If you're looking to increase profits, there are two main types of sales incentives you can use. Customer sales incentives drive more business by bringing in more traffic, and employee incentive programs motivate your customer service representatives and sales teams to work harder to convert customer interest into completed sales.

There are a few things you need to remember before attempting to initiate any kind of sales incentives. You don't want to do anything that will potentially bring you more risk than reward.

1. Rule out customer incentive programs that will cost you too much money to implement. Sure, free samples will bring in customers, but it's not so smart when your product costs $50.

2. Make sure your employee incentive programs are actually motivating. Giving an employee a free sticker or key chain for bringing in a new account won't work as well rewarding him or her with an extra vacation day or a gift card.

3. Use purchase incentives for items that are not selling well on their own only. Otherwise, you're basically handing out free gifts with no return.

Action Steps
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Research sales incentive programs that have proven effective

Start is with some online research. You will find that a lot of companies have published details of sales incentive solutions that worked well for them.

I recommend: Maritz, a well-known marketing company, has a good list of client case studies you can start with to get a sales incentives overview. Another good place to look is on Incentive Magazine's website.

Ask employees what sales incentive ideas will motivate them best

Hold a meeting or teleconference to encourage employees to share their biggest motivators. Instead of letting them pull ideas out of thin air, give them some sales incentive basics to start with. This will keep the meeting constructive.

I recommend: Order catalogs from places such as Corporate Rewards and World Incentives and have employees look through them and select their favorite items. Choose one or a few of the top ranked incentives and incorporate them into your incentive plan.

Use consultants to develop custom reward incentive programs

There is no shame in asking for help, and a consultant will have good experience in what works and what doesn't.

I recommend: Attend trade shows in your line of business to connect with marketing companies that will have consultants available. TSNN.com has a good search engine you can use to find events and also get information, such as price quotes on promotional giveaways. Find a consultant through the Incentive Marketing Association. Contact them to find members in your area.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Always assess and reassess your programs, whether they are retail sales incentives or employee incentives. If one incentive stops working well, have another one waiting in the wings.

Motivating sales people is more art than science, but that doesn't mean you shouldn't try. After all, only a fraction of your crew are truly self-starters, and they already surpass quota. The big money is to be made in getting the slow swimmers into the water while showering attention on the superstars who drive your bottom line now. Here's a quick primer on the developing a successful sales incentive plan:

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A clear plan is a plan they'll follow

Make the program simple. Salespeople have enough detail in their daily work to track without having to spend time working out your incentive plan.

I recommend: Draft a quick, professional compensation plan (for a fee) using an online questionnaire at QuickForms. A more erudite explanation of sales incentive planning is in PDF file form at Salary.com. A simple walk-through can be found at the Incentive Marketing Association.

Yes, the 80/20 rule is unbreakable, as usual

Your top people are likely already plenty motivated, yet the second tier is where you'll see the most upside in terms of sales change. Understanding what drives each group can be difficult and distracting if you don't have human resources staff.

I recommend: Many companies work through consultants, including Maritz, Globoforce, Hinda, and Cygnal Group.

Track progress publicly

A horse alone will walk, but put another horse beside it and – voila – they start running. It's important to talk about who is closing deals and where people are in terms of goal. If you don't, each sales person will keep their own, error-prone tally, and then the problems begin.

I recommend: Move the process online, making results and incentives rewards immediately transparent, even to remote offices or outside sales. Take a look at offerings from SalesDriver, Xcelsius, LoyaltyWorks, Corporate Rewards, Perks and Xactly.

Try a little sugar

People need not only to win but to be seen winning. Public recognition in little ways, often, means a lot. Lapel pins and specially labeled business cards ('Chairman's Circle' or '$1 Million Seller') seem hokey, but they aren't to the folks who get these recognitions, nor to customers and suppliers who notice. The ones who don't make the cut will try all the harder.

I recommend: Shop ahead of time at Dinn Brothers, Crown Awards and Recognition Source.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  An incentive program seems less real the less you talk about it. Promote, promote, promote, before, during and after.
• •  You have to deliver what you promise and on time, or you'll never get another incentive program running again. Get your cash or product incentives in line before you even announce the program, or it will get by you.
• •  Sales programs are designed to pick winners and losers, but most successes come from teamwork. Pooling or points systems can be a big motivator, so that when the big deal is inked, everyone involved gets a bit of the credit — and the reward.
• •  Consider various types and levels of gifts, even extra time off or services they might not otherwise buy, like house-cleaning or car detailing. Stress relief is as welcome as cash to some.

