5 Tips for Designing Effective Incentive Compensation Programs

By WISE Academy

Often we are asked about tasting room staff incentives for wineries and best practices for a program. An Incentive Compensation Program (ICP) is a tool used to motivate and compensate a sales professional to meet goals or metrics – over a specific period of time – to help achieve business goals. When well designed, an ICP should pay for itself.  Based on the many conversations and our research, here are five tips for designing a program that works.

1. Reward the Right Things – Tie incentive compensation to all the key performance aspects of the Tasting Room Professional’s job.

• A quality ICP should focus your tasting-room team members on the full DTC Triple Score (wine sales, wine club sales and contact data capture).
• For the best results, we encourage having a blend of individual performance (so super stars are motivated to stay) as well team performance incentives (to avoid sales sharks).
• If the ICP is paid out based on team performance, be sure to always post individual performance as well to motivate (and attract more of) the super stars.  Winners want to see their name at the top of the leader board. People who are not comfortable being held accountable for sales will not like this at all, and that is OK.  They will go find another job that is a better fit.

2. Link Pay to Results– Base incentives on measurable, quantifiable results. Establish performance goals that are attainable with hard work, but not too easily achieved. There should be a challenge.

• It’s good to have an umbrella portion paid annually based on all the success of all DTC channels (TR, events, club, phone & web) to promote the importance of TR team’s critical role in selling wine club memberships and gathering more names to fuel the online and phone channels.  Basically to reward everyone for playing well together.
• Dollars paid per club member should create goal congruence by escalating by club, based by price point.  For example if a 3 bottle club pays $15, then the 6 bottle club should pay $30 and the 12 bottle club should pay $60 per new member. We’ve seen dollars paid per new club member from as low as $10 to as high as $120, depending on the club.

3. Establish Milestones – Measure your winery’s recent performance and establish relevant goals for improvement.

• Measure what matters, post performance visually, teach what the numbers mean and celebrate successes as you go.  A great book on the power of this approach – called Open-Book Management – is The Great Game of Business, written by Jack Stack. A wonderful guide to measuring and sharing numbers that matter.
• In addition to total sales, total new club members and total names captured, be sure to also talk about conversion rates and average order size metrics.  This will allow those who work part-time to still measure their success and have pride about their own performance vs. group progress.
• Agree on one book of record – usually the winery POS system – which should be available to all team members so that they can access to see how they are doing on a given day, week, month.

4. Focus on the Long Term – Since the wine club is typically the most consistent, largest revenue stream, getting and keeping club members is extremely important. Additionally, continuing to grow your mailing list /database of your customers is equally important for long term growth of the business.

• Club: Best practice is to pay team members individually for wine club sign ups (and allow/ plan for sharing) then have a kicker that everyone benefits (i.e., everyone gets another $1 or $2 per member sold all month) by when monthly new club membership goals are exceeded.  This promotes great camaraderie and support among team members.
• Club: We are starting to see additional winery incentives based on tenure – or other total wine club membership goals – as well to motivate TR staff to continue to treat club members as VIPs when they visit the winery.
• Contact Data: We’ve seen wineries pay anywhere from $0.10/name to $1.00/name.  Web sales metrics will calculate the average value / email name for each winery.  Those will give you some guidelines of what makes sense for you brand.
• Contact Data: Start by having data capture contest with wine prizes.  Engage the team in finding many different ways to effective capture more names.
• Contact Data: Once you move the needle (raise your contact data conversion rates) you’ll establish your “new normal.”  Then you can roll into an individual ICP program, structured similar to club ICP but with a smaller $ / name.

5. Tie it All Together – By tying incentive compensation to desired performance, you can identify, motivate and retain your most valuable employees.

• There should be no limit (ceiling) to the ICP.  The best sales people think in terms of “you don’t limit my compensation and I won’t limit your sales.” Effective sales ICP are structured so they are self-financing.  Meaning you are not paying out much (if anything) until the budget has been exceeded.  It is the incremental sales that should fund the ICP.
• If you have multiple locations, hopefully you can establish the same structure across all properties, although the dollar amount paid per new member will vary based on the different club price points.  When you pay (immediately or at time of one or more shipments) and penalties for early drop outs (if any) should be consistent.

We are seeing more and more wineries implementing ICPs beyond wine club sign ups. Don’t be afraid of this performance-based culture change.  When managed wisely it really works and will pay for itself – implementing a well thought out ICP can be rewarding on many levels.