Terms

Spiff

A spiff is a short-term, immediate bonus paid to a salesperson for achieving a specific goal, like selling a particular product or booking a set number of demos. Companies use these incentives to quickly move specific inventory, launch new products, or meet short-term sales targets. While typically a cash bonus, a spiff can also take the form of gift cards, merchandise, or travel incentives.

Historical Context

The term "spiff" dates back to 19th-century England, originally describing a bonus paid to retail clerks for selling old or undesirable merchandise. This practice helped shopkeepers move slow-selling stock while motivating their sales staff. By the early 20th century, spiffs were a common practice in both wholesale and retail.

The concept continued to evolve, with a notable modern example being Apple's use of spiffs in the 1980s to drive computer sales. This strategy significantly boosted their market presence and helped solidify the spiff's place in modern sales culture. Today, they remain a popular short-term incentive across many industries.

Common Uses

Spiffs are versatile tools used to drive specific sales behaviors and achieve immediate business objectives. Companies strategically deploy them to influence sales team focus and accelerate results in key areas, often outside of the standard compensation plan.

  • Products: Pushing high-margin items or new product lines to gain market traction.
  • Inventory: Clearing out old or overstocked merchandise to make room for new items.
  • Adoption: Encouraging the sale of a newly launched product or service.
  • Loyalty: Building brand preference among channel partners or third-party resellers.

Spiff vs. Stipend

While both are forms of payment, spiffs and stipends serve fundamentally different purposes in a business context.

  • Spiff: A variable, short-term bonus tied directly to performance, such as selling a specific product. It's ideal for driving immediate sales goals, like clearing old inventory or promoting new items. However, it can sometimes encourage unhealthy competition. Enterprises and mid-market companies use spiffs for tactical sales boosts.
  • Stipend: A fixed, regular payment meant to cover specific expenses, often for interns, trainees, or as a general allowance. It provides predictable income but isn't tied to sales performance. This makes it suitable for roles where support and enablement are prioritized over direct sales incentives across companies of all sizes.

Industry Applications

Spiffs are a go-to tactic across numerous industries to energize sales teams and hit specific targets. They are particularly effective in environments with tangible products and clear sales cycles, allowing companies to adapt them for various strategic goals.

  • Retail: clearing out seasonal merchandise or slow-moving inventory.
  • Manufacturing: incentivizing distributors to prioritize and push new product lines.
  • Technology: driving sales of specific software bundles or new feature adoption.

Benefits and Drawbacks

Spiffs can be a powerful tool for motivating sales teams and achieving quick wins, but they aren't without their risks. When implemented thoughtfully, they can drive significant results. However, if poorly managed, they can lead to unintended negative consequences.

  • Benefits: Spiffs provide a direct incentive, boosting sales team motivation and focusing efforts on specific, short-term goals. This is highly effective for launching new products or clearing out excess inventory quickly.
  • Drawbacks: They can encourage negative behaviors like "sandbagging," where reps delay sales in anticipation of a spiff. This can also foster unhealthy competition and lead reps to prioritize spiffed products over the customer's best interest.

Frequently Asked Questions about Spiff

Are spiffs considered taxable income?

Yes, spiffs are considered taxable income by the IRS. They are treated as supplemental wages, and companies must report them accordingly. Salespeople should expect to pay income and payroll taxes on any spiff payments they receive, whether in cash or as a non-cash prize.

How are spiffs different from regular sales commissions?

Spiffs are short-term bonuses for specific, tactical goals, like selling a new product. Commissions are a core part of a salesperson's compensation, calculated as a percentage of total sales revenue over a longer period. Spiffs are extra, commissions are standard.

Can spiffs create a negative sales culture?

They can if not managed properly. Over-reliance on spiffs may lead to unhealthy competition, reps prioritizing spiffed products over customer needs, or "sandbagging" sales. A balanced incentive structure is key to avoiding these pitfalls and maintaining a positive team environment.

Other terms

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Psychographics

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Buying Committee

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Direct Mail

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Lead Scrape

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Consumer

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Sales Lead

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Contact Data

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Revenue Forecasting

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Google Analytics

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InMail Messages

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Channel Partners

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Return on Marketing Investment

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Infrastructure as a Service

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Always Be Closing

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Sandboxes

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Product Recommendations

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Touchpoints

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User Testing

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Revenue Operations KPIs

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RESTful API

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Omnichannel Sales

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Messaging Strategy

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Gated Content

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Lead Scoring

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Master Service Agreement

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Sender Policy Framework

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Funnel Analysis

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Data Enrichment

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Customer Retention

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Complex Sale

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User Interaction

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Kanban

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Draw on Sales Commission

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Enterprise

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SDK

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Sales Partnerships

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Sales Partnerships

Trademarks

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Consideration Buying Stage

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Consideration Buying Stage

Buyer Behavior

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Sales Process

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No Spam

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No Spam

Closed Won

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