Usage-based models and Sales Compensation
Usage-based pricing or product-led growth models are becoming increasingly popular. We often hear from our customers and community about the challenges they face in building an effective sales compensation plan to support this model.
Generally speaking, the traditional SaaS compensation plan gets turned on its head with a usage or consumption based revenue engine. This blog post aims to outline a simplified approach to sales compensation planning and execution for usage-based growth models.
-
Your Team’s Role in Customer Success:
Imagine a sales plan that acts like a mutual growth engine for both your customers and your sales team. In a usage-based model, the value your product offers is directly tied to how much your customers use it. It's paramount to first map out how your product adds value from the customer's standpoint.
There are three key stages where your sales team can make a significant impact:
- Sign-up: This is the entry point. If your product requires a sales touch to get the customer on board, incentivizing sign-ups is your starting line.
- Onboarding: Next, it's all about getting customers to hit those initial success milestones with your product. Your team's role here could mean the difference between a satisfied customer and one that slips through the cracks.
- Expansion: Finally, encouraging customers to delve deeper into your product by using more features or services. This is a goldmine for adding value and, accordingly, should be a focus for rewards and incentives.
-
Pinpointing Key Activities and Rewarding Them:
Identifying and rewarding key activities is arguably the most important step! The trick is not to scatter incentives across the board. Instead, place them strategically where they'll have the biggest impact. This benefits both customer success and your bottom-line. Choose the activities closely tied to customer engagement and revenue growth. Simplify your incentive structure to focus on what truly moves the needle—whether that's bringing in new customers, ensuring they reach their first success milestone, or encouraging them to expand their usage. We recommend prioritizing the top one or two most impactful sales activities, then building a weighted incentive structure to encourage those behaviors.
Identify and reward the most impactful sales activities that drive customer engagement and revenue growth. Prioritize one or two key activities and create a weighted incentive structure around them.
For example, if your focus is on expanding market share, your compensation plan might heavily favor new business acquisition and onboarding. A sample plan could be:
- New business: 70%
- Onboarding: 30%
- Expansion: 0%
On the other hand, if your product is designed to attract new business and your sales team is responsible for driving continued usage, your plan might look like this:
- New business: 0%
- Onboarding: 30%
- Expansion: 70%
Remember, these examples are simplified and should be tailored to your specific business model.
-
Selecting Incentives That Drive Success:
When setting up your compensation levers, think about what actions you're encouraging at each stage of the customer journey. Here are some simplified incentives you might consider at each stage:
For Sign-ups: Consider a straightforward bonus for each new customer or a percentage of the contract value they sign.
During Onboarding: Rewards might be tied to customers successfully using key features for the first time or achieving specific early success metrics.
For Expansion: Look at bonuses for upsells or increased usage, aligning the sales team's interests with encouraging customers to get more value from your product.
Wrapping It Up
In conclusion, remember, the goal is to create a plan where success for your sales team means success for your customers. This symbiotic relationship is the cornerstone of a sustainable and thriving business model.
Crafting a sales compensation plan with these principles can catalyze growth by aligning sales efforts directly with customer success. This approach ensures your sales team is incentivized to not just sell, but to sell in a way that builds lasting value for your customers and for your business. Keep the focus on what genuinely drives customer satisfaction and usage, and your compensation plan will not just be a cost of doing business—it will be a strategic tool for sustainable growth.
Need Help?
Looking for assistance with sales planning, strategy, and executing FY25 sales plans? Contact our experts at Continuous Scale today. Whether you require a new system for intricate commission calculations or simply need extra support to tackle project work efficiently within your finance team, don't hesitate to reach out to us!
