This article defines what a SPIFF is in the context of sales, explains how it works, who it’s for, and why understanding SPIFFs matters for sales professionals and managers.
Define SPIFF
SPIFF in Sales Context
A spiff, also known as a Sales Performance Incentive Fund, is a short-term sales incentive designed to encourage salespeople to reach specific targets within a designated period. Spiffs are designed as one-time bonuses for achieving short-term objectives, distinguishing them from commissions, which are ongoing and based on sales revenue. Sales commissions are a regular part of a salesperson’s earnings, whereas spiffs are designed to provide immediate motivation for specific actions or sales.
The term ‘spiff’ dates back to 1891 and has several meanings, including Sales Performance Incentive Fund, Sales Program Incentive Fund, and Sales Promotion Incentive Fund. In the sales world, a SPIFF is typically something that companies and brands pay to their sales reps when they perform well at their job. It isn’t a part of a basic salary, which everyone gets. Instead, a SPIFF is something that companies award individually to their sales reps provided they perform exceptionally well at closings, or are able to book a demo or succeed at pretty much any other profitable activity that involves profitable sales.
Now that we’ve defined what a SPIFF is, let’s explore the literal meaning and historical context of the term.
Literal Meaning of Spiff
Literally speaking, a spiff is an informal American word that means something or someone that looks stylish, attractive, or pleasing. For example, a black leather jacket worn to a casual dinner might be described as “spiffy.” Historically, ‘spiff’ has also been used to describe someone as well-dressed (‘spiff well dressed’) and as a verb meaning ‘to make spiffy’ or ‘to reward.’ The term has also been associated with sensory experiences, such as the sound of postage stamps parting or the graunch of mechanical objects, highlighting its descriptive and historical usage.
With the literal and historical context in mind, let’s dive deeper into what a SPIFF looks like in practice.
Difference Between SPIFFs and Commissions
Spiffs are designed as one-time bonuses for achieving short-term objectives, distinguishing them from commissions, which are ongoing and based on sales revenue. Sales commissions are a regular part of a salesperson’s earnings, whereas spiffs are designed to provide immediate motivation for specific actions or sales.
Understanding this distinction is crucial for both sales professionals and managers, as it helps clarify how different incentive structures can be used to drive performance.
What Does It Look Like?
Forms of SPIFFs
A SPIFF can take the form of any incentive that you, as a manufacturer, may pay to a salesperson who does more than just a decent job. SPIFF compensation is most usually in the form of cash, credit, or cheques. However, some manufacturers, owners, or executives may also award SPIFFs in the form of cash spiffs, monetary bonuses, reloadable cards, gift cards, merchandise presents, or even incentive-based travel trips. Spiffs can also take several forms, including cash bonuses, non-cash rewards, tiered spiffs, and mystery spiffs.
Tax Implications
In the U.S., most SPIFF rewards are considered taxable income and must be reported on W-2 or 1099 forms.
Historical Usage of Spiff
The term ‘spiff’ dates back to 1891 and has several meanings, including Sales Performance Incentive Fund, Sales Program Incentive Fund, and Sales Promotion Incentive Fund. Jones describes ‘spiff’ as not only referring to sprucing up or enhancing something, but also as a term used for embellishing or improving cases, properties, or appearances in various scenarios.
Basically, SPIFFs can be any reward or token that has a monetary value. It can be hard cash, a product, a free service package, a subscription, a development opportunity, an educational opportunity, or any other form of immediate incentive to a sales representative who rakes in the big bucks for the company in which they’re working.
Now that we’ve covered what a SPIFF looks like and its various forms, let’s see how you can determine if your company offers SPIFFs and what acronyms you might encounter.
Does My Company Offer SPIFFs?
Just like there’s a variety of SPIFF-able incentives, there’s also a variety of the term’s acronyms. You may already know what a SPIFF is and may have also been on its providing or receiving ends if you’re familiar with any of these alternate acronyms:
- Sales Person Incentive Forms
- Sales Performance Incentive Funding Formula
- Sales Performance Incentive Fund
- Special Performance Incentive Fund
- Specific Price Incentive For Final Sales
- Special Pay Incentive For Fast Sales
Now that you know the different forms and acronyms of SPIFFs, let’s clarify how SPIFFs differ from other types of compensation like bonuses and raises.
How is a SPIFF Different From a Bonus or a Raise?
Let’s be clear here. A SPIFF is never a part of the basic salary, i.e., something that each one of the employees will receive equally according to their job description and regardless of their performance.
