Sales incentive programs are designed to drive performance and boost revenue, but even well-structured incentive systems can be manipulated. Research shows salespeople across industries often exploit these systems to maximize personal gain-sometimes at the expense of their companies and customers. This comprehensive examination explores the common tactics salespeople use to game the system, why these behaviors occur, their impact on businesses, and how organizations can protect themselves from these potentially damaging practices.
The Landscape of Sales Gaming Behaviors
Sales gaming refers to various tactics salespeople employ to manipulate incentive systems, sales targets, and reporting mechanisms. These behaviors range from relatively harmless optimization strategies to outright fraudulent activities. According to recent Harvard Business Review research, these practices are widespread across industries and can significantly impact company performance.
Sandbagging: Strategic Manipulation of Sales Timing
One of the most common gaming tactics is “sandbagging,” where salespeople deliberately delay closing sales or withhold information about potential deals until a more advantageous time period. Sandbagging refers specifically to delaying the close of a sale or deliberately underreporting the scope of potential deals.
Salespeople practice sandbagging in various ways:
- Delaying the close of a nearly finalized sale until the beginning of a new quarter
- Withholding information about potential large-scale deals
- Deliberately forecasting low expectations for deals to exceed targets later
- Lengthening the process of closing deals to align with personal incentive timelines4
The primary motivation behind sandbagging is typically to exceed expectations and surprise managers with better-than-forecasted performance. For example, a salesperson might withhold information about two large-scale deals until the final weeks of a quarter, then close both to dramatically exceed their quota.
Channel Stuffing: Artificial Inflation of Sales Figures
Channel stuffing is a deceptive practice where companies inflate sales figures by deliberately shipping more products to retailers and distributors than they can reasonably sell to end consumers. This typically occurs immediately prior to reporting periods such as quarter-end or year-end.
The technique involves:
- Shipping excessive inventory to distributors before reporting periods
- Offering lucrative incentives, deep discounts, rebates, or extended payment terms to persuade distributors to accept excess inventory
- Creating an artificial sales bump that temporarily increases reported revenue and profit
What makes channel stuffing particularly concerning is that distributors often retain the right to return unsold inventory, which calls into question whether a final sale has actually occurred. The Securities and Exchange Commission (SEC) frowns upon this practice as it misleads investors about a company’s actual performance.
Manipulative Sales Techniques: Exploiting Customer Vulnerabilities
Beyond manipulating sales metrics, some salespeople employ tactics that exploit customer vulnerabilities to close deals. These techniques often blur the line between persuasion and manipulation.
Common manipulative tactics include:
- Building rapport to create emotional dependence, making customers feel uncomfortable rejecting the salesperson
- Exploiting customer-disclosed vulnerabilities by positioning products as the only solution to their problems
- Playing on customers’ fears or desires by exaggerating either the dangers of not buying or the benefits of purchasing
These tactics can be particularly damaging as they prioritize short-term sales over long-term customer relationships and trust.
Discount Abuse: Unauthorized Price Reductions
Discount abuse occurs when salespeople offer unauthorized discounts to close deals quickly. This often takes the form of “discount over discount,” where multiple discounts are improperly combined.
Examples include:
- Applying employee discounts to customer purchases and pocketing the difference
- Offering unauthorized additional discounts on top of seasonal promotions
- Combining multiple discount types that should be mutually exclusive
While discounts can effectively drive sales, unauthorized discounting can significantly erode profit margins and train customers to expect lower prices.
Why Salespeople Game the System?
Understanding why salespeople engage in these behaviors is crucial for addressing them effectively. Research indicates several key drivers:
- Misaligned Incentive Systems
The primary driver behind gaming behaviors isn’t necessarily unethical character but rather misaligned incentive systems. As noted by experts, “People don’t game systems because they’re unethical. They game systems because the system itself is misaligned”.
When incentive programs prioritize short-term gains over long-term trust and customer relationships, employees learn that success isn’t about doing what’s right but rather what’s rewarded. This fundamental misalignment creates an environment where gaming behaviors can flourish.
