Sales kickers are contract incentives that align with your business goals. They’re given to sales representatives to boost revenue and are typically implemented in SaaS companies around the world. Here are its types: up-front cash, contract length, inflation, churn, clause, and reverse. In this blog, I’ll also be covering the advantages of sales kickers like increased motivation, better alignment with company goals, increased predictability of revenue, and better sales team morale; and disadvantages such as increased complexity, and risk of short-term focus.
Adding a sales kicker to your compensation plan is a great way to boost revenue for SaaS organizations.
The goal of a sales kicker is to incentivize the sales team to sell more products, generate more revenue, and contribute to the growth of the company. However, it has its own set of drawbacks too.
But what is a sales kicker exactly?
In this blog, I’ll cover what are the top six sales kicker structures, their benefits and disadvantages.
Let’s get started!
Top 6 Types of Sales Kickers
Sales kicker or sales accelerator is a type of monetary incentive that employers offer to help their teams sell more. It can be used as a tool to motivate salespeople and increase their productivity.
For example, if a representative closes 200% of their top, according to the sales kicker/accelerator clause, they can earn 10% on top of their normal commission.
(This quota can be applied to the one-off sale or to all sales made in a particular period.)
Now, let’s look at the six types of sales kickers that are commonly used in businesses:
1. Up-Front Cash Kickers
An up-front cash kicker is a one-time payment made at the beginning of a financial transaction. It is the bonus paid to a salesperson for closing a sale.
The goal of this kicker is to motivate the sales team to work harder and sell more of the new product, thus generating more revenue for the company.
A software company launches a new product that they want their sales team to sell. To incentivize the team, the company decides to offer an up-front cash kicker of $10,000 to any salesperson who closes a deal for the new product within the first 90 days of its release.
The salesperson would receive this bonus in addition to their regular commission, which is calculated based on a percentage of the sale value.
2. Contract Length Kicker
A contract length kicker is a financial incentive offered to a salesperson based on the length of time that a customer has signed up for a particular product or service.
The salesperson would receive the kicker payment after the customer has signed the contract and begun paying for the service.
But how is this helpful?
Software companies usually need to tackle customer churn. This leads to a loss in business for organizations. In many cases, increased churn can impact revenue and reputation.
Contract length kickers incentivize the sales rep to sell more longer-term contracts, helping the organization generate predictable revenue.
A SaaS company might offer a salesperson a Contract Length Kicker of $500 for every customer who signs up for a 2-year contract, and an additional $1000 for every customer who signs up for a 3-year contract.
3. Inflation Kickers
Inflation kicker is designed to motivate the sales team to sell more services, even if the price of the service is increasing due to inflation.
The goal of this kicker is to encourage the sales team to continue selling software services, even if the cost of providing the service is increasing due to inflation.
Additionally, inflation kickers are applicable for organizations that encounter a lower churn rate and more predictable revenue.
However, many vendors avoid this strategy and simply increase the price of the contracts by X% which helps them be profitable.
A SaaS company might offer a salesperson an Inflation Kicker of $100 for every 1% increase in the inflation rate. This means that if the inflation rate goes up, the salesperson would receive an additional commission payment based on the increase in the inflation rate.
4. Churn Kickers
Churn kickers are a way to incentivize the sales team to retain more customers and reduce the rate of customer cancellations.
It offers a great benefit in terms of ROI (Return on Investment). But it should be carefully designed to understand how the product offering impacts consumer behavior.
For instance, if a particular feature as an add-on reduces churn, you can ask your reps to put those features in the contract from the start. This avoids lower churn rates.
Churn kicker payments are made after the end of each quarter, or at another designated time agreed upon by the company.
A software company might offer a salesperson a Churn Kicker of $1000 for every 1% reduction in the churn rate.
This means that if the salesperson is successful in reducing the rate of customer cancellations, they would receive an additional commission payment based on the reduction in the churn rate.
5. Clause Kickers
Clause kickers are incorporated to reduce the customer churn risk before their contract ends. To keep your customers going on, you can incentivize your reps to keep the cancellation clause out of the contract.
Companies can pay the representative 2% on top of every contract that doesn’t contain early closure or cancellation clauses.
If the rep managers avoid early cancellation in 20 contracts, then they might receive a kicker of 40% at the end of the quarter or after each deal is signed.
This encourages reps to think long-term and keep an eye out for customers who would like to stretch the clauses.
6. Reverse Kickers
Representatives can go the extra mile to close a particular deal. This means even if they have to offer heavy discounts they would.
However, heavy discounts can be detrimental and affect your bottom lines.
Luckily, you can use a reverse kicker.
What’s a reverse kicker?
A reverse kicker works by reducing commission percentages if the representative offers discounts on the contracts.
This encourages them to think twice about the profitability and revenue before offering a discount on every deal to show sales numbers.
If your representative keeps offering a 20% discount to every customer other than enterprise leads, you can reduce their commission by 5% for every 20% discount given.
What Are The Benefits of Sales Kicker?
Here are the benefits of introducing sales kickers in your organization:
1. Increased motivation
Sales kickers provide a financial incentive for salespeople to work harder. This leads to increased motivation and higher performance.
How?
If your business goal is to generate more long-term contracts and recurring revenue, you can tie your sales kicker to that. This motivates your reps to close more long-term contracts over short-term deals.
2. Better alignment with company goals
Sales kickers hold salespeople accountable for meeting their sales targets.
And when these targets are tied with company goals, it ensures that the sales team is focused on achieving the outcomes that are most important for the business.
3. Better sales team morale
Sales kickers can boost the morale of the sales team, as salespeople feel that their efforts are being recognized and rewarded. This can lead to increased job satisfaction and a more positive work environment.
What Are The Drawbacks of Sales Kicker?
Even though kickers have their benefits, they need to be balanced and carefully designed. Let’s see the most common pitfalls while designing a sales kicker:
1. Increased Complexity
Sales kickers can be complex to implement, as they require careful design and tracking in order to ensure that they are fair and effective.
Additionally, kickers can be expensive for the company. They may require additional resources to implement and track, and sometimes result in higher compensation for the sales team.
That is why defining your kicker policy is absolutely crucial. You can’t simply give hikes all the time.
2. Leads to short-term focus
Sales kickers can lead to a short-term focus, as salespeople may be more focused on achieving the sales targets in order to receive the kicker payment, rather than building long-term customer relationships.
The kicker, if poorly implemented, reduces job satisfaction. Salespeople may feel that they’re not being fairly compensated for their efforts.
To avoid this, your should tie your kickers to business objectives. This will directly impact the result you’re trying to achieve.
Wrapping Up
Sales kickers can be an effective tool for motivating sales teams and improving sales performance.
However, they should be used with caution, as they can also have some drawbacks as discussed above.
It is important to carefully design, implement and monitor your kicker’s impact on your team and company.
Additionally, you should also balance the benefits of sales kickers with other compensation and recognition programs like bonuses, stock options, and other non-financial incentives.
Pick the kicker that suits your business the best and keep monitoring it to improve your bottom lines and achieve business goals!
