Why getting rid of spiffs is good for your tech business

In tech marketing, product marketing managers from a distant past employ sales spiffs to motivate the sales teams to sell their product over or in combination with another product.  The argument they give is spiffs act as motivational tools to sales teams to push their product which under normal course of the sales process wouldn’t have sold.

This is the Wikipedia definition of spiff:

A spiff or spiv is an immediate bonus for a sale. Typically, “spiffs” are paid, either by a manufacturer or employer, directly to a salesperson for selling a specific product.

Why spiffs are bad

Spiffs are worse than discounts and price reductions when they come from the product marketing or product management team.   Here’s what happens when you offer these sales spiffs:

  1. Spiffs undermine sales team compensation structure.  If you are spiffed to sell a product, it should have been assigned a quota and appropriate compensation/commission to the assigned sales teams by sales management.  If nobody in sales management signed off on the product, don’t sell it.  Instead of fixing the organizational commitments between sales leaders and business unit leaders tactics like spiffs shift the real problem from organizational commitment to short term sales incentives.
  2. Spiffs create bad sales behavior.  The company’s leadership has already determined which products to sell and what targets to hit.  By introducing the spiffs, product marketing teams create bad sales behavior where they start incentivizing sales team to do something that they have no explicit sales goals around.  Make that a habit and you’ve come to create a sales team that starts ‘expecting’ these rewards on a regular basis.  It takes away their focus from the core product(s) they need to sell and diverts their attention.
  3. Spiffs delay the inevitable and prolong product decay.  Let’s say the product marketing team comes up with a spiff for each poorly selling product in the portfolio.  Rather than communicating the real truth that the product is not competitive in the market place (product strength, marketing message, sales capability or market demand), spiffs delay the inevitable.  Absent the spiff, the product is not going to sell and it would have communicated the right message to the company leadership to make a decision about the product to continue or discontinue its production.  Instead, adding the spiff, just keeps a dying product in place with no real benefit except the short term activities around the spiff and the huge opportunity costs associated with running the spiff programs.


What can we do instead?

  1. Use our talents to come up with better ideas for marketing and sales.  Those that require real hard work and creativity, not sloppiness.
  2. Shutdown products that don’t perform, or double down on investment if your firm believes there is a market need for the product and you are positioned to succeed.  Don’t distract your marketing and sales teams, and definitely don’t demand them to attain revenue goals for products that shouldn’t really be sold as a separate product when they are just a feature of another product.
  3. Figure out  alternative product packaging and positioning than doling out a spiff.  You may want to combine multiple products and sales teams to tell the story of a problem you are solving in a coherent manner than split the story, products and teams across business units and compete with attention from sales for selling a particular underperforming product.
  4. Don’t spiff a product that already sells on its own and take credit for its sale.  If the product is competitive and there is market demand, it is bound to sell.  If you have extra dollars in your marketing budget spend it wisely or give it back to the business.  This is the hardest thing for a product marketing manager to do – to give back budgeted, allocated money.

Spiffs have a place in the world.  When you want to push physical inventory that is sitting in the shelves of stores, car lots and warehouses, it makes sense to discount the excess supply, generate demand, incentivize sales teams to sell the product.  But in technology product marketing where the goods are digital, spiffs are a silly idea.  They worked in the PC world when older edition laptops had to be pushed into the market ahead of newer versions.  But definitely not for digital goods in a cloud computing world.

What is your experience about marketing technology products with sales spiffs?

Prabhakar Gopalan (follow my tweets at @PGopalan)

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