2023 High Technology Sales Compensation Trends
Consumption Pricing Models.
Customer Success Jobs.
These are just a few of the hot topics impacting sales compensation today. Hundreds of high technology sales compensation leaders recently learned more about how companies are tackling these and other topics at Alexander Group’s annual Sales Compensation Symposium. Through speakers, attendees and Alexander Group research, three key sales compensation challenges emerged among technology companies.
1) Attracting and Retaining Top Talent
The great resignation (or “reshuffle”) is not over—talent mobility continues to be high. Even with the recent reductions in force (RIFs), unemployment is still low. Sales compensation is a sizable investment, so it is crucial to invest in the right talent to help realize ROI.
With over 50% of companies increasing their sales comp budgets, there are three leading practices to effectively manage talent:
- Invest in the right coverage that maximizes productivity
- Increase quality of talent
- Instill market competitive and aligned sales comp plans
Best-in-class companies are re-evaluating their job architecture to maximize talent attraction, development and retention while optimizing their cost of sales. Alexander Group research shows that pay is the leading factor (>50%) for offer acceptance and employee attrition. Thus, competitive sales compensation plans are key to attracting and retaining top talent.
2) Updating Metrics to Accommodate New Consumption-based Pricing Models
It is no surprise that consumption pricing models continue to be a hot topic. While identify, land, adopt, expand and renew (ILAER) motions vary by pricing models, consumption models require adopt, expand and renewal to happen concurrently. Typical sales compensation metrics for consumption pricing models include:
- Consumption Revenue (or Incremental Consumption Revenue)
- Annual Contract Value (or Estimated Annual Contract Value)
- Combination of the Above
Companies should select the right sales compensation metric based on contract type (e.g., a committed pool of funds/credits and pay-as-you-go), job role and tracking/quota-setting capabilities. The guiding principles are to pay for persuasion, desired behaviors, keep it simple and linking in-year pay to in-year performance.
3) Aligning Sales Compensation Plans to Job Evolution
Customer Success: Customer success (CS) teams are facing multiple pressures including diversified portfolios and reduced headcount. Still, it is important to not let CS be viewed as a cost center – ensure they have skin in the game for driving positive revenue outcomes. Because job types vary by segment and product type, companies must align plan type and metrics to the type of CSM. Leading companies measure CSMs as close to the business outcomes as possible and invest in measuring/tracking adoption if they don’t have a viable metric yet.
Overlay Specialists: The overlay specialist role is used to focus on new buying contacts, when the offering requires new/different knowledge and/or when the product requires additional focus. Measures for this role depend on their deployment—aligned to an AE, aligned to a product or aligned to a channel partner. Companies must constantly rationalize the design and deployment of overlay specialist jobs to manage their overall cost of sales—some jobs will be removed, combined or evolved (e.g., refocused on a new product).
Partner Account Manager: The partner ecosystem is continuing to merge as partners do more than just resell or fulfill. Companies are working with new route-to-market partners as well as doubling down on a smaller set of key partners to emphasize strategic growth priorities (e.g., specific product line, customer segment or vertical, etc.). Partner programs have more complex financial incentive structures and increased emphasis on sourced and influenced sales rather than just sell through/fulfilled sales. Partner account manager sales compensation plans now include many different types of measures including sourced, influenced and technical certifications.
Alexander Group Can Help
Profitable growth is a key focus in today’s macroeconomic environment. Best-in-class companies scrutinize all sales compensation cost of sale drivers to keep cost in check, including headcount and ratios, productivity/attainment (e.g., bimodal distribution), pay levels and plan/policy design (e.g., add-on bonuses). However, it’s important to not overcut sales compensation plan cost (e.g., uncompetitive upside) so that it is no longer market competitive to attract and retain high-caliber sales talent.
Need assistance with sales compensation planning?
If you would like a deeper dive into these topics or other sales compensation topics, please contact the Alexander Group to schedule a complimentary briefing of the Sales Compensation Symposium and to discuss your situation and solution options.