Incentive Program - Definition & Meaning

Published in Marketing and Strategy Terms by MBA Skool Team

What is Incentive Program?

Incentive Program is a specific scheme used to promote certain actions or behavior by a group of people over a defined period of time. Incentive programs are used in sales to attract new customers and retain existing customers.

Rewards associated with Incentive program can be both

Monetary Rewards – Cash

Non- Monetary Rewards – Gift Cards, Certificates, Merchandise, Travel and Experiential

There are different types of Incentive programs

• Employee Incentives – The programs that are used to increase the overall performance of an employee, reduce turnover, increase retention, and drive performance on a daily basis.

• Consumer Incentives – Target consumer retention and increase profits

• Points based incentives – Collect and redeem points. Loyalty programs are examples of points based incentive program

• Sales Incentives - The programs are used to drive sales, reduce sales costs, enhance margins, developing new territory

• Dealer Incentives – Improve performance for the dealers

• Online Programs – Incentive websites – Pays people in gift or in cash for completing offers or referring friends on to the website

Incentive programs (Generally for Sales People) can be developed by following a 9 step process. They are primarily

• Establishing objectives – Identifying the goal or the objective that needs to be accomplished

• Outlining the Strategy – The next step is building a foundation for the Incentive program which also includes defining the target segment

• Measuring the performance – Defining both qualitative and quantitative goals

• Establishing the budget – Depending whether the program involves sales or non sales program, budget has to be prepared

• Preparing the budgeting elements – It includes three primary elements- number of participants, length of the program and the expected results

• Selecting a best reward –Selecting the correct award is also important because if the individual is not motivated enough then the incentive program may not drive the objective or goal

• Administering the program – The target group needs a clear and a consistent communication along with timely feedback for performance measurement.

• Celebrate the success of the program – The ending of the incentive program should be celebrated along with the target group and the performance measurement by the team or the individual should be provided at this point

• Analyzing the success of the program – It involves revisiting the areas which needs attention such as consumer behavior and the deviation from the goals or the objectives


Craft Brewery Wide Performance Improvement Program, Special Performance incentive fund

1. Salesman sells company’s product to customers 2. Customers pay company for products 3. Company pays salesman 4. Salesman receives regular commission 5. Salesman receives SPIFF rewards


Hence, this concludes the definition of Incentive Program along with its overview.

This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

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