Sales Incentive Plan

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A Sales Incentive Plan (SIP) is a business tool used to motivate and compensate a sales professional (or Sales Agent) to meet goals or metrics over a specific period of time, usually broken into a plan for a fiscal quarter or fiscal year. A SIP is very similar to a commission plan, however a SIP can incorporate sales metrics other than goods sold(or value of goods sold), which is traditionally how a commission plan is derived. Sales metrics used in a SIP are typically in the form of sales quotas (sometimes referred to as POS Shipments), new business opportunities and/or MBOs (Management by Objectives). A SIP is often an auxiliary form of compensation used to drive the independent action of the sales professional and is usually used in conjunction with a base salary.

SIPs are used to incentives sales professionals where total dollars sold is not a precise measure of sales productivity. This is usually due to the complexity or length of the sales process or where a sale is completed not by an individual but by a team of people, each contributing unique skills to the sales process. SIPs are used to encourage and compensate each member of the sales team as he/she contributes to the team's ability to sell. It is not uncommon for the members of such teams to be located in different physical locations (often working in different countries) and for the product introduction to happen in one location and the purchase of such a product to occur in another location.