification, directly boosting the individual's earnings upon achieving specified targets. This instant monetary benefit serves as a powerful motivator for salespersons, driving them to exceed performance expectations.

Non-cash SPIFFs encompass a variety of incentives beyond monetary rewards, including gift cards, merchandise, trips, and experiences. These are strategically crafted to reinforce the desired behavior in the employees, align with the company's culture and values, and foster a sense of camaraderie and appreciation within the teams.

How SPIFF works

Creating a SPIFF program that effectively motivates sales teams and drives results involves the following steps:

• Set clear goals and objectives Establish clear and achievable goals and objectives aligned with the company’s overarching business goals. The goal could be activity-based (e.g., conduct a certain number of product demos), consistency-based (e.g., reward the highest customer satisfaction rating), target-based (e.g., generate 15 leads), or any other result that is aligned with the department goal (e.g., promote a new product), leveraging effective lead generation capabilities to drive success. Ensure objectives are straightforward and quantifiable to provide clarity to team members about what needs to be achieved.

• Types and value of incentives When determining the type and value of an incentive, consider the preferences and motivations of the sales team. Select incentives that offer value without exceeding budgetary limitations.

• Defining the timeframe for achieving the goal SPIFF is meant to be a short-term incentive program. Establish the specific timeframe for sales reps to achieve the defined goals to qualify for the incentive program. Defining time frames also creates a sense of urgency and excitement, pushing team members to give their best efforts within the set period.

• Tracking progress: Monitor the goals and sales performance closely throughout the defined time frame. Once the objectives are met, promptly reward the successful individuals with the agreed-upon incentive. This reinforces positive behavior and encourages high performance.

Advantages of sales SPIFF

A successful SPIFF program presents many benefits to both the organization and all the teams involved.

1. Instant motivation

A sales rep typically has a compensation structure that includes performance bonuses in addition to their fixed pay. However, these are paid only at the end of the quarter or fiscal year if and when revenue targets are met. They are not immediate or direct. 

SPIFF offers a swift reward for meeting short-term targets and motivates the sales team. They provide instant gratification, boost morale, and a sense of accomplishment that goes a long way in staying inspired to perform. 

2. Healthy competition

SPIFFs promote a dynamic and competitive sales culture, where continuous improvement and achievement are celebrated and rewarded. It is a great way to foster camaraderie and healthy competition. The right reward structure encourages teams to think innovatively, prompts team members to develop creative strategies, and works collaboratively to consistently achieve excellence. 

3. Increased focus

According to Gallup, only 23% of employees across the globe are genuinely engaged in their work. A SPIFF program creates a sense of urgency and motivation within the sales team. The allure of immediate gratification further sharpens their focus on short-term goals, motivating them to take decisive action to meet or exceed expectations. Sales representatives strive to outperform their colleagues to earn these incentives, leading to heightened productivity and engagement.

Designing an effective SPIFF program

Sales SPIFFs, when done right, have a positive impact on employee morale and the sales pipeline. Here are some key steps involved in designing a successful sales SPIFF program:

1. Goal alignment

An effective SPIFF program strategically aligns SPIFF goals with specific business needs to maximize impact. Identify key business objectives, such as boosting sales of a particular product, penetrating new markets, or improving customer retention rates. Tailor the SPIFF goals directly to these objectives. For instance, to drive sales of a new product line, SPIFF incentives could be based on units sold, the number of product demos set up, or the percentage increase in sales compared to previous periods specific to the product. 

2. Target setting

Ensure that SPIFF goals adhere to the SMART criteria:

• Specific - Clearly define what needs to be accomplished, like increasing sales of a specific product or reaching a revenue target. 

• Measurable - Provide quantifiable metrics to track progress, like achieving a percentage increase in sales.

• Achievable - Set realistic goals within the sales team's capabilities, considering market conditions and available resources. 

• Relevant - Align goals directly with the organization's overall business objectives.

• Time-bound - Have a clear deadline or timeframe for achievement, providing a sense of urgency and focus. 

Example of a SMART SPIFF target: Increase sales of Product X by 10% within the next quarter to get a special bonus.

3. Incentive selection

Choosing the right sales incentive for a SPIFF program requires a lot of thought. Understand the unique preferences, motivations, and demographics of your sales team.  Whether cash bonuses or non-monetary rewards like gift cards or experiences are more effective depends on individual preferences and industry dynamics. Budget constraints must also be considered to provide meaningful rewards within financial limits.

Cash incentives: Pros:

• Offers recipients the freedom to use the money as they see fit.

• Has a universal appeal across age groups

• Easy to administer in terms of logistics and distribution

Cons: 

• Over time, recipients come to expect cash incentives, thus reducing its impact as a motivator.

