What’s a SPIFF program — and does your business need one?
Spend time talking with sales managers and reps, and you’ll probably hear about SPIFFs.
What are they?
SPIFF programs are short-term campaigns to incentivize the sale of certain goods or services. These programs are common among sales reps, authorized resellers and channel partners to close more deals and stay motivated. SPIFFs are extras, offered in addition to commissions and base salaries, not as replacements for them.
If SPIFFs sound like a tool you’d like to use at your company, you’re in good company. Lots of organizations use SPIFFs to:
- Increase sales volume
- Grow through upsells and cross-sells
- Connect with new prospects
A SPIFF can be a great way to motivate your sales team to hit small goals on their way to larger accomplishments.
However, setting up and running a successful SPIFF program isn’t as easy as dangling prizes in front of your team. There are practical, ethical and even legal considerations to factor into your SPIFF plan. Read on to learn:
- What SPIFFs are
- Why they exist
- When they’re OK to use and when they’re not
- How to create a SPIFF plan that gets results
How do SPIFF programs work?
Companies use SPIFFs to boost short-term sales or hit short-term targets.
Offering a cash bonus, a vacation or a sought-after prize can motivate your sales staff and your partners.
The key is to establish clear and achievable goals and a timeframe within which to achieve them.
How long have SPIFFs been around?
The history of SPIFFs isn’t clear. The term has been used since at least the 1890s. A newspaper described incentive programs for London dress shop clerks to sell hard-to-move items.
In that case, according to an archived Pall Mall Gazette article, symbols written on the tags of unpopular merchandise showed clerks which items to push without alerting customers to the program.
Other SPIFF program examples over the years include the longstanding practice of automakers offering incentive payments directly to dealership sales reps for selling specific cars or hitting manufacturers’ sales goals, something that’s been standard since the 1960s and possibly earlier.
Why are SPIFFs called SPIFFs?
The modern usage of SPIFF stands for sales performance incentive fund.
Why are there two F’s, you might ask? It’s unclear.
There’s a theory that “SPIFF” is borrowed and adopted from those London clothiers who told clients they look “spiffy” in order to sell them last season’s clothes. Or, more likely, it’s an overlooked misspelling that was accepted with time.
These programs are also called SPIFs or SPIVs. The incentives themselves are also called SPIFFs.
Boost motivation with SPIFFs
Besides increasing sales, contacts with prospects or upsells, there’s another, less tangible benefit to SPIFFs in sales — better employee or partner engagement.
If your sales reps could use a motivational boost or if your partner program seems to be moribund, a SPIFF can help get people excited again.
One study of bonuses and employee motivation, described in the Harvard Business Review, found that SPIFF-style, conditional bonuses (in this case, paid when reps hit a weekly quota 20% higher than their previous best) led to “a sales increase of approximately 24%.”
However, the same study also found that SPIFFs are less effective when they’re always available. It may be better for engagement and sales to implement SPIFFs at peak times rather than having them “always on.”
Can a SPIFF work for your organization?
Whether a SPIFF can help your company reach its sales goals depends on having a few things:
- A clear short-term goal for the SPIFF, like increasing sales to new customers or upsells to existing ones
- The budget for sales incentives
- A sales team, resellers or partners who’ll be motivated by the SPIFF
- An industry or vertical where offering SPIFFs is OK — not every business is legally allowed to offer SPIFFs (more on that below)
With all these elements in place, you can start planning your SPIFF program.
What can be a SPIFF incentive?
The SPIFF incentives that work best for your company will depend on what your salespeople want and what you can offer. In general, SPIFFs fall into two categories:
Different SPIFF program examples for different needs
1. Cash bonuses
Cash is an always-popular choice, because winners can get their bonuses right away. However, actual cash isn’t as popular as it once was because there are better alternatives. For example, Visa® prepaid cards are easier to spend online. They offer some advantages for your business, too.
Buying prepaid cards in bulk can get you a discount off the face value of the cards.
Cash and paper checks are vulnerable to theft and fraud that can drain your business' checking account. With a digital card, delivery is instant and you can verify it online.
For all these reasons, SPIFF cards – prepaid cards – that your team can use in stores and online, may be a better choice.
Cash — physical or digital — isn’t the only option. Your sales team or company partners might also be motivated by non-cash SPIFFs like:
- Retailer gift cards
- Gift cards to popular restaurants, retailers, salons or amusement parks
- Tickets to live music and theater performances and sports events
- Vacation packages
- Gym or yoga class memberships (in person or virtual)
- Museum memberships
- Time off – let top performers take a half day off on a Friday or take a long lunch on the house
- Cool stuff: high-end noise-canceling headphones, smart TVs, countertop espresso makers and ring lights for all those Zoom sales calls can drive your team to do more
Depending on the person, any of these can be a power motivator to close more high-value deals.
Identify the best sales SPIFF ideas for your reps and partners
Of course, even the coolest-sounding SPIFF bonus will only work if your reps or partners want it. To decide what sales SPIFF to use for your next program, gather info from a few key sources.