A bonus is where almost all employees working in sales get some form of relief in addition to their salary for all their hard work. Bonuses might vary from employee to employee, but they’re nearly as commonly handed out as salaries.
A raise is a formal way of changing one’s job status to a higher one, along with an increase in either the basic salary or bonuses or both. With a raise, the whole nature of the job changes, and it isn’t as commonplace as a bonus or as regular as a salary.
A SPIFF stands out from all these formal terms and monetary returns in that the only criterion for earning a SPIFF is performance par excellence. No matter what the job is or what salary, experience, or bonuses it entails. A SPIFF can be given to anyone who catches a big fish for the company. Unlike the other three, a SPIFF isn’t something planned or scheduled. Whenever a sales employee performs well, they’re likely to earn a SPIFF!
It’s also important to note that spiffs are typically one-time bonuses offered for achieving specific short-term goals, while sales commissions are ongoing payments based on a percentage of sales. Sales commissions reward consistent, long-term performance, whereas spiffs are used for immediate, targeted sales objectives.
With the differences clarified, let’s move on to who should receive a SPIFF and how to structure your SPIFF program.
Who Should You Give a SPIFF To?
Eligibility Criteria
Before you begin ticking off the list of all employees who made a sale in the past week or so, just be clear; not all employees would necessarily qualify for a SPIFF. To implement a successful SPIFF program, start by defining clear objectives that align with broader business goals, ensuring that the program is focused and relevant. Obtaining buy-in from the sales team is crucial, as their support and approval can significantly impact the program’s success. SPIFFs are something that requires a bit of calculation and contemplation before you dish them out for your employees. If we think that excellence is the criterion for awarding SPIFFs, then whose excellence or progress do we envision? Our own? Our senior staff’s? Or that of those who work on similar employment levels within the sales framework?
There are no specific rules here. It’s preferable not to award SPIFFs to anyone and everyone who makes a sale, but instead, you may look at the employee’s own performance improvement and whether they have met or exceeded expected benchmarks or objectives to figure out if they deserve a SPIFF for the specific high-performance duration or for an exceptionally well streak of sales!
Types of Employees
Recognizing top performers is essential, and managers play a key role in identifying and rewarding these high achievers to maintain motivation and fairness within the team, which can be supported by creative sales awards ideas to motivate your sales team. When setting eligibility criteria, ensure they are clear and logical so that they make sense to everyone involved. Communicating the terms of the SPIFF program clearly and frequently helps ensure that all participants understand the goals, eligibility, and timelines, which is essential for engagement and success.
You may identify three types of employees in any company who may or may not deserve SPIFFs based on their performance. These include:
- The Draggers: They’re the ones who appear steadily unmotivated and usually do not bring much to the table when it comes to boosting sales or building new sales strategies.
- The Gems: These are the ones who remain motivated for the cause of their own career aspirations, which may not always involve incentives. They not only bring in the most massive sales, but they also encourage others to play their part.
- The Bulk: Somewhat focused and motivated, but not exactly the gems of the crown. They’re usually the majority of employees in any organization.
Communicating SPIFF Programs
It’s also important to tailor SPIFF programs to the preferences and needs of your sales team for maximum effectiveness, building a reward system that truly motivates your sales team. Additionally, SPIFFs should be simple, fair, and not overused to avoid creating a toxic environment and employee issues like sandbagging.
With a clear understanding of who should receive a SPIFF, let’s look at the purpose behind these incentives.
What is the Purpose of a SPIFF?
The idea behind awarding a SPIFF is to acknowledge the efforts and results of the sales rep’s performance, while also motivating that sales rep to continue excelling. SPIFFs are a key part of incentive programs designed to promote specific products, drive desired behaviors, and help achieve sales goals, especially when paired with strategic sales incentive prizes to motivate your team and boost sales. By providing immediate recognition, SPIFFs can boost morale among sales professionals and sales reps, increasing motivation, job satisfaction, and reducing turnover. Sales spiffs introduce a fun, friendly sense of competition among team members, motivating them to reach specified goals or metrics, much like creative sales contests that actually work to boost results. These incentive strategies, when tailored to the needs of the sales team, can maximize productivity and increase sales by applying proven ways to improve sales motivation. They also offer many benefits, such as boosting team morale and fostering a sense of achievement and competition within the sales team. It is also to encourage and motivate others to perform better in order to secure their own SPIFFs. Common uses of spiffs include launching new products, moving old inventory, end-of-period pushes, driving specific behaviors, and building channel loyalty.
