Subscription Sales Incentive Compensation
Posted by www.makanasolutions.com Admin on Tue, Mar 24, 2009 @ 03:20 PM
Subscription sales are any sales that are paid on a recurring basis, usually monthly versus lump sums. Examples of products and industries that use the subscription pay model include: Magazines and publishing, SaaS (Software as a Service) companies, Cleaning Services, and Memberships (athletic clubs, wine clubs). When developing an incentive plan for subscription sales we recommend the following:
- Keep it simple- focus on 2-3 metrics
- Most important metric is Monthly Recurring Revenue (MRR)
- Build annual quotas to incent performance throughout the year and prevent gaming of the plan
Things to consider/ ask yourself:
- Are you better off with one year contracts to preserve the ability to raise prices or do you need multi-year contracts to improve attainment?
- What is the cost of capital and how much is an incremental upfront payment worth?
Things we recommend:
- If client attainment is low (<90% renewal rate) add accelerators to push sales of longer contracts.
- Depending on the size and maturity of your company you may want to split your teams into two teams. One team will be your "hunters," who search for new business and are paid on the MRR metric. The second team will be the "farmers," who focus their attention on renewing existing subscriptions and will be paid on customer retention successes. Each team will be focused on their own metric and be paid accordingly.