Four Effective Strategies for Structuring Sales Compensation in a Consumption-Based Go-To-Market Approach

Four Effective Strategies for Structuring Sales Compensation in a Consumption-Based Go-To-Market Approach

In today’s competitive business landscape, companies are increasingly adopting a consumption-based go-to-market approach to drive sales and revenue growth. This approach focuses on selling products or services based on actual usage or consumption, rather than traditional one-time purchases. As companies transition to this model, it becomes crucial to structure sales compensation plans that align with the consumption-based strategy. Here are four effective strategies for structuring sales compensation in a consumption-based go-to-market approach.

1. Align Compensation with Customer Success Metrics:

In a consumption-based model, customer success is paramount. To ensure that sales representatives prioritize customer satisfaction and retention, it is essential to align their compensation with customer success metrics. This can be achieved by incorporating key performance indicators (KPIs) such as customer retention rate, upsell and cross-sell revenue, and customer satisfaction scores into the sales compensation plan. By tying compensation directly to these metrics, sales representatives are incentivized to focus on building long-term relationships with customers and driving their success.

2. Implement Tiered Commission Structures:

A tiered commission structure can be an effective way to motivate sales representatives to drive higher levels of consumption. By offering increasing commission rates as sales representatives achieve higher levels of consumption targets, companies can encourage them to upsell and cross-sell to existing customers. This structure not only rewards sales representatives for their efforts but also aligns with the company’s goal of increasing customer usage and revenue.

3. Introduce Performance-Based Bonuses:

To further incentivize sales representatives to exceed consumption targets, introducing performance-based bonuses can be highly effective. These bonuses can be tied to specific milestones or stretch goals related to consumption levels. For example, if a sales representative achieves a certain percentage increase in consumption over a specified period, they can earn a bonus on top of their regular commission. This strategy encourages sales representatives to go above and beyond their targets, driving higher levels of consumption and revenue for the company.

4. Provide Ongoing Training and Development Opportunities:

In a consumption-based go-to-market approach, sales representatives need to have a deep understanding of the product or service they are selling. To ensure their success, it is crucial to provide ongoing training and development opportunities. By investing in their knowledge and skills, companies can empower sales representatives to effectively communicate the value of the product or service and drive higher levels of consumption. Additionally, offering training on customer success strategies can help sales representatives build strong relationships with customers, leading to increased consumption and revenue.

In conclusion, structuring sales compensation in a consumption-based go-to-market approach requires careful consideration of customer success metrics, tiered commission structures, performance-based bonuses, and ongoing training and development opportunities. By aligning compensation with customer success, motivating sales representatives to drive higher levels of consumption, and investing in their skills, companies can effectively drive sales and revenue growth in a consumption-based model.

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• Source: Plato Data Intelligence.
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