FEATURESTORY

Remarkable Rewards, Extraordinary Results!

How to motivate high-salaried salespeople

by Paul Nolan

In retrospect, it makes perfect sense, but Tim Houlihan, Vice President of Reward Systems at Minneapolis-based BI, recalls being initially surprised when his company was hired by Barneys New York to oversee an incentive program for sales associates. Many of the sales floor employees at the famous upscale department store chain are well-off.

"They aren't working at Barneys for the money. They're working there for discounts and the access to stuff," Houlihan says. He knew instantly that the incentive program would be successful. Participants earned points for selling specific brands and could redeem those points for high-end merchandise. "It had nothing to do with money. They didn't need more money," he says.

It's a good bet that high-earning sales reps on your team are in a similar situation. Many companies assume that salespeople making six-figure salaries are driven by money and will respond best to cash incentives. Houlihan respectfully disagrees.

"I don't doubt that more cash will get more performance, but how much more? The really big changes in performance come when you offer something other than money," he says.

Lock in on luxury

Why does a $2,000 gas grill motivate a top-performing salesperson more than a $2,000 bonus? Two words: hedonic luxuries.

As reported in our cover story last fall (see: "Why Cash Incentives Fail") people are hesitant to spend money on non-essentials even if they earn a substantial income. Behavioral economists have long known that consumers often experience an immediate "pain of paying," which can weaken the pleasure derived from consumption or discourage purchases altogether.

BI creates incentive programs for companies worldwide. Less than 1 percent of participants earn $5,000 or more in AwardperQs points, but the overarching concept of motivating with luxuries works across the board.

"We're all hardwired the same," says Houlihan. "No matter how much you make, there's something that everybody wants that they won't buy for themselves." Incentive pay earned for hitting a predetermined quota typically is lumped in with overall salary and used to pay bills or stuffed into savings accounts. There's little "halo value" to the award, which explains why, in Houlihan's words, cash can only buy a certain amount of extra effort.

Indeed, research by Ran Kivetz, a professor of marketing at Columbia University Graduate School of Business, shows that a significant number of people (as much as 39 percent) will "precommit" to indulgence by selecting a luxury item as a reward over a cash amount of equal or greater value. It makes sense, many incentive experts argue, to lock your program participants into the luxury category and not provide a cash option.

"People are willing to work harder for hedonic luxuries," Kivetz says. "When they start thinking about dollars, they become more rational, more economical and less willing to work for it."

 

 

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