Incentives increase the probability that sales people will stitch customers up with things they don’t want. This can lead to customers lapsing, complaining and disputing payments – all adding costs to the system.

Worse, incentives can increase the probability that customers will NOT be sold the things they want. For example, if a sales incentive includes ‘triggers; for the amount of cross-selling, a sale that won’t count as a cross-sale may not be completed because it would adversely affect the incentive. Yes – incentives can drive sales away!

These things can only be made visible by studying the system. Here is one example.

Sales managers are usually unaware of the costs associated with incentives; they only pay attention to what is reported. It is a common illustration of the failure to understand the causes of costs.