Three Ways to Cut Customer Churn and Increase Sales Motivation
The following article is based on an interview with Mark Roberge. He is an Advisor to HubSpot and former Chief Revenue Officer of HubSpot\’s Sales Division. Mark is the bestselling author of the award-winning book, The Sales Acceleration Formula: Using Data, Technology, and Inbound Selling to Go from $0 to $100 Million.
In our interview with Mark, we asked him: What are some of the biggest problems in sales teams and scaling them? He had three major recommendations, and all three focused on sales compensation:
- Don’t just pay for closed contracts.
- Link sales careers to customer success.
- Involve reps in comp plan design.
1. Don’t Just Pay for Closed Contracts
The biggest problem Mark sees today in the sales world is that sales doesn’t care enough about customer success. Yes, dedicated Customer Success teams can take you a long way. But what about your sales comp plans? Are they aligned with customer success?
Revenue-Only Comp Spells Trouble
People talk the talk . . . but when push comes to shove, sales teams with vanilla sales comp plans will do whatever it takes to close a deal and collect a commission check. They will let others pick up the pieces later.
You can’t blame them if that is what the sales comp plan tells them to do. Further, executives—and their bosses, the investors—expect and demand revenue from sales. So, most of the time this is what salespeople are measured on and paid to do: drive revenue by closing contracts.
To Mark, sales compensation is a root problem. Sales teams obsess over contracts, revenues, and commissions. These items get 99% of their attention, while everything else that needs to happen post-sale to drive total customer success gets what is left over—the crumbs.
The derogatory term “shelfware”, or purchased but unused software, exists because sales teams pushed through million-dollar deals that were great for them but terrible for customers. Sometimes these mega-deals took so long to implement that customers ended up paying for unused licenses for a year or more. Or these deals included more modules than the customer could ever actually implement, so they ended up paying for software that never delivered value to the customer.
Pay Salespeople Over Time
The shelfware problem was epidemic with pre-SaaS (Software as a Service) software, and still happens, even in SaaS. The cloud/subscription model changed everything. It reduced the friction to implement software or move to a different vendor if one overpromised. By paying over time, software companies are incented to keep customers happy rather than extract as much money upfront as possible. People understand this intuitively, but our sales compensation plans haven’t caught up.
Think about this scenario: you have two reps who both closed $1M in revenue this year. With your first rep, all her customers are happy and they’re expanding and renewing their contracts because of it. With your second rep, their customers are miserable, complaining and churning out. If your compensation model is set up so that both of these reps are paid the same, you’ve got a problem.
Pay 50% on a Lifetime Value Trigger
Mark proposes incorporating a customer lifetime value trigger into your comp plan. Churn and retention are the best indicators of customer lifetime, but they take too long to tie to your sales comp.
Mark recommends finding an “aha moment” in your product or service that your customer completes in the first two months that flag them as an ongoing success. Pay the sales rep half their commission when they sign the contract, and half when that “aha moment” happens.
Here are some popular examples of how a company knew a customer would be successful:
- Dropbox—when an account has added one device, one file, and one user.
- Slack—once a team exchanged 2,000 messages.
- HubSpot—once the customer used 5 out of the 25 available features in the platform.
- Twitter—after someone followed 30 other people.
2. Link Sales Careers to Customer Success
In a role where success and failure are so easily quantifiable, having an annual performance review to decide on an annual percentage bump in salary doesn’t make sense. It provides little incentive for your top performers to push harder and doesn’t provide them a clear path to getting to the next level.
Instead, Mark recommends adding tiers to your sales roles, each with clearly documented milestones to hit. Each milestone should have a sales component, a productivity component, and a customer lifetime value component. If you hit all three, you get promoted to the next level.