• It has the potential to create unhealthy competition.

• May not provide a lasting impact.

Non-cash incentives: Pros:

• Provide tangible rewards that are perceived as more valuable and have a more lasting impact. 

• Allows for greater personalization of individual preferences to make them meaningful.

• Perceived as an additional perk, and hence avoids entitlement mentality.

Cons:

• They have limited versatility compared to cash rewards, as they are specific to certain products or experiences.

• May not appeal to all recipients equally, as individual preferences vary widely.

• Selecting, procuring, and distributing non-cash incentives requires more effort and logistical coordination than cash rewards.

4. Program structure

Implementing a structured program with rewards tied to achievement levels, such as bronze, silver, and gold tiers, is an effective approach to accommodate sales representatives' diverse capabilities and motivations.

By offering tiered rewards, organizations acknowledge and celebrate incremental successes, ensuring that all sales reps, regardless of their starting point, have the opportunity to earn recognition and incentives. This structure motivates high performers to strive for greater achievements and encourages continuous improvement among those at lower performance levels. A tiered reward structure promotes fairness and transparency by aligning incentives with individual performance levels. Sales reps feel empowered to set ambitious goals and track their progress toward achieving them, knowing their efforts will be recognized and rewarded.

Examples of SPIFF programs

Here are some examples of SPIFF programs to help sales managers and sales team leaders plan SPIFF programs better:

Examples of cash SPIFF programs:

1. Selling a specific number of units of a new product:

• A software company offers a $25 bonus for each new software license sold within the first month of launch.

• An appliance store offers a commission boost for salespeople who sell a specific number of new energy-efficient refrigerators.

2. Upselling or cross-selling additional products/services:

• A financial advisor receives a higher commission for selling a bundled investment package that includes both stocks and bonds.

• A car salesperson earns a bonus for selling extended warranties or service packages alongside new car purchases.

3. Short-term push to close deals before the end of a quarter:

• A real estate agent receives a bonus for closing the most deals before the quarter ends.

• A travel agency offers a commission bump for salespeople who book a specific number of last-minute vacation packages.

Examples of non-cash SPIFFs programs:

1. Selling a specific number of units of a new product:

• A clothing company offers a limited-edition jacket with the company logo for salespeople exceeding their new product's sales quota.

• A tech company awards a top salesperson of the month trophy and a free month of their premium service to the winner.

2. Upselling or cross-selling additional products/services:

• A telecommunications company offers a free tablet for every customer who signs up for both internet and phone service.

• A furniture store holds a contest where the salesperson who sells the most dining room sets wins a luxury weekend getaway.

3. Short-term push to close deals before the end of a quarter:

• A construction company offers tickets to a sporting event for the salesperson who closes the most deals during a specific week.

• A software company offers the top-performing sales development representative a day out at a theme park to make a certain number of calls during a specific week.

Potential challenges of SPIFFs

SPIFF works great when done right. But it's easy to implement a flawed SPIFF and miss targets. Here are certain things you should remember while designing a sales SPIFF:

1. Toxic work environment

SPIFF programs designed largely for individual targets will result in sales team members focusing on their targets at the expense of the larger team goals. This could lead to a breakdown in communication and purposefully misleading tactics that focuses on sabotaging their team member's performance. 

This can be mitigated by encouraging teamwork. Incorporate team-based SPIFFs where rewards are tied to collective achievements. Emphasize a culture of support and camaraderie rather than pitting individuals against each other.

2. Over-reliance on SPIFFs for motivation 

When SPIFFs are over-used, sales reps may become less engaged and passionate about their work, as their efforts are primarily driven by the desire for rewards rather than genuine interest or satisfaction in their roles. This will also foster a culture of entitlement and dependency, where sales reps expect to be rewarded for every achievement, potentially leading to complacency and reduced productivity.

Mitigate this challenge by supplementing SPIFFs with other forms of recognition and incentives that promote intrinsic motivation—meaningful work, career advancement opportunities, and a supportive work environment.

3. Neglecting long-term goals 

The urgency to meet SPIFF targets may overshadow the importance of cultivating lasting customer relationships, building brand loyalty, and pursuing strategic initiatives contributing to sustained growth. To mitigate this risk, organizations should implement measures that balance short-term performance incentives with a focus on long-term success.

Conclusion

If the execution is right, a SPIFF program can fetch a considerable ROI for a business. By understanding the different types of sales SPIFFs, and aligning them with organizational goals and individual team members’ preferences, well-tailored sales SPIFFS can effectively drive the desired behaviors and outcomes.

By designing a SPIFF program that is strategic, customized, and engaging, organizations can cultivate a culture of high performance, motivation, and success among their sales teams.