The Latest from the Go-to-Market Experts
July 10, 2019
How to Structure SDR Sales Commission in an ABM world
Want to know how to build an SDR sales commission structure in an account-based marketing framework (and make your sales reps happier in the process)? Read our simple guide below to learn everything you need to know about SDR compensation and ABM.
TABLE OF CONTENTS:
- How do I get SDRs engaged with ABM?
- How can I get my team to focus on pipeline acceleration?
- How do I motivate my sales team to personalize more?
- How do I get my team to engage the entire buying committee and reduce future churn? “The Pokemon Bonus”
- How do I keep my SDRs from wasting time on meetings with the wrong contacts? The “Double or Nothing Bonus”
- How do I keep my SDRs from working the wrong accounts because of ~gut feelings~?
Account-Based Marketing and Sales Commission
We hear from many of our customers: “We know ABM is crucial to long-term revenue growth, but we don’t know how to alter our current sales commission structure to accommodate this change.”
Most sales compensation is built around activities which result in meetings set (often with arbitrary accounts). In an ABM framework, these meetings need to be with the right people at the right accounts in order to be valid. So – how do you make the switch?
The good news is you don’t have to reinvent the sales compensation wheel to start an ABM program. All you need to do is measure the metrics that matter in an account-based marketing model and apply them to the existing on-target earnings for your sales team.
A Few ABM Metrics That Matter:
- Opportunities Created (from ICP or target accounts)
- Account-Based Engagement
- Pipeline Velocity
- Annual Contract Value (ACV)
- Buying Committee Penetration
- Retention/Expansion Rates
Typical sales compensation plans offer commission tied to traditional metrics like lead consumption and meetings set. While standardized and easy to execute, this traditional approach creates an assembly line mindset among salespeople that often yields mishandled leads, lost prospects, and a “one-size-fits-all” messaging strategy that won’t resonate with your target audience.
This is the kind of poor brand experience that will drive your potential customer right into the arms of a competitor. This approach also removes marketing from important pipeline involvement downstream and focuses all of their attention upstream, usually resulting in more leads but at a lower quality.
But what if you could use the same sales commission structure, but tied to the actual metrics and best practices that yield more revenue?
Reinforcing ABM behaviors with sales compensation
There’s no better way to incentivize marketing and sales alignment on revenue goals than by tying both team’s performance to new ABM KPIs which determine bonuses or commissions.
In an ABM sales comp structure, sales commission could be dictated by a few critical factors, the most important being account-based engagement rates and opportunities created with key decision makers within the organization. This will encourage the sales team to deliver more personalized messages and content, fostering a positive brand experience that will impact a renewal opportunity downstream. This is better for everyone – especially your customers.
This can also promote a constant feedback loop between sales (who needs marketing’s support to create bespoke content) and marketing (who needs sales’ help to identify the content which results in more meaningful conversations).
Every organization is going to be different based on location, TAM, where goals are at in their org, deal size and how quickly a deal closes – but the metrics that matter should remain the same across departments.
It’s also how to guarantee marketing involvement during the entire buying cycle of a target account. This level of alignment will result in more opportunities, faster pipeline, and happier customers.
As you consider how to reconfigure your compensation plans in an ABM framework, look at what your on-target earnings (OTE) is for your sales reps and back into what a reasonable goal would be for quality growth. This is a meeting that should take place between sales, marketing, and finance leaders.
How We Do It: Quality Over Quantity
At Terminus, we practice what we preach. Our acquisition strategy is based entirely on an account-based marketing model. If you’re here reading this because of an ad, email, social post, or some other marketing channel – it’s because we used an AI-driven data set to determine that you would be a successful customer with Terminus.
Our hyper-condensed list of dream accounts (like you) reduces the amount of accounts (not leads or contacts) that any salesperson would be able to work. To accommodate this reduction and to encourage sales to work these accounts in thoughtful, premeditated, and strategic ways, we also cut the opportunity target in half and increased the commission offered per account. Why? Because the account to opportunity conversion rate is higher.
For SDRs who work between 100-150 accounts per rep, we cut the demos set target in half from 16 to 8. Additionally, for opportunities that are created with a director level or above, we offer an additional cash kicker for every meeting with key decision maker, which incentivizes our reps to work accounts more thoroughly to make contact with the right people. The value of the kicker is percentage-based on the size of the account and revenue potential of the opportunity.
We also measure the progression of opportunities through the funnel so that a sales team is incentivized to make subsequent “smart touches” within their account to progress them forward. This is reflected as another component in their commission – once when the opportunity reaches our interest stage, and once when the deal closes. Our interest stage is predetermined by sales and marketing and exhibits certain behavioral signals that constitute a sales-accepted account.