Here is how a formal career path was used at HubSpot (ARR = Annual Recurring Revenue):
HubSpot Sales Rep Career Path
You’ll notice Mark did not include a sales rep tenure piece in the milestones or career path. Mark’s best reps took 7 months, and some took 20 months, to reach the second level. It was largely up to them. The stars can level-up faster without waiting for an annual or other arbitrary point in time to qualify for a performance review and a possible next bump in target pay.
Additionally, publishing a career path tied to revenue, productivity and lifetime value establishes clear and public expectations. It gives everyone transparency into what management values and what it takes to succeed.
3. Involve Reps in Comp Plan Redesign
Mark always involved his sales teams in comp redesign. He started with a “town meeting.” After communicating the goals for the plan, he’d open up the floor to structural ideas and the brainstorming would begin. As the meeting progressed, he’d share some of the structures that were being considered and invite people to offer their feedback.
As a follow-up, Mark created a page on the company wiki, reiterating the reasons for changing the plan, stating the goals, and describing some of the structures that were being considered. The conversation would then continue online with ideas and reactions. He responded to most comments online, which allowed salespeople to catch up and participate when they had time.
Involving your reps in helping redesign their plans reduces comp plan change friction and resistance. It gives them a voice and encourages them to contribute concerns and ideas. It reduces surprises for reps and managers, and reps are pre-educated before the new comp plan is finally rolled out.
Bonus: Rating Salespeople Like Uber/Lyft Drivers
It’s not Mark’s advice, but it fits here. Do you know which of your salespeople are creating great customer experiences, and which ones are too aggressive or overpromising? (Remember: big megaphones.) If you can’t tie comp to an Aha Moment, ask customers to rate your salespeople. After a string of painful SaaS buying experiences, Jason proposed . . .
- Survey: 90 days after a sale is closed, send an automated survey to buyers with one question: “How was the buying process, on a score of 1–5?” Sooner than 90 days is too early. “Churn and burn” deals, where products are sold to customers that don’t need them and “fakeware” deals where the rep overpromises on features, don’t show up right away.
- Sales Score: Reps with a 5-star Sales Score on an individual deal, and a 4.8 or higher overall Sales Score get an accelerator bonus. Maybe even 20%. Enough to be material. Possibly this accelerator is in lieu of other accelerators, perhaps it’s the only one.
- Public: Every salesperson’s Sales Score is published internally, so everyone knows. Management dashboards should include the Sales Score. This way, managers—even the CEO—can be alerted to low-rated salespeople. This helps field managers fine-tune their performance management and coaching efforts. It is especially relevant when low-rated reps have big deals on the line: these situations need tight monitoring. Management can make sure the deal is structured to deliver long-term customer and company success.
The Bottom Line
Align your salespeople with success metrics that customers and management care about. Even with these examples, it will take creativity on your part, because sales teams and customers vary so much market to market. But do it, and you’ll reap huge short- and long-term rewards.
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Aaron is married with 9 children (mostly through adoption), loves motorcycles, and keeps a 25-hour workweek. He’s a keynote speaker and also the best-selling author of Predictable Revenue, called “The Sales Bible of Silicon Valley,” based on an outbound prospecting system that’s created more than $1 billion across Salesforce.com and other companies. He’s Co-CEO of PredictableRevenue.com.
Jason is a serial tech entrepreneur and venture capitalist, who founded the world’s #1 resource for SaaS entrepreneurs: SaaStr.com and has invested in SaaS companies worth collectively in excess of $1.5 billion. Jason was CEO of EchoSign, and led it from $0 to $100 million+ in revenues and a sale to Adobe. He is married with two kids, runs every single damn day, and loves anything related to Hawaii.
Collin is a second-time entrepreneur. He is the Co-Founder of CARB.IO, which merged with Predictable Revenue in 2014. It became Predictable Revenue’s Accelerate team (an outbound team for hire) and offers Outbound Automation software. He oversees product strategy, works with Aaron Ross to lead the Revenue team and hosts the Predictable Revenue Podcast.
Fun fact: Collin refereed hockey in order to pay rent during the first few years of starting the company.
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