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How to Create a Sales Compensation Model That Drives Upsell and Cross-Sell Opportunities

How to Create a Sales Compensation Model That Drives Upsell and Cross-Sell Opportunities

Imagine joining a sales organization and your colleagues are, more or less, only doing the bare minimum to reach their quotas. In some organizations, this is the case. Sales teams rarely go above and beyond to consistently grow customer accounts. What they may not know is that according to Mckinsey & Co., cross-selling can increase sales by 20% and profits by 30%. This revenue can be used to replace the money lost from dropped deals or customer attrition.

This article will focus on several strategies you can use to drive the sales behaviors and results needed to keep your sales team striving for ambitious goals and business on a successful growth path.

Types of Compensation for Subscription Sales

Every business has its unique services and products, vision, and overall mission. But the one thing that every company shares are the primary goal of filling the pipeline to increase revenue.

There are many different types of compensation, such as:

  • Quota attainment
  • MBO (Management by objective)
  • OTC (on-target commissions)
  • OTE (on-target earnings)

Typical compensation models give sales reps a commission that’s a percentage of each sale or commission tied to a total revenue target. (monthly/quarterly/yearly). However, when talking about subscription-based revenue there are additional complexities that can make designing a sales compensation strategy complicated.

Another strategy that companies can also use is SPIFFs (sales performance incentive funds) to incentivize sales teams. SPIFFs incent teams to go above and beyond and to show that they can achieve stretch sales goals.  SPIFFs also allow companies to drive key initiatives outside of quota targets.

If your sales reps typically don’t reach their sales goals until the end of the quarter, you can use SPIFFs to drive behavior that motivates sales teams to consistently upsell and cross-sell. For instance, you can make the upsell or cross-sell worth a factor of 1.25 to 1.50 percent so that they get more towards their quota than 1:1.

SPIFFs can be structured as a team and/or individual incentives so that everyone works toward a revenue goal as a team, and individually. This model allows for flexibility, so you can change targets each quarter as needed. Compensation doesn’t necessarily have to be money-oriented. You can also offer paid time off or create a rewards trip for top performers.

Create Tailored Fixed Compensation Plans for Your Sales Team

Creating tailored and fixed compensation plans for your sales team is important. You need to really understand what drives your team to customize the best plans.

Flexibility is key, and it allows you to shift the focus for each quarter as business priorities change. You can also shift the focus for each person as well. For example, new hires may have a different focus than the rest of the team. This level of flexibility allows you to vary the weighting as your priorities shift.

If you are looking to drive a specific behavior during a certain time frame with your team, like performing 25 calls+ in a day to promote a specific sale you may have going on, you could weigh your compensation structure to drive the behavior. Try offering a 70/30 split between bookings and activities where70% of a sales rep’s bonus would focus on completing their revenue/bookings quota and 30% based on activity completion.

Reward Sales Teams Along with Business KPIs

Sales KPIs provide valuable data on your sales cycle and can help your team proactively keep up with forecasting to reach their goals. They are key for forecasting your business’s growth and overall success.

Some key KPIs that you should be tracking are:

  • # Of Client Discovery Meetings
  • Prospect/Client Follow-ups Completed
  • MQL to SQL Conversion
  • Bookings
  • Upsell/Cross-sell %
  • Renewal Rate
  • Net Retention Rate

Rewarding your team for reaching (and especially overachieving) your business KPIs is key to keeping up morale and overall employee satisfaction.

For example, your team may have a goal of a 90 percent customer renewal rate at a base level which could make up $1 million in revenue. You added an additional goal of a two percent increase with cross-sells and upsells (reaching $1,100,000). As an incentive for reaching this goal, you could take $20,000 and use it as a team incentive. Your sales team created an additional $80,000 over the original goal and the reps are also happy with their incentive. Everyone wins because they all get a piece of the profit.

Feedback is Paramount – Listen to Your Sales Teams

Feedback is vital for this model to work. If the team struggles to reach the sales goals, you must be able to understand what is hindering them, whether it’s process-oriented, market demand, or if that goal is not fully understood or achievable. Be sure to guide the conversations around feedback so that the sales reps can influence how to reach the sales goals. The goal of the feedback conversation should be to engage, motivate, and understand where your reps are coming from.

Listening to feedback from your teams helps you stay flexible with your compensation plans to get the results you need. Giving your team a say in the process gives them more skin in the game and motivates everyone to succeed.

Partner with a Third-Party Team of Expert Sales Professionals

When it comes to creating a compensation model that drives more cross-sells and upsells, subscription-based compensation can be complicated. But tailoring a plan gives you the flexibility to shift targets each quarter based on company revenue goals and priorities.

By rewarding sales teams based on KPIs, you can create revenue goals that reward sales reps and incentivize them to do more cross-selling and upselling.  You can create an inclusive environment that fosters overachievement behaviors in every team member because everyone gets more money.

If you need help developing a tailored compensation plan for your sales teams, contact ServiceSource and speak with one of our experts.

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