In a binary comp structure, a sales rep is only encouraged to move an opportunity from open to closed and move on to the next low-hanging fruit. In ABM, sales teams are rewarded for building a meaningful relationship from start to finish. This often yields faster, easier upsell opportunities as well as higher renewal rates.
And You Can, Too
6 Quick Ways To Reinforce ABM with Commission
As you build out your ABM program, it’s important to consider the behaviors that you’re trying to incentivize and how they fit into your overall strategy. A sales compensation plan is promulgated by the belief that money motivates action. If a salesperson is not motivated, they will not take the desired actions.
Here is a list of common issues our customers have experienced as they continue to transition to an ABM framework, and ways you might alter your commission structure to alleviate them.
Note that these are just suggestions, not guidelines.
1) How do I get SDRs engaged with ABM?
If you’re struggling to get started or motivate your team to commit to an ABM mindset, consider running a small SPIFF or monthly incentive to drive immediate sales participation.
For every meeting set with one of your target accounts within the first week, offer a small cash incentive or prize provided immediately. This can boost interest and adoption of your ABM program across the sales org.
2) How can I get my team to focus on pipeline acceleration?
Your first step is to calculate your average deal cycle and elevate that number throughout the organization. Once the number is understood by your marketing and sales team, you can include an additional 1% kicker on the commission payout for any sale completed under the average deal cycle (or some percentage faster than average).
This will motivate your sales team to stay engaged throughout the pivotal touch points within the buying cycle right until the very end. Be sure to update and publish this number regularly to ensure your average deal cycle is always understood by every team member, so everyone is aligned on the opportunity journey stages.
3) How do I motivate my sales team to personalize more?
ABM represents an opportunity for your sales and marketing teams to align on a personalized outreach experience with your product or brand. This requires your SDR team to participate in the research and personalization phase.
We recommend having your sales leadership work with each SDR or AE to complete a worksheet in which they identify all members of the buying committee and include some relevant personal or professional information about them. What is their background? What products are they familiar with using? What industries have they sold to? What do they like to do for fun?
After all, an SDR can’t personalize their outreach if they haven’t done any research – so make research part of their compensation package. How does this motivate your team? Make it a requirement that a commission can only be paid out after this discovery worksheet has been completed and submitted it to their manager.
4) How do I get my team to engage the entire buying committee and reduce future churn?
We’ve all been there – your champion leaves the company and there’s no one left to advocate for your offering. The best way to avoid that is by building lasting relationships with the entire buying committee upstream.
Enter “The Pokemon Bonus.”
This can be an additional cash incentive or free PTO day which is only rewarded for sales made in which the entire buying committee is engaged. Engaging the entire buying center raises the likelihood of renewal, expansion, and doesn’t leave just one-person champions if there’s turnover at your target account.
Using a basic worksheet similar to the one from step 3 can help your team strategize their outreach. Once they’ve “caught them all,” they qualify for the “Pokemon Bonus.”
5) How do I keep my SDRs from wasting time on meetings with the wrong contacts?
It would be too simple to tell you to offer a cash incentive only for meetings set with key decision makers (that’s what we do). You can also take things a step further by removing commission targets from meetings set with anyone less than a director level.
If you don’t want to be so extreme, you can use what we call “The Double or Nothing Bonus.”
With the “Double or Nothing Bonus,” you offer double commission to an SDR who can go back to accounts which have had meetings with a low-level coordinator or non-influencer and leverage that meeting into a second with another stakeholder. If an SDR can prove that they can go higher in the account from a bottom-up start – they qualify for the “Double or Nothing Bonus.”
6) How do I keep my SDRs from working the wrong accounts because of ~gut feelings~?
A common issue most every organization encounters is misalignment between sales and marketing teams. Marketing will often hand sales a bunch of accounts and sales looks and them and thinks, “no thank you.” Then they are off to the races working accounts they’ve found on their own that ~feel~ like a good fit.
This is an issue that needs to be confronted both on the compensation end and the culture end. A sales reps biggest motivator is closing more sales, but they also need to feel included in the end-to-end process. Have the sales, marketing, CSM, and finance teams work on your target account lists together, based on ACV, renewal stage, engagement, intent, and any other criteria that fits your ideal customer profile.
Once you have your perfect list, have sales agree that they only get paid 100% commission on these accounts and only 50% commission on accounts outside of this list (or whatever your team deems appropriate). Also reinforce the idea that marketing will guarantee support only for the accounts on this target account list, so sales understands that when they go after non-targeted accounts – they are on their own and will make less.
These are just a few ways you can use sales compensation to drive greater ABM adoption and to influence better behaviors among your sales team. Have more ideas? Email us at firstname.lastname@example.org and let us know what you think about sales compensation in an ABM world. Want to read more about traditional sales compensation? Read this guide from Hubspot.