With the purpose of SPIFFs established, let’s discuss the best timing for awarding them.
How Should I Pick the Right Time to Hand Out SPIFFs?
Once you’ve picked your SPIFF recipients, it’s time to answer the next big question: When to award a SPIFF? Choosing spiffs that align with your company’s objectives and sales goals is crucial for driving the right behaviors and achieving desired outcomes. A well-timed SPIFF acts like a pressure valve, releasing excess air and boosting performance at critical moments, much like how machinery needs to release pressure to function efficiently. Just as you might hire two gardeners or use a washburns hire service to spiff up your grounds, or bring in new furniture to refresh and motivate your office, spiffing up your sales environment can energize your team and improve results. When you create an effective spiff program, consider factors like timing, budget constraints, and the specific needs of your sales team to maximize motivation and results, while also aligning rewards with a target-driven sales environment.
Occasions for SPIFFs
- Near Audits:
SPIFFs can be especially effective near the end of a quarter, serving as a ‘final push’ for the sales team to meet targets and maximize motivation during this critical period, similar to running call blitz contests that build confidence and performance. If you want to hit a target for your sales or want to achieve a quarterly or yearly goal, setting up SPIFF rewards might help boost your sales. Those who are vying for the rewards will work harder to secure their SPIFF, hence more effective sales closings and better audit results! - You Want a Sales Boost:
Offering incentives like SPIFFs can help boost sales even when there is no specific target to meet. If there is no specific target to meet any time soon, your sales reps may feel a bit lazy, hence affecting your sales. If you want to see an instant boost in their performance, it’s best to offer some incentives. - With Growing Competitions:
If there’s a new product contending with your own, it can be difficult to maintain a successful sales reputation. As the competition grows tougher, you’ll want your staff to work harder to keep up your sales records and stop your competitor from breaking them. In this case, too, sales incentives come into play by engaging your employees in a reward-based work strategy. SPIFFs can also foster healthy competition among sales reps, motivating them through fun contests and real-time sales leaderboards and tracking software to energize your sales environment. - Launch of a New Product:
At the beginning of a new product launch, it’s crucial to focus on promoting the specific product or new services to ensure their success. Your sales reps are the torchbearers of that image! You need your sales representatives to amp up their performance so that the new product isn’t a flop. For this, they’ll need to work on their closing techniques and demo securing. A SPIFF, in this case, is an effective way to motivate your salespeople to concentrate on selling the specific product or service during its initial launch phase, helping to build a positive brand image! - Clearing Your Inventory:
Getting an old item to sell is just as hard as getting a new one to sell, especially when inventory clearance needs to happen within a short period. You may set up a clearance sale, offer freebies, or use any other sales technique, but that will still leave behind a few leftovers that may need your staff’s special efforts. When these couple of products are left on the shelves or in your inventory, they can be harder to sell because they simply don’t garner enough attention.SPIFFs can motivate sales reps to focus on closing deals quickly to clear out remaining inventory. So whoever manages to pack in a few sales on those hard-to-clear leftovers surely deserves a reward for it, right? Well, a SPIFF in this situation can also help you out. You may designate a few SPIFFs for all those who can siphon off those remaining items from your inventory during your clearance periods!
To maintain engagement and motivation, spiff programs should include a mix of cash and non-cash rewards, catering to the diverse preferences of your sales team, supported by well-chosen sales incentive prizes and rewards. After the SPIFF program concludes, it’s important to track its effectiveness by analyzing outcomes and gathering feedback. Managing SPIFFs on manual spreadsheets often leads to payout errors and disputes, so using Incentive Compensation Management (ICM) software or leaderboard software for sales teams is recommended for accurate tracking. When implemented strategically, organizations often see a 15% to 22% lift in short-term sales performance from SPIFFs. This helps optimize future programs and ensures your SPIFF initiatives remain impactful.
Get SPIFF-y
Getting your sales team to stay motivated in rapidly changing market environments is a pretty hectic job, mainly because their job, in return, is just as hectic. In this case, a series of short-term rewards, whether monetary or a monetary substitute, can work really well in keeping your employees motivated to strive further.
SPIFFs offer that exact kind of acknowledgment and reward to your most deserving workforce and encourage them to keep up their good performance, making an impact as noticeable as the crunch of the car door closing, signaling a job well done and impossible to ignore!
Ready to boost your sales team’s motivation with effective SPIFF programs? Book a demo today and see how SPIFFs can transform your sales performance!
