Incentive Planning in Direct Sales
When well-planned and well-executed, incentive (or, promotion) campaigns are very effective tools that expedite reaching goals. They are quite often used by direct selling companies, too. Some of them succeed but some others fall short of achieving any desired results. Are you doing your best to make good use of these programs?
Let’s take a look at the stages of the process…
Setting the Objectives (Really, why are we doing this?)
The first step is defining the objective of this action. The usual failures here are setting irrelevant goals or a set of goals that do not support each other. Oh, there is one more that is even worse than these two: Setting objectives that contradict!
Typical objectives in direct selling could be product trial; new field member or customer acquisition; cross selling; upselling; getting rid of slow-moving products; increasing average order, field activity, or retention, to name a few.
Determining Targets (What do we want to achieve in numbers?)
If you really want to be precise, this is possible only if you have statistical information or past data on hand. In many of the cases though, we don’t have this luxury so we have to rely on experiences or intuition. Being realistic (that is, being neither over-optimistic or over-pessimistic) is of utmost importance at this stage.
Choosing the Reward (What will be the “carrot”?)
The “carrot” itself
This is one of the most important decisions during the planning process. As a general rule, the reward can be anything that can induce the desired action. Using a slow-moving product as a reward could be a big mistake. It is hardly possible for a product that is not being demanded to miraculously motivate field just because it is a “gift” now.
Another consideration here is about the value of the reward. We should always remember that a reward’s perceived value and its actual cost are entirely different. The wider the gap between the two is, the more likely the reward will be successful.
One last point, in relation to the above issue is the offer’s “real cost”. Most of the time, the least costly alternative is one of company’s existing products. However, if the promotion succeeds, this means that product will sell less at least for a certain period of time. This is a hidden cost that needs to be taken into account.
Level of activity to be rewarded
The desired action should always be the “maximum possible”. However, it is not always easy to know in advance, what that “maximum possible” is. If you put the bar too high, the promotion will not work regardless of how attractive the reward is. On the other hand, if the bar is set too low, then the company will end up with unnecessarily high promotion expenses.
Maintaining Control (What if the campaign goes out of hands?)
Some promotions are costly. Actually, some are very costly. There is no problem with this as long as that route is chosen intentionally. Control though, is even more important in such a situation.
Try to maintain control from day one. That is, keep the tools at hand to be able to stop the campaign at any point before it gets out of control. One easy way to do this to announce the promotion “until stocks last”. As no one but you would know what the real stock level is, you secure yourself here. Another alternative is setting an ending date that is sooner than the actual ending date you have in mind. This leaves you with the possibility of extending the promotion, as needed.
Communication (What and when are you telling?)
In many cases, communication stage does not receive the emphasis it deserves. However, regardless of how well-planned a promotion is, it just cannot work unless it is well-communicated. All those who are expected to participate (company management, employees, suppliers, direct sellers, and the end-users) should be informed comprehensively and soon enough to be able to respond to that promotion.
Measuring (What did we say this promotion was for?)
Typically, every program should be measured for the results achieved against the original aim. This step provides us with the following: 1) The discrepancy between the results and the targets, 2) More importantly, lessons for future promotions.
Blaming (Who should you hold responsible if the campaign fails?)
If the promotion does not produce the desired results, in my opinion, the last to be blamed should be the external factors. Obviously, we should have made something wrong at one (or maybe more) of the stages mentioned above.
Planning a good incentive campaign is no magic. However, it does require a vision and a good amount of professional thinking to be successful.
Hakki Ozmorali is the Principal of WDS Consultancy, a management consulting firm in Canada specialized in providing services to direct selling firms. WDS Consultancy is a Supplier Member of the Canada DSA. It is also the publisher of The World of Direct Selling, global industry’s leading weekly online publication since 2010. Hakki is an experienced professional with a strong background in direct sales. His work experiences in direct selling include Country and Regional Manager roles at various multinationals. You can contact Hakki here.