1. Talk to your sales reps about what would motivate them now.
Keep in mind that what’s appealing now may change in the future.
For example, a family admission package to the regional water park will probably get more attention during the heat of summer than during the light chill of early fall — and who wants to wait a whole year to use their bonus?
2. See what your channel partners and resellers want.
As with your reps, you want to find out what can get them more engaged in selling right now.
Do they want cash, trips or something else?
3. Find out what your competitors are doing.
You may not know, but it’s a good bet your reps and partners do.
- Does the high-end boutique across the avenue send its top performers for spa days?
- Is the dealership down the street sponsoring gym memberships as a SPIFF?
- Do resellers get cash for hitting big quotas?
Can you match or outdo those incentives?
4. Review what’s worked (and what hasn’t) in the past.
Has your company run SPIFF programs before? What were the results?
Review the return on investment (ROI) and engagement numbers to see if those programs led to the kind of sales and engagement you’re looking for. Use that information to shape your current plan.
How to create a SPIFF program for your company
How do you structure a SPIFF?
Now that you’ve reviewed the SPIFF ideas and come up with some that align with your goals and your team’s motivation, you can start mapping a SPIFF plan. It should include:
- Sales goals. Is your goal to move out last season’s product before new models arrive, or to upsell software subscribers on a higher tier of customer support? For each SPIFF you offer, be as precise as possible so reps know exactly what to sell for the bonus.
- Acceptable sales methods. Set down your rules. Do only paid-in-full sales qualify for the SPIFF, or can buy-now-pay-later sales also put a rep in the running? What incentives can sales reps and partners offer to customers as part of the program?
- Eligibility. Is the SPIFF only available to reps on your sales teams, or can resellers and channel partners participate as well? What information do reps and partners need to submit for their SPIFF goals?
- Time frames. When does the program start, and when does it end? When will reps see their SPIFF?
- Incentives. Are you offering cash bonuses, trips or experiences like box seats to the big game? Do you have enough of whatever you’re offering to cover all salespeople who reach the SPIFF goal?
- A review plan. Block out some time after the program ends to see how your SPIFF program worked. Did you hit your targets? What percentage of your eligible team members participated? What was the ROI on your SPIFF? Did participants offer any feedback? This information can help you improve your incentive programs over time.
Run your incentive programs efficiently with SPIFF program templates
Once your SPIFF campaign is launched, you’ll need to keep careful track of what your sales reps and partners are accomplishing, so you don’t overlook anyone’s SPIFF sales or apply them to the wrong person. To keep everything organized — and to run future SPIFF offers more easily — it’s a good idea to create templates for:
- A document showing reps, resellers and partners the products and services that qualify for the SPIFF
- A tracking form where members of your SPIFF program can log their SPIFF sales, dates, customers and amounts
- A portal or email address where participants can submit their SPIFF documentation
- A spreadsheet or database to log all your SPIFF program members’ information and the results of your program
Commission management apps come with templates ready for you and your team to customize and use. They typically integrate with your organization’s CRM, ERP software and other systems.
We’ve gone over the basics, but there’s more to know about SPIFFs before you roll out your program.
What’s the difference between a sales commission and a SPIFF?
The main difference is that a commission is a percentage of the sale that a rep or partner earns, while a SPIFF is a one-time, flat-rate cash incentive or prize.
Another difference is that while at many companies reps receive their commissions quarterly, SPIFFs are typically paid out faster — weekly or monthly, in many cases.
However, it’s important to remember — and make sure employees and partners understand — that both commissions and SPIFFs are taxable income and must be reported. In some cases, SPIFFs are considered employee wages even when the SPIFF comes from a third party like an automaker, rather than directly from the employer, according to a 2020 U.S. Department of Labor opinion.
Are SPIFFs illegal?
SPIFFs are sometimes illegal, depending upon the industry and the client.
For example, Business Bank of Texas recommends avoiding SPIFF programs if your clients are government agencies or are tax-exempt, because of a 2007 federal ruling. In 2017, Berkely Research Group recommended that companies in the life sciences industry should review their SPIFF programs to make sure they don’t violate federal anti-kickback laws.
Because the laws around SPIFF programs are complex and specific, it’s wise to have your legal department or business attorney review your SPIFF plan before you launch it.
Is SPIFF capitalized or not?
Most often, you’ll see SPIFF in all caps, to avoid confusion with the word “spiff,” which means to spruce up or clean up.
Is there a difference between a SPIFF and a SPIV?
No. SPIFF and SPIV (and SPIF) are interchangeable terms for the same kind of sales incentive programs.
Ready, set, SPIFF
The bottom line on SPIFFs is that they can help your company hit short-term targets, while increasing rep and partner engagement.
When you take the time to create a detailed plan and have it vetted before you launch, a SPIFF can help you hit quarterly stretch goals for revenue, new customer acquisitions and more, so you can keep your sales pipeline full and flowing.