- Pressure to Meet Quotas
Quota attainment typically serves as a key performance metric for salespeople, directly impacting their compensation and job security. When faced with the threat of missing targets, salespeople may resort to gaming tactics to ensure they meet their numbers.
This pressure intensifies near the end of reporting periods, particularly when salespeople are close to but not quite reaching their targets. The psychological and financial pressure to “make the numbers” can drive otherwise ethical individuals to engage in questionable practices.
- Short-Term Over Long-Term Thinking
Many sales incentive programs inadvertently encourage short-term thinking by rewarding immediate results without considering long-term consequences. This short-term focus can lead salespeople to prioritize tactics that boost current numbers, even if those tactics will create problems down the road.
Impact on Businesses and Customers
The consequences of sales gaming extend far beyond individual salespeople to affect the entire organization and its customers.
- Financial Damage
When salespeople game the system, companies often face significant financial repercussions:
- Revenue recognition issues that can lead to accounting irregularities
- Reduced future earnings as sales are pulled forward from future periods
- Margin erosion from excessive discounting
- Potential regulatory fines and penalties in severe cases
The Wells Fargo case exemplifies these consequences at their most extreme: the bank paid more than $3.7 billion in fines after employees opened millions of unauthorized accounts to meet unrealistic sales goals.
- Damaged Customer Relationships
Manipulative sales techniques and high-pressure tactics can severely damage customer trust. When customers discover they’ve been manipulated or pressured into purchases they don’t need, they’re unlikely to return for future business.
Additionally, practices like channel stuffing can lead to customer dissatisfaction when distributors are burdened with excess inventory they cannot sell, potentially damaging relationships throughout the supply chain.
- Distorted Business Intelligence
Gaming behaviors distort the accuracy of sales data, leading to flawed business intelligence that can affect strategic decision-making. When management cannot trust sales forecasts or performance metrics, planning for future quarters becomes increasingly difficult.
Detecting and Preventing Sales Gaming Behaviors
Organizations can take proactive steps to identify and address gaming behaviors before they cause significant damage.
- Audit Incentive Programs Regularly
Regular audits of sales incentive programs can help identify patterns that suggest gaming behaviors. By examining sales data for unusual patterns-such as dramatic spikes in sales at the end of reporting periods or excessive discounting-companies can spot potential issues early.
- Design Balanced Incentive Systems
Creating incentive systems that balance short-term performance with long-term value can help reduce gaming behaviors. This might include:
- Incorporating customer satisfaction metrics alongside sales targets
- Implementing clawback provisions for deals that don’t materialize as expected
- Designing compensation plans that reward sustained performance rather than just period-end results
- Foster an Ethical Sales Culture
Building a sales culture that values integrity alongside performance can help prevent gaming behaviors. When leadership clearly communicates that how sales are achieved matters as much as the numbers themselves, salespeople are less likely to engage in questionable practices.
As noted in the research: “The real question isn’t ‘how do we stop people from gaming incentives?’ The question is: ‘What would business look like if doing what’s right was the highest-rewarded behavior?'”
- Monitor Key Indicators
Organizations should watch for warning signs that may indicate gaming behaviors:
- Unusual sales patterns, particularly at the end of reporting periods
- High return rates or cancellations in subsequent periods
- Excessive discounting or price overrides
- Customer complaints about sales practices
- Large differences between forecasted and actual sales
Conclusion
While sales incentive programs play a crucial role in driving performance, organizations must remain vigilant about how these programs might be manipulated. By understanding common gaming tactics, recognizing warning signs, and creating balanced incentive systems that reward integrity alongside results, companies can harness the motivational power of incentives while protecting themselves from their potential downsides.
The most effective approach isn’t simply to crack down on gaming behaviors but to redesign systems that currently encourage them. When doing what’s right for customers and the company aligns with what’s rewarded, salespeople naturally gravitate toward ethical sales practices that build sustainable success.
As businesses continue to rely on sales incentives to drive growth, the challenge lies in creating systems that motivate high performance without incentivizing manipulation-systems where ethical behavior and business success go hand in hand.
References:
How Salespeople Game the SystemDeal Registration – TechTarget
Harvard Business Case – R2502J
Sales Quotas – Salesforce
Deal Desk – Salesforce Blog