Though a secondary benefit of employee incentive programs and customer incentive programs can be to increase morale or get shoppers talking, the most important goal should be to make money for your business.

This means that you should consider pricing and costs of sales incentives before you put them into practice. This should be an important part of your yearly promotional budget. Here are some things to think about:

1. Sales incentive programs don't have to be expensive to be effective.

2. The important thing is to have good return on your investment.

3. Consider several incentive plans before deciding on one.

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Prepare a sales incentive plan budget

When you're preparing your annual budget, make sure to put reward incentive programs into the mix. Whether you have five dollars or five thousand dollars to spend, it's best to know that number up front.

I recommend: Do some research to see what kind of plans you can incorporate for the dollars you have. Although the goal is to make money on this project, you may not want to risk putting the company into debt. The Incentive Marketing Association has a member list that you can use to contact companies and ask for pricing estimates. Incentives Marketplace offers fixed-budget programs, which can give you a good idea of what you can get for your price range. Their costs range from under $100 to over $2,000.

Hire a marketing consultant to run your customer incentive program

If you're not comfortable conducting your incentive plan by yourself, it's perfectly reasonable to get a consultant to help you. Consultants will be able to advise you on strategy and help you calculate your return on investment.

I recommend: Do some research before you hire a your consultant so you will know what is considered a reasonable rate. Consultants charge anywhere from $50 an hour to $200 or more. Strategic Insight, based in Phoenix, offers a three-month subscription to remote consultation services for $99 per month. This gives you six total hours of talk time. Also, if you hire a freelance consultant instead of a company, the rate may be less expensive. Try posting the job on a site like Freelance Work Exchange or Odesk. Contractors will send you bids for the work.

Consider sales incentive solutions that are free or almost free

If your budget is very low for whatever reason, you can forgo the marketing consultant and go with an inexpensive plan you develop on your own. Sometimes this strategy works surprisingly well.

I recommend: Use resources you already have to reward employees, such as holding a potluck lunch at the end of every month you meet your sales goals or scheduling a Recess at Work Day devoted to fun and team building. Give customers purchase incentives by holding a Customer Appreciation party with food and music to bring them into your office and hopefully buy something while they're there. Sunrise Marketing sells custom advertising postcards for as little as 11 cents each, making it an inexpensive way to get them in the door.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  You can use incentives more than once if they prove effective. This can save you money and time.

Organizing a sales incentive program can be a great way to increase sales, thus increasing profits. In a sales incentive program, greater sales are incited through the exchange of a quality product or other reward for increased effort of employees or customers. Every business is different, with different products or services and different employees; a sales incentive that works for one business may not work for another. When developing a custom program, keep the following sales incentives key terms in mind.

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Employee incentive

An employee incentive is something used as a reward for increased employee productivity designed as a source for motivation, such as a raise, a trip somewhere or a quality product.

I recommend: Learn more about tried-and-true employee sales incentives from Perks.com.

Consumer incentive

A consumer incentive is a product, discount, benefit or other reward given to a customer for purchasing a product or conducting business. It is used to increase sales by encouraging customers to buy rather than encouraging employees to sell.

I recommend: Read more about consumer sales incentive programs at the website of Sales Promotion Services.

Dealer incentive

A dealer incentive is a premium or other reward given by a manufacturer to retailers and distributors in return for an increased purchase from the manufacturer. It is designed to motivate larger than usual purchases.

I recommend: Visit Cars.com to read about how dealer sales incentives, like the ones commonly used in the auto industry, work to increase sales.

Close-ended program

A close-ended program is a type of sales incentive program that has a pre-determined number of awards given, such as rewarding the top sales person or top three sellers.

I recommend: Find a guide on how to run a successful close-ended incentive program at AllAmericanClocks.com.

Open-ended program

An open-ended sales incentive program is a type of incentive program that has no limit on the number of rewards that can be given, and rewards any employee that achieves a specific goal.

I recommend: Discover why some experts claim open-ended incentive programs generate more sales at FIRE Light Group.

Continuity program

A continuity program is a program designed to offer an incentive to a customer for repeated business. It motivates the customer to return again with future business with incentives such as frequent flyer miles, hotel points or discounts.

I recommend: Learn about using continuity incentive programs by reading how the Wine of the Month Club's program is a success.