If you lead sales or marketing, you know the budget review drill. When you raise the incentive program, finance asks the only question that matters: what did it deliver?
“Sales went up” is not an answer. Sales might have increased regardless, and finance knows it.
That question is likely to come up more often. Australia’s Reserve Bank has lifted the cash rate for a fifth time this year, and households will feel the pinch as growth slows. Many businesses already are. Costs are rising faster than selling prices, and the latest NAB Business Survey shows margins at their lowest since June 2020.
Consumers will delay decisions, cut order sizes and review every brand and price, but they will still buy. Household spending rose in September, with essentials up 1.2% and discretionary spending up just 0.3%. Money is moving to what has to be bought, and away from what can wait.
Business customers follow the same pattern. Contractors still need materials, sites still need cleaning supplies and fleets still need servicing. The difference is in supplier choice. When budgets tighten, buyers consolidate spend, putting more through fewer suppliers and favouring those who deliver real value.
This is the opportunity. The overall pool may shrink, but your share is there to be won.
When budgets are cut, marketing is usually the first to be reduced. Advertising spend is committed upfront, with returns measured later. A well-structured incentive program flips this. You set the terms upfront: what you’ll pay, who qualifies and what actions are required. Spend only increases when results do.
That is the case to make at budget review, but only if your program is designed to prove it. Here’s how to design, measure and fund a B2B incentive program.
A program that pays for itself rests on three moves. Set the baseline, fund rewards only from new profit, then prove the result. Get these right and the budget review conversation changes.
Before anything else, set one number for each customer: what they would buy without any incentive.
Three situations need extra care:
2. Fund rewards from incremental gross profit
Revenue is the wrong measure. A sales lift at thin margins can lose money, especially when margins are already tight. Measure the margin on incremental sales only, then commit a fixed share of that new gross profit to rewards.
Example: a customer’s sales rise by $100,000 at a 30% margin.
Reward costs never exceed the return.
3. Prove the lift, don’t assume it
A rising sales line is not proof. In a declining market, holding steady might be the real achievement.
Hold back a comparable group of customers and compare results. If participants maintain spend while the control group cuts back, the program is working. If participants outperform the control group, you have evidence that stands up to scrutiny.
Expect your sales team to challenge the baseline. Show the method, use each customer’s own history, and review it annually. A clear baseline is far easier to defend than a rebate no one can explain.
In a tight market, the temptation is to pay more to hold on to customers. A better reward program is built on two choices: what customers receive, and what they have to do to earn it.
1. Build rewards around value, not size
It’s tempting to outbid competitors with bigger rewards. Resist that urge. The goal is to win the spend without overspending on rewards.
Value doesn’t always mean higher cost. These cost little to provide and matter more when everyone is under pressure:
A reward the customer chooses and remembers has more impact than a larger rebate that disappears into the P&L.
2. Tie every hurdle to a specific action
Rewards work best when they pay for a specific behaviour, not for results that would have happened anyway.
A national cleaning distributor paid a flat 2% rebate on all customer purchases. When leadership asked what the rebate returned in new sales growth, the sales team couldn’t answer clearly.
The distributor replaced it with a growth incentive built around one behaviour: consistent monthly ordering and range extension. Rewards were paid only above baseline and capped at 35% of incremental gross profit.
The results:
Just as important, the result could now be explained and defended to anyone who asked.
Pull 12 months of sales data for your top 50 customers. For each, estimate their total spend in your categories and where you expect it to go next year.
The first number is your baseline. The gap is the share your program should target before a competitor does.
When budgets tighten, a self-funding incentive program is not a cost to cut. It is how you protect revenue and keep costs under control.
Do this, and the budget review shifts from asking what it cost to what it earned.
