SPIFF Sales Incentive: Meaning and Examples

What is a SPIFF in Sales?

SPIFF: S=Special, P= Payment, I=Incentive, F=for, F=Fast, S=Sales

A "spiff" in sales is a special incentive offered to salespeople to motivate them to sell specific products or services. The term "spiff" can be an acronym for "Special Payment Incentive for Fast Sales" or just a colloquial term derived from sales jargon. These incentives are usually above and beyond regular commissions or bonuses and are typically used to:

• Boost Sales of Specific Items: Companies might use spiffs to push products that are overstocked, nearing the end of their product life, or new to the market.

• Promote New Products: When a new product is launched, spiffs can encourage salespeople to focus on it, ensuring it gets market attention.

• Encourage Competition: SPIFFs can create a competitive environment among sales staff, leading to increased overall sales.

• Reward Immediate Results: Unlike regular commissions or bonuses that are often calculated over a longer period, spiffs are often paid out quickly, providing immediate rewards for specific achievements.

Are SPIFF and Commission the Same Thing?

No! SPIFF and Commission are different. SPIFFs (Special Payment Incentives for Fast Sales) and commissions are both incentive-based compensation methods used to motivate sales teams, but they differ in their structure, purpose, and application:

Definition and Purpose:

• SPIFFs: A SPIFF is a short-term incentive program designed to drive immediate sales results. It's typically used to promote specific products, clear inventory, or boost sales during a particular period. SPIFFs are often used to motivate salespeople to focus on selling certain items that might otherwise be overlooked.

• Commissions: A commission is a longer-term, ongoing incentive that's typically a percentage of the sales value or profit generated by the salesperson. Commissions are a fundamental part of a salesperson's overall compensation structure and are used to align their interests with the company’s revenue goals.

Duration:

• SPIFFs: These are usually for a limited time. They might last for a day, a week, or a month, depending on the specific goals of the program.

• Commissions: Commissions are ongoing and are a regular part of the salesperson’s compensation, often paid monthly, quarterly, or annually.

Payment Structure:

• SPIFFs: The incentives can be in various forms, such as cash bonuses, gift cards, trips, or merchandise, and are usually apart from the regular income.

• Commissions: This is usually a cash payment based on a fixed percentage of the sales generated or a margin achieved.

Target Focus:

• SPIFFs: Targeted towards selling specific products, services, or achieving a particular sales activity.

• Commissions: Generally linked to overall sales performance, without necessarily emphasizing specific products or services.

Motivation and Behavior:

• SPIFFs: Aim to create immediate motivation and a sense of urgency, often leading to short-term spikes in sales for targeted products.

• Commissions: Foster a long-term, consistent sales effort, encouraging salespeople to continuously perform well.

Calculation:

• SPIFFs: The calculation is typically straightforward, and based on achieving specific, short-term sales goals.

• Commissions: The calculation can be more complex, involving percentages of sales, profit margins, and sometimes tiered structures based on performance levels.

In practice, many sales organizations use a combination of both SPIFFs and commissions to create a balanced and effective sales incentive program that addresses both short-term goals and long-term sales growth.

SPIFFs can be offered in various forms, such as cash bonuses, gift cards, vacations, or other prizes. They are particularly common in retail and automotive sales but can be found in many other sales-driven industries as well.

SPIFF Programs Examples

There are quite a few companies that use SPIFF programs to incentivize their sales teams. For example, Dell has been known to use SPIFFs to encourage sales of specific products or services. They offer a cash bonus or a special prize to their sales reps for closing deals on these items within a certain timeframe.

Another company that uses SPIFFs is Salesforce. They have a program called the "Big Deal Bonus," which rewards their sales reps with extra cash for closing large deals. This not only encourages their sales team to go the extra mile but also helps to drive revenue for the company.

Various companies across different industries utilize SPIFF programs to motivate their sales teams and drive specific sales objectives. Here are some examples:

Pharmaceuticals and Medical Equipment:

Medical Device Companies: These companies might use SPIFF programs to encourage sales representatives to focus on newer or niche products. For example, a rep might receive a custom luxury swag for each unit sold of a new medical device that the company is trying to establish in the market.

Automotive Industry:

Dealerships: Car dealerships often use SPIFF programs to encourage salespeople to focus on moving specific models, especially those that are overstocked or are from an older inventory. For instance, a dealership might offer a $500 bonus for every older model year car sold within a certain timeframe.

Retail Industry:

Electronics Stores: Stores selling electronics might use SPIFFs to push certain brands or new product lines. For example, a store could offer sales associates a $50 bonus for each high-end television of a particular brand sold during a holiday season.

Telecommunications:

Cell Phone Carriers: These companies might run SPIFF programs to encourage the sale of specific phone models or plans. For instance, a carrier might offer a $100 SPIFF for each customer a salesperson upgrades to a higher-tier plan or a newly launched smartphone.

