How to set your KPIs when committing to an incentive program
Incentive programs are designed to provide businesses with profitable year-on-year growth. The success and growth of the program are reliant on the pre-set key performance indicators (KPI).
KPIs are fundamental to an incentive program because they measure the success of the concept, as well as the growth of the company. Each program has KPIs that measure engagement, achievement (how many achieve the end reward) and the overall sales growth and margin.
Over the past 21 years, we have managed over 100 incentive programs and have learned that engagement is an important KPI because it can predict the success of a concept early on. This KPI is measured against your communication material, including the open rates of your progress reports and eDMs, as well as the number of times a customer logs into the program’s microsite to learn about what they can achieve.
This early KPI can provide stakeholders with a quick snapshot of whether or not their customers are going to achieve or overachieve during the incentive period. The level of a customer’s engagement then contributes to them potentially earning enough tokens or points to be rewarded at the end of the program, which in many circumstances is a trip of a lifetime or something aspirational.
There is also a separate KPI for the number of people who achieve their individual targets and attend the incentive at the end of the program. The targets are then finalised with the consideration of last year’s sales results, the ‘business as usual growth’ (normal growth) and the incentive growth percentage the business wants to achieve during this period.
A third KPI then measures the overall sales growth, measuring the percentage growth of what all customers purchase during the buying period. This KPI is determined from the overall sales results achieved compared to the previous year, using that figure as a baseline.
There is also then an additional internal KPI to measure and benchmark your sales representatives. This KPI has two measurements – sales growth for the sales representative in their territory and the number customers who are engaged from each sale representative’s territory or area. These figures can then be displayed internally as a leader board to create competition between your team.
Finally, when measuring the success of a program, our team suggests 30 per cent achievement is a good outcome, while a program with 40 per cent is very good. 50 per cent achievement is determined as great. Over the years, our best ever incentive program received 69 per cent overall achievement.
The power of two: strategic alliances with non-competing businesses
In most recent times, when our clients were under pressure to achieve more with less, we have introduced a number of non-competing clients who serve a similar customer base. These are known as strategic alliances. Strategic alliances are an effective way of generating more engagement and reducing costs within an incentive program.
This is because it shares the costs for all clients involved while making it easier for customers to achieve due to the splitting of the total targets. Most importantly this results in the program engaging more customers, rewarding more customers and achieving greater incremental margin for the business. (See more in our next blog: How strategic alliances can help the success of incentive program)
At the conclusion of the incentive program, each business determines their own successes and failures. These are established differently across all the parties involved. The KPIs are set to measure the overall program success with profitable growth being the major factor. This also ensures the success of our philosophy of “you need to achieve to receive”. We have found this to be powerful and effective while communicating with our incentive program clients.