Are you considering adding spiffs to your sales incentive program? What exactly is a spiff in the first place? Are you even using the word “spiff” correctly? What are some of the advantages and disadvantages of using spiffs to incentivize your sales force? Are you looking for a software solution to automate spiffs? In this blog post, we’ll answer all your questions.
Definition of Spiff
Obviously, you don’t want to lose credibility by using “spiff” incorrectly. However, it turns out that the word has no commonly accepted definition. An early reference to “spiff” can be found in a slang dictionary of 1859, referring to “The percentage allowed by drapers to their young men when they effect sale of old fashioned or undesirable stock”.
The most common modern definition seems to be either “Sales Performance Incentive Fund” or “Special Performance Incentive Fund“. We recommend using this definition to avoid confusion. You can also get a sense of what a spiff should be from expressions such as “spiffy” or “to spiff up”. In our opinion, a spiff should:
- Come from a special budget
- Represent secondary (not mainline) commissions
- Be limited in time
- Be exciting
Here are some sentences showing how spiff may be used in actual conversations:
- “She earned a spiff by signing up the most customers last month”
- “Our company just set up a $20K spiff fund for top performing partners”
- “All radio equipment sales come with a spiff next month”
Ways to Use Spiffs
To Support Partners
Many corporations establish special incentive programs for their partners. Typically they establish some type of a limited, time-bound slush fund, which is used to reward partners for attaining specific goals. For example, this could be signing up more than X customers during a month, or selling more than Y in goods within a quarter.
To Manage Inventory
Using spiffs, you can influence how products will be sold and prioritize sales. For example, you could setup a spiff to liquidate ageing products. Or you could setup a spiff to accelerate sales of newly introduced products or more profitable ones. You could even setup a spiff to encourage cross-sell, up-sell, or product bundling sales activity.
To Support a Campaign
If you have sales campaigns or initiatives, a spiff can help you support those efforts. Essentially, your spiff acts as a one-time promotion for your reps. A simple implementation could be “sell X, get Y extra in commissions”. You probably want the offer to be time-sensitive – both to feel exciting and to match your campaign’s duration.
To Acquire New Accounts
The backbone of your sales incentive program should NOT be spiffs. You don’t want to distract your reps from important goals based on, say, total gross revenue. However, spiffs can help deliver secondary goals, such as accelerating customer sign ups. Essentially spiffs can help you include lower-priority yet important sales goals such as new logo acquisition.
To Encourage Renewals
Once a deal has been signed with a customer, reps often move on to new pastures. However, for businesses based on subscriptions, renewals are critical. Including spiffs based on renewals can help your reps also focus on customer retention. Those spiffs are typically paid quarterly, and based on either renewal rates or renewal counts.
To Improve Communication
A spiff can be a great opportunity to create some excitement, and even improve communication. A well-designed spiff can generate a lot sales energy, focus reps on new goals, and create a reason for management to regularly communicate with the team how it’s doing (with some positive reinforcement). Many reps praise spiffs for creating a more fun environment.
To Fix Quotas
Setting up quotas correctly requires accurate forecasting, which can be challenging. When quotas are too high, organizations can choose to lower them. However, this sometimes isn’t the best option because it makes reps feel like their commissions are guaranteed regardless of results. For this reason, it can be appropriate to use spiffs to fill the gap left by incorrect quotas.
Designing A Spiff
This example shows what you need to think about when designing a spiff. You need to think about the spiff’s period, who is eligible, and agree on a budget. Also, you may need to create or update sales enablement content. We recommend using an automated commission management solution to deliver spiffs to your reps.
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Disadvantages of Spiffs
Spiffs aren’t perfect. They should only be used as bolt-ons to a mainline incentive programs. They should only be used to address specific and unique business needs. Here are some risks and issues associated with spiffs when used incorrectly.
Your reps may recommend the wrong product or solution to customers in order to earn a spiff. They may also try to manipulate numbers, for example by postponing customer sign ups to the next quarter in order to attain quarter-based targets. You don’t want to set up an atmosphere where dishonesty pays.
If you use spiffs too frequently (or they always look like the same thing), they may be perceived as a prerogative or create a sense of entitlement. It’s also quite easy for reps to lose interest if the incentive no longer feels special. For this reason, spiffs should be time-bound and unique.
Perhaps some of your reps don’t know how to sell those products which qualify for a spiff. Or they may prefer methodical (steady) sales methods to one-off sales behaviors driven by spiffs. This can make some of your reps feel diminished, demotivated, or upset because they can’t take advantage of spiffs.
If your spiff isn’t well implemented, there could be some finger pointing as goals are missed, generating negative feelings. In addition, if spiffs aren’t paid correctly, some reps are incorrectly disqualified, or spiff funds run out, your reps may feel cheated out a commission, which will backfire.
Distracting or Confusing
Your spiffs can become a distraction. For example, they could encourage your reps to sell what’s on the “spiff list” versus what customers actually need. Things could also get confusing if there are concurrent spiffs, and reps must figure out which one would benefit them the most.
What People Say About Spiffs
Here are some examples of what actual people say about spiffs on the internet:
Example #1 – “Any salesman that works at a dealership where the spiffs are more than the commissions should run like hell. They are taking advantage of you and your talent”
Example #2 – “A spiff program won’t solve for a larger root issue of having the wrong people, a flawed compensation plan, or ineffective sales management”
Your spiffs should be special, and should not represent the principal component of your sales incentive program. You should also not rely on spiffs to patch a faulty incentive program (ex: one with unreasonably low payouts).
Example #3 – “These companies are offering huge spiffs when their salespeople sell high efficiency HVAC products and accessories. I just do not like when […] tries to mislead consumers by exaggerating the savings generated by this equipment due to those spiffs.”.
Your spiffs should not encourage unethical behavior by promoting certain products when others are more appropriate for your customers.
Example #4 – “Are you a proven closer? Sick of being drip fed? Do you want to be paid the top rate of commission on the island plus spiffs paid daily? Do you want to work for a great company with a team ethic, no cherry picking?”
This company is trying to make commissions exciting using daily spiffs! Note the mention of “team ethic” immediately following that of “spiff” to reassure candidates that this will be a fair level playing field.
Ready to Automate?
If you’re ready for a more agile sales incentive program (for example, one which includes spiffs!), you need to automate. Using Sales Cookie, you can:
- Calculate accurate commissions for all reps using a simple “calculate” click
- Eliminate all manual generation / distribution of commission spreadsheets
- Provide each rep with an incentive dashboard – with their commissions, goals, announcements, enquiries, etc.
- Keep track of your current and past commission payouts, rep quotas, etc.
- Make it easier to change and manage incentive plans
- Improve accounting / legal compliance
Please visit us online to learn more!