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How to Incent SaaS Renewals

Most SaaS metrics contemplate a lifetime relationship, but a renewal is transactional so traditional metrics aren't sufficient and that makes incenting this activity a little harder.

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Here’s a renewal plan that we’ve worked on with one of our favorite clients, to help their Client Success team focus on retention.

Setting Quotas

When setting quotas, CS is probably the most challenging group. Accounts have extremely variable difficulty and likelihood of renewal. Accounts shift regularly, and sometimes your best reps are given the most challenging accounts. Sometimes, it was a problem with the customer-- they are cost cutting, sometimes it's a problem of expectations from sales. You must immediately accept that your CS rep may not have the power to save that account.

How do you set fair quotas in the face of that?

1. Create team incentives. Account load shifting means less if the whole team is responsible.

Maybe work on how you present the idea.

2. Have account level plans. Your client's CS rep has the best possible view of whether a client will renew or not, and should be scoring clients periodically.

3. Payouts and quota for dollars in. Don't put a rep in a hole where they can't achieve any payment.

4. Performance management and compensation are related, but not the same. Say your big account going into 2018 was Toys R Us. You did everything to make their programs with you successful, but not enough to stop the bankruptcy. How do you treat that today? We need to acknowledge that you can have great performance, but maybe a not great payout (and vice versa)

RIP, Geoffrey.

Our Quota Metric: Incremental TCV

This metric is different from the traditional SaaS metrics. We focus on the transaction value. It’s simple, but nuanced, and definitely different than most of us track in our SaaS businesses.

We give credit/payment for the incremental dollars (euros/pounds/your currency) that is contracted. Critically, for an early renewal or short term extension, you are only compensating on the incremental time the account manager added on, not the whole renewal.

Also, note that you don't get "dinged" for churn- you get paid for dollars in, and that feels fair.

Rewarding Performance

<75% of Quota Target, pay out 0x of base rate

75%-110% of Quota Target, payout 1x base rate

110%+ of Quota Target, payout 1.5x base rate

Focus less on the numbers, but the general logic here is to keep the tiers simple- below expectations, meets expectations, exceed expectations.

Questions and comment below!

#TCV #commissues #CSComp #IncentiveComp #SalesCommissions