What is a SPIFF? SPIFF stands for sales performance incentive fund formula, which is a short-term sales incentive strategy in which sales reps are awarded a bonus for closing a sale or booking a demo. SPIFFs, unlike traditional sales incentives, typically have cash value. Today, the most common form of delivery for a SPIFF is through reloadable debit cards. However, SPIFFs can also take the form of gift cards, select merchandise, or an incentive travel trip.
What Is a SPIFF in Sales and Why Use It?
Manufacturers, distributors, and wholesalers use SPIFFs to award sales reps and channel partners at the point of sale. SPIFFs help manufacturers and distributors:
- Increase sales for high margin products.
- Move old inventory to free up space.
- Accelerate adoption of new products.
- Build brand preference with channel partners.
- Give a boost to sales for a specific time period (to meet quarterly sales goals, for instance).
What Does SPIFF Stand For?
One way to answer “What is a SPIFF?” is to spell out what SPIFF stands for. There are multiple variations of the SPIFF acronym, including:
- Sales Person Incentive Forms (SPIF)
- Sales Performance Incentive Funding Formula (SPIFF)
- Sales Performance Incentive Fund (SPIF)
- Special Performance Incentive Fund (SPIF)
- Specific Price Incentive For Final Sales (SPIFF)
- Special Pay Incentive For Fast Sales (SPIFF)
The History of SPIFFs
To more thoroughly answer the question “What is a SPIFF?”, the word originally appeared in the Oxford English Dictionary of 1859, which defined SPIFF as: “the percentage allowed by drapers to their young men when they effect sale of old fashioned or undesirable stock.” In 1890, the word resurfaced in the Pall Mall Gazette, in an article describing how London shop girls were rewarded for selling certain articles.
By the early 20th century, SPIFFs were common practice in wholesale and retail. It is believed that the acronym was most likely created sometime after 1930 to explain the origin of the word. Later, SPIFFs would have a major impact on Apple’s success in the PC market of the 1980s and 1990s.
For every Apple you sold, you filled out a form and got a bonus. Suddenly everyone got interested in the //c. Apple had no idea we could sell so many computers. The top prize was a //c computer plus a cash bonus, Apple expected a few salesmen would reach the goal by late December, but I had already won the top prize twice over by the end of the first week of December.— Charles Eicher in The Register
How Have SPIFFs Changed Over the Years?
So how have SPIFF incentives changed since their origin in the 1800s? In structure, not much has changed. But in execution, today’s SPIFF programs are very different. What changed? Digital transformation. These days, manufacturers, distributors, and wholesalers have moved past the question of “What is a SPIFF?”, to asking how software can empower their SPIFFs.
SPIFF software provides companies with the following benefits:
- More detailed data and analytics
- More immediate reward delivery
- More intuitive sales-claims submission
- More accurate sales verification
- Automated communication with sales reps
- Ability to structure multiple, simultaneous promotions
- Fewer manual processes or opportunities for user errors
Potential Issues with Sales SPIFFs
SPIFFS can be exciting, but it’s crucial to plan them with both enthusiasm and caution. In the pursuit of excellence, three key challenges may arise. Establish a timeframe, budget, and rules on the outset that avoid these challenges, and you should be golden.
1. Insincerity or Sandbagging From the Sales Team
A little healthy competition never hurt anyone. But when it comes to a SPIFF bonus, sincerity is the name of the game. Sandbagging, or intentionally setting low goals in order to overachieve, is tempting but rarely drives performance growth.
Tip for setting sales goals
Are you basing your sales goals on current deal stages? Instead of using fixed odds to forecast revenues, track deal progress and outcomes and use a continuously-fed bell curve to predict the odds of sales success. When you count the frequency of won deals as a percent of all deals, you can forecast deals won with more accuracy.
Thanks to Bob Suh’s HBR article for this wisdom!
Sales leaders can promote authenticity by:
- Foster a culture that values transparency and teamwork. Opportunities for public and peer-to-peer recognition are great places to start.
- Set realistic goals and track them. Make sure you have a system to accurately track and authenticate sales claims in a timely way.
- Highlight the long-term benefits of genuine achievements.
- Establish a feedback loop to address concerns early on and create an environment where success is measured not just in numbers, but opportunities for growth and learning as well as improved collaboration.
2. Exhausting Sales and Marketing Budgets
In the realm of SPIFFs, strategic budgeting is the key to sustained success. While the allure of cash spiffs is undeniable, they demand a balanced and thoughtful approach. To prevent budget bloat and unexpected expenses:
- Prioritize incentives that align with overall business objectives, ensuring that each SPIFF contributes to the team’s success.
- Personalize SPIFFs as much as possible. Sales growth opportunities vary according to your reps’ region, sales team or company size, experience, etc. One rep’s territory optimization could be another rep’s untapped market.
- Implement a tiered reward system tied to specific performance levels, preventing overuse of financial resources while maintaining motivation.
- Regularly assess the ROI of incentive programs to refine and optimize budget allocation.
3. Creating a Toxic Work Environment
The more you drive teams towards success, the more important it is to guard against the emergence of a toxic work environment. To maximize the benefits of incentives, champion an ethos where each win contributes to a positive atmosphere, elevating collective success without compromising team spirit.
- Emphasize shared goals and celebrate collective achievements. Recognize team efforts, especially those that make individual success possible.
- Implement clear guidelines and consequences for unethical behavior, ensuring that the pursuit of SPIFFs does not compromise the team’s cohesion.
- Foster a positive workplace culture that values collaboration and mutual support.
Not Sure Where to Start with SPIFFs?
Lots of sales leaders who once asked “What is a SPIFF?” are now asking how to start a new SPIFF initiative. But they want to skip to the part where they’ve been running SPIFFs for ages and they know what works vs. what doesn’t. If that sounds like you, consider working with Extu. We’ve helped companies quickly implement well thought-out SPIFFs that boost sales team motivation, move old inventory, and increase sales of new or under-performing products.
Ready to build a SPIFF program? Give us a call!
Want to learn more about SPIFFs? Dig deeper into the use cases of SPIFFs, as well as their ethical and strategic implications in Sales SPIFFs vs. Long-Term Sales Incentive Programs.