Retail incentive plans 101

Retail incentive plans can increase sales, improve customer satisfaction, and enhance employee engagement. 

Employee incentives drive results for retailers. That’s been proven by decades of effective retail incentive plans, as well as clinical studies on the incentive theory of motivation.

The TL;DR: Behavior is shaped by consequences. 

In the retail context, this means employees are more likely to repeat actions that lead to rewards. By offering incentives for desired behaviors, retailers can guide their staff towards actions that benefit the business. 

A thoughtfully-crafted retail incentive program can help you achieve the results you want with minimal resources. 

In other words, you can incentivize employees to work harder without blowing your budget. Or spending hours on choosing and distributing prizes.    

Here’s a look at different types of retail incentive plans and how to implement them. 

What is a retail incentive?

A retail incentive is a reward or bonus offered to retail employees. These incentives encourage employees to achieve specific goals. 

It’s all about aligning employee performance with your company’s objectives. Retail incentives improve the performance of your workers, leading to better business outcomes.

Retail incentives can take many forms. Monetary rewards like cash bonuses or gift cards will push employees to go the extra mile. But non-monetary benefits, like extra PTO or career development opportunities, can also be a powerful motivator. 

The key is to choose incentives that resonate with your team and encourage them to excel.

What are the incentives for retail stores?

Retail stores can offer a wide range of incentives to their employees, including:

Sales-based bonuses

These are financial rewards given to employees who meet or exceed specific sales targets. 

For example, a store might offer a $100 bonus to any employee who sells over $5,000 worth of merchandise in a week. This type of incentive directly ties performance to rewards, motivating employees to push for higher sales.

Commissions

Commissions give employees a percentage of every sale they make year-round. This could be a flat rate across all products. They can also vary based on product type. 

For instance, a furniture store might offer a 2% commission on sofas but a 5% commission on higher-margin rugs.

Commissions create a direct link between an employee's efforts and their earnings. But that can also lead to more aggressive sales tactics that impact the customer experience.  

Employee discounts on merchandise

Offering staff significant discounts on store products can be a powerful incentive, especially in fashion or technology retail. This not only rewards employees but also turns them into brand ambassadors, as they're more likely to use and recommend products they own.

Performance-based promotions

This involves advancing employees to higher positions based on their sales performance or other metrics. It provides a clear career path within the organization, encouraging long-term commitment and consistent high performance.

Recognition programs

These can include "Employee of the Month" awards, public praise in team meetings, or feature stories in company newsletters. 

Recognition programs keep employees engaged, making them more likely to stay with your company. They’re especially effective when paired with monetary incentives. Even a small $50-$200 incentive can reduce employee turnover by 43%.

Contests and competitions

Short-term sales contests or team competitions can create excitement and drive focused effort towards specific goals. These could be individual or team-based, and rewards might include cash prizes, extra time off, or special experiences.

You can combine multiple types of incentives to achieve different KPIs and appeal to different employee preferences.

For example, your retail incentive plan could pair commissions with contests and non-monetary incentives. A bonus for the month’s top performers will foster a sense of urgency. And recognition at the end-of-month meeting will encourage them to keep up the good work. 

What are the three types of incentives?

Commissions are in the incentives family. But, beyond the usual commissions structure, retail sales incentive programs usually fall into three main categories.

Bonus-based incentives

Bonus-based incentives offer additional monetary rewards for achieving specific goals or targets. These can be individual bonuses for top performers. Or team bonuses for reaching collective objectives. Bonus-based incentives are highly effective for driving short-term results and creating a sense of urgency around key business priorities.

Discount-based incentives

Discount-based incentives provide employees with special pricing or exclusive access to products or services. 

This type of incentive not only rewards employees but also encourages them to become brand ambassadors by using and promoting the company's offerings. Employee discounts can foster a deeper connection between staff and the products they sell, leading to more authentic and effective customer interactions.

Leaderboard-based incentives

Leaderboard-based incentives tap into employees' competitive spirit by publicly ranking performance. This approach creates a sense of friendly rivalry and can be particularly effective in motivating sales teams. 

You can use leaderboards to track any number of metrics — upsells, sales volume, customer satisfaction scores, etc. — providing real-time feedback and recognition for top performers.

Use cases for retail incentive plans

Retail incentives are used to drive performance across all different types of industries. Here’s just a few of the potential use cases.   

Restaurant upsells

An effective retail incentives program can motivate front-of-house staff to upsell specific menu items, increasing both ticket size and overall revenue.

For example, a restaurant might implement a tiered incentive system for dessert sales. Servers who sell 10 desserts in a week might earn a $20 gift card, while those who sell 20 could earn $50. This structure encourages consistent upselling throughout the week.

Another approach could be a team-based contest for appetizers. The restaurant could set a monthly goal to increase mozzarella stick sales by 15%. If the Tuesday lunch shift hits the target, each server gets a $100 reward. 

Warranty sales

Retail incentives provide immediate motivation for frontline retail staff to promote high-margin warranties. 

Consider a home appliance retailer partnering with a warranty provider. They could implement a SPIF (Sales Performance Incentive Fund) where sales associates earn a $30 reward for every extended warranty they sell on large appliances like refrigerators and washing machines. 

Plus, they might include a "power hour" where the incentive doubles to $60 for warranties sold during the busiest shopping time each day.

This structure not only motivates staff to consistently offer warranties but also encourages them to focus their efforts during peak sales periods.

Insurance policy sales

Insurance companies can leverage retail incentive plans to boost policy sales, particularly when introducing new products or targeting specific customer segments. 

Let’s say an insurance company is launching a new home insurance policy. They could create a two-month retail incentive plan with increasing rewards based on the number of new policies sold. For instance:

• 5 new policies = $250 payout

• 10 new policies = $750 payout

• 15 new policies = $1,500 payout

This tiered structure motivates agents to push harder for more sales, while the limited time frame creates a sense of urgency. 

How to incentivize retail employees

Creating an effective retail incentives program requires careful planning and execution. Be sure to:

• Set measurable goals: Define specific objectives for your incentive program, like increasing sales by 10% or reaching a 90% CSAT.

• Choose appropriate incentives: Select rewards that align with your employees' preferences and motivations. Ask your team about the types of incentives they find most appealing. (Usually, cash is king.)

• Establish clear criteria: Ensure that all employees understand how they can earn incentives and that the criteria are applied consistently across the team.

• Communicate effectively: Update employees on their progress and the overall performance of the incentive program.

• Use technology: Implement an incentives platform to automate reward distribution and provide real-time tracking. Pro tip: Look for a platform that offers a wide range of reward options that your retail employees can use right away.

• Review regularly: Evaluate the effectiveness of your retail incentive plan and adjust as needed.

Create your retail incentive plan with Tremendous

Implementing an effective retail incentive plan doesn't have to be complicated or time-consuming. Tremendous makes it easy to send retail incentives and track your payouts.

With Tremendous, you can offer retail workers over 2,000 reward options, from gift cards to prepaid cards to direct deposits. That way, they’ll always get the perfect incentive — and you don’t have to go gift shopping.  

And our rewards cover 200+ countries and territories, so you can incentivize frontline workers all around the world. 

We automate the sending process so you can distribute retail incentives in seconds. Then, track all your payouts in one place. 

Ready to kick off your retail incentive plan? Sign up for a free account today or book a demo to see Tremendous in action.