Measuring Success Within Sales Compensation
Overcoming challenges and preparing for the future.
As with most industries, the technology space is in a state of constant evolution, and tech companies are increasingly making the move to XaaS and subscription models. However, one size rarely fits all when it comes to implementing a new go-to-market strategy to stay on pace with demanding customer expectations.
In Segment’s case, a customer data platform provider, they were experiencing rapid growth with strong logo acquisition and expansion while simultaneously facing challenges around retention in churn. In conjunction, creating an attractive sales compensation plan in an efficient and scalable way to recruit and retain top talent was top priority. The key question became: how do you measure success within sales compensation?
While there are various metrics used to measure growth (learn more about how recurring revenue companies measure and compensate their sellers on growth), a common question that arises in XaaS companies is finding the right metric for their unique situation. Is it better to have two measures – one for new logos and one for renewals – or combine them? Segment wanted to keep focus on new annual contract value (ACV) while ensuring incentives were implemented around renewal, so they essentially created a net recurring revenue (NRR) measure.
As a result, Segment saw an increase in renewal rates which pushed sales reps to be more mindful of ensuring they aligned Segment’s solutions and projects to customers’ pain points. However, with those results also came unintended consequences requiring additional improvements around effectively onboarding customers and aligning those customers with the right intended outcomes and required capabilities. By overcoming these unforeseen challenges, Segment now has incentives that are appropriately designed for the reps, along with an improved high quota participation rate. Overall, growth re-accelerated and retention rates dramatically improved more than 15 points over two years.
Listen to the entire conversation between Joe Morrissey, Chief Revenue Officer at Segment, and Ted Grossman, principal at Alexander Group, to hear Segment’s recent success story of aligning sales compensation plans to match their rapid growth and what the outcomes were (along with some unintended results) to leave Segment in a positive place for continued growth.
Alexander Group Guidance
If you’re in the process of transitioning to XaaS subscription, or if you’re interested in learning more about use cases or redesigning your sales compensation, please contact the Alexander Group Technology team to learn how Alexander Group can help.