Improve Your Retail Employee Incentive Programs

Many highly successful independent and chain retailers attribute much of their success to management incentive programs that produce higher compensation potential, stronger company loyalty and better financial results that benefit both the company and the employees.


There is no magic formula for creating an incentive program to fit every situation, but most operators agree that for an incentive program to be effective, the participants need to believe in the program, be trained in how to achieve the desired results and performance managed as they work toward their goals.


Surveys of leading retail companies have found that the following key characteristics as being the most common in those producing successful results.




6 Tips For Building a Powerful Retail Incentive Program


The program must be simple and easily understood by participants – Plans that were very involved and complex tended to have average results at best. The most effective plans were simple in that they were based on the results of no more than 3 to 4 areas – what we refer to as KPIs or Key Performance Indicators.

KPIs must be reasonably controlled by the employee – We were working with a client a while back on a retail sales training program where our objective was to increase conversion rate and average dollar per sale. The only problem…the retailer’s compensation program was focused on selling extended warranties and the Company credit card. They were not even measuring conversion and average sale at the store –level. We showed them how to make the change to the pay plan and the results when tied in with our Top Check Sales Training were greater than they had hoped

Targets must be mutually agreed upon and achievable – Many retail operators with successful plans note that performance goals in the areas of sales, profit and other KPIs are discussed with their team members using “pull” management techniques where the reps are focused on achieving new monthly “all-time-highs.” The objective is to make the goals challenging, but at the same time, also achievable and realistic. That doesn’t mean that we do not have minimum expectations, but it does mean that result improve when there is mutual buy-in.

 Training is a key factor in implementing new incentives – I once worked for a retailer that changed their compensation plans every year. One year the bonuses and commissions were sales-focused. The next they were margin-focused and so on. The problem was that it often took employees several months to make the adjustment to the new changes (and we all know people hate change). The key to the success of these changes therefore, was how effectively the employees were trained to understand their compensation and to implement the activities necessary to achieve target. So structure your retail training programs around compensation at least once a year and during your new employee orientation programs.



Focus on immediate rewards versus long-term incentives – Manager programs that were based on providing monthly or quarterly incentives tended to be more successful than those based on annual or semi-annual schedules. For sales representatives, weekly or biweekly incentives worked better than monthly or quarterly bonuses.

Provide reporting and tracking mechanisms – Of course it goes without being said that on any program you need to give your team the tools – usually through your POS reports and monthly P&Ls that they need to understand their progress toward their goals. This allows them to make course corrections and for you to provide remedial retail sales and management training as required.


If you’re been contemplating an incentive plan for your team members, be sure to consider these important factors to increase the odds your plan becomes a win-win for you and your people