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