Software and Technology Companies:

SaaS (Software as a Service) Providers: SaaS companies often use SPIFFs to motivate sales teams to focus on selling annual subscriptions over monthly ones, as this improves cash flow and customer retention. They might offer a certain percentage of the first-year’s subscription fee as a SPIFF.

Real Estate:

Real Estate Agencies: To encourage the sale of properties that have been on the market for a long time or are high-value, agencies might offer SPIFFs to agents who close deals on these properties.

In building a SPIFF program, companies typically:

• Identify specific products or services they want to push.

• Set a clear and attainable goal for salespeople.

• Decide on the incentive (cash, gifts, trips, etc.).

• Communicate the details of the program clearly to the sales team.

• Track the sales and performance related to the SPIFF.

• Provide the rewards promptly after the achievement of goals.

Each company's SPIFF program is tailored to its unique products, sales cycle, and market dynamics. The key to a successful SPIFF program is ensuring that it's well-structured, motivating, and aligns with the company's broader sales strategies and goals.

SPIFF programs can be a great way to motivate sales teams and drive results for companies. Just remember, with great SPIFFs comes great responsibility.

How to Build a Successful SPIFF Program

Running a successful sales SPIFF (Special Payment Incentive for Fast Sales) program involves careful planning and execution to ensure it effectively motivates your sales team and aligns with your business goals. Here are key steps to consider:

Clearly Define Objectives

Determine what you want to achieve with the SPIFF program. This could be moving overstocked inventory, promoting a new product, or boosting sales during a slow period. Your objectives will guide the structure of your program.

Set Measurable Targets

Establish clear and achievable sales targets. These should be challenging yet realistic, ensuring that your team feels motivated rather than discouraged.

Choose Appropriate Rewards

Select incentives that will truly motivate your sales team. This could be cash, prizes, extra time off, or other rewards. Knowing your team's preferences is crucial here.

Communicate Clearly and Effectively

Ensure that all participants understand the rules, targets, duration, and rewards of the SPIFF program. Clear communication prevents confusion and ensures everyone is on the same page.

Ensure Fairness and Accessibility: 

Make sure the program is fair and provides equal opportunities for all eligible participants. This means setting reasonable and attainable goals that don't favor one group over another.

Track and Report Progress

Regularly track and report the progress of the SPIFF program. This not only helps in managing the program but also keeps participants informed and engaged.

Keep it Time-Bound

Set a clear start and end date for the SPIFF. This creates a sense of urgency and helps maintain focus and momentum throughout the program.

Legal and Ethical Compliance

Ensure that your SPIFF program complies with all legal and ethical guidelines relevant to your industry and region.

Evaluate and Adapt

After the program concludes, evaluate its success against your objectives. Gather feedback from participants to learn what worked and what didn’t, and use these insights to improve future programs.

Celebrate and Recognize Achievements

Publicly recognize and celebrate the achievements of participants. This not only rewards those who excelled but also motivates the entire team for future initiatives.

Remember, the effectiveness of a SPIFF program largely depends on how well it is tailored to your team and business objectives. It's important to keep iterating and improving based on feedback and performance data.

Are There Any Disadvantages of SPIFF Programs?

Companies need to carefully design SPIFF programs with clear objectives, fair opportunities, and a balance between long-term sales strategies and ethical sales practices. If regular evaluation and adjustments based on outcomes and feedback are not implemented, SPIFF programs can lead to the following problems. 

• Short-Term Focus: SPIFFs can encourage a short-term mindset among sales staff, leading them to prioritize immediate sales of specific items over long-term customer relationships and broader business goals.

• Unbalanced Sales Efforts: By incentivizing certain products or services, SPIFFs can lead to neglect of other important products, potentially causing an imbalance in the company's overall sales strategy.

• Potential for Unethical Sales Behavior: In pursuit of SPIFF rewards, some salespeople might engage in high-pressure sales tactics or misrepresent products to customers, which can damage the company’s reputation and customer trust.

• Conflict Among Team Members: SPIFFs can create unhealthy competition among sales staff, leading to conflicts, reduced collaboration, and a potentially toxic work environment.

• Complexity in Sales Compensation: Managing SPIFFs can add complexity to the sales compensation structure, making it difficult for salespeople to understand their earnings and for the administration to manage payouts.

• Reduced Motivation Over Time: If SPIFFs are used frequently, they can lose their effectiveness as motivational tools. Salespeople might come to expect them as part of their regular compensation, reducing their impact.

• Cost Inefficiency: SPIFF programs can be costly, especially if they don't yield the expected increase in sales or if they cannibalize sales that would have occurred without the incentive.

• Quality of Sales: There’s a risk that in the rush to make more sales to earn SPIFFs, the quality of customer engagement and sales might diminish, potentially leading to higher customer churn rates.

• Dependency and Expectation: Regular use of SPIFFs can lead to a culture of dependency where sales teams expect periodic incentives to perform their basic duties.

• Inequity Issues: If not designed carefully, SPIFFs can create perceived or real inequities among team members, especially if certain sales roles have more opportunities to benefit from the SPIFFs than others.