For a subscription business the number of stakeholders and functional teams impacted by the sales strategy is likely three times what it used to be in the old economy. While you balance between acquiring, retaining and monetizing your customer base, your sales strategy will continue to evolve affecting your entire organization, its culture and the way you view its success.
As your sales strategy changes, your incentive compensation plans become more complex and sophisticated. When your focus is on acquisition, you incentivize teams that bring in new logos. Once your customer base starts growing, you focus on making sure the product sticks with them, and your rewards go to those who keep the customers happy, engaged and renewing. Finally, once you have built the customer’s loyalty, you put your sales compensation dollars into “farmers”, who ensure that your business grows and flourishes within the accounts that you have already won.
In this stage, your organization is focused on acquiring new customers to grow your business. The primary focus of your incentive compensation spend will be on incentivizing your sales and marketing team to increase leads and acquire new logos.
Start-up businesses leverage ICM solutions to:
- Measure & report on the engagement model across multiple teams.
- Design commission, bonus and MBO plans based on financial metrics, such as annual contract value (ACV) and monthly recurring revenue (MRR) and non-financial metrics, such as the qualified lead velocity rate (LVR).
- Tie an individual’s compensation performance to results on a monthly, weekly or daily basis, which puts you in a great position for coaching to drive even greater results.
Especially for organizations that operate on a subscription basis and renew contracts regularly, they need to share incentive compensation between “hunters” and “farmers” – sales executives and account managers.
The emphasis on compensation hinges on retention. Though multi-year deals and cash up front are still important to cash flow, businesses need to keep the support team accountable so that customers remain happy and loyal.
Growing businesses, leverage ICM solutions to:
- Incorporate territory, payee and period specific quotas and targets into plans.
- Create robust reporting and analysis for business users.
In this stage, companies need to divide the compensation pie into many, many slices – a complex matrix that includes the marketing team, product specialists and other players.
As your business grows, the need increases to compensate more people for more things. Territories expand, but it’s no longer just outside sales that need to share the benefits. Product specialists need financial acknowledgement for their part in educating prospects and new clients. For marketing, compensation can be tied to annual contract value (ACV) or annual recurring revenue (ARR). As revenue streams and compensation gain in complexity, companies can do well to introduce managers by region or even to introduce a Chief Revenue Officer.
Maturing business leverage ICM solutions to:
- Conduct what-if calculations based on forecast and pipeline data.
- Draw data from multiple sources to include all of the information required to compensate for each department or function.
The right Incentive Compensation Management solution will provide your organization with the ability to automate the design, administration and optimization of your compensation plans based on many metrics, relevant to a subscription business. As the measurements of success change throughout each stage, your compensation plans will change. The ability to make those changes in a timely manner, will not only save you time, but will ensure that your compensation plan design aligns with your sales strategies. The right ICM solution will connect to all of your data sources; providing you with the whole picture of all the different metrics of that equal your success.