BillyHoyle

Senior Account Executive

Help Me Create a Case On Why We (IC's) Should Be Getting Comped on MtM overages...

Hey y’all!

I’m prepping a pitch for our GTM execs about comping reps on usage overages and monthly self-service add-ons. I know some companies, like Salesforce, have a solid approach here, but does anyone else feel like their SoPs and Finance & Accounting teams handle this fairly and effectively?

Quick context: Right now, we don’t get comped on any overages. We have two main types:

1. Consumption overages – These are often things customers aren’t super aware of, like total messages sent in a month. Currently, we’re expected to leverage these monthly overages to get customers to contract for higher usage thresholds.

2. Monthly self-service add-ons – If a customer needs more licenses for a short period (e.g., adding seats for a couple of months), they can just add and remove them as needed.

I’d love any insights on how you’ve successfully made the case for comp on these types of transactions or if your orgs have set this up in a way that feels fair. My main argument is that, if profitability is the goal, sellers shouldn’t be spending time on transactional contracts, and, to ensure this, we should be compensated for them as this would take away the desire to attempt to get overages contracted in.

Would love to hear y'alls thoughts.

EDIT: One thing that comes to mind is that you want customers to interact with self-service portals for propensity-to-buy data. If you don't comp reps on self-service buys, they are going to inherently talk customers into avoiding those self-service portals.

EDIT: It seems as if a majority of the individuals here think reps should never been comped based on usage/overages. Maybe this only pertains to very specific pieces of SaaS (i.e. AI Providers) that have true Pay-As-You-Go/Consumption pricing models?

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poweredbycaffeine

WR Lieutenant

4

☕️

I hate to be your devil, but you shouldn't be paid on outcomes that you do not directly influence.
Overages, especially for something the user is not aware of, is not something you worked on or influenced. If you can leverage those overages as a spark to sign a larger contract or upgrade a tier, and you run a process for that, then you should be comped. Overages due to ignorance or mistakes should not end up in you making money because it is not predictable and therefore cannot be forecasted to tracked against as a component of CAC/margin.

Self-add-ons...again...did you do anything to influence this decision? If they are not term-based, aka they can be added and removed whenever the customer wants, then you are going to get paid on something that is momentary. If they sign a long-term deal for X seats or Y feature, then sure, get paid

If you told me you don't get paid ANYTHING on a deal because it's usage or performance then I'd say get that cash, but it sounds like you are getting paid on the original contract. Yes, it sucks to hear this perspective, but if you cannot show your impact on the opp then you shouldn't get a dime. This is why most companies pass this on to CS/AMs to handle.

BillyHoyle

Tycoon

3

Senior Account Executive

Sort of believe this if you are selling professional services, but in a world where SaaS is shifting to usage based pricing models I don't know if this necessarily remains true. Effort follows comp. If, as a leader, you don't want your reps focused on super transactional deals by cherry picking overages and self-service annual conversions and instead want them focused on strategic deals it seems like the easiest way to do that would be to just compensate reps on the transactions that are going to take place regardless. In addition to that, you also get the benefit of making your org easier to do business with. I can't even remember all the moronic single seat add-on deals that I've sold over the years that took 3+ days to provision because it had to go through approvals at an EoQ, why wouldn't you want to enable your customers to do this themselves?

I know there are big, big SaaS players (our blue-clouded overlords) that have this comp mindset. They can't be the only ones thinking this way.

BillyHoyle

Tycoon

1

Senior Account Executive

Also, could argue that I impacted overages by "fostering adoption" lol.

poweredbycaffeine

WR Lieutenant

1

☕️

I’ve built comp plans for several SaaS companies. Some that sell the way you are referring to.

BillyHoyle

Tycoon

1

Senior Account Executive

And you are still a firm believer that reps should spend their time inserting themselves into self-service motions and overage collections to attempt to capture comp? I've been on those sales floors and the conversations are the least value-add conversations of all time. i.e. "If you ever need to add seats, PLEASE call me, I might be able to get you a better deal."

poweredbycaffeine

WR Lieutenant

1

☕️

I don’t think you should be involved and I don’t think you should get comped on something you are not selling. If anyone is involved, it is CS/Support, not AEs.

If there is a middle ground it’s that self-service upgrades are credited to the AE for the first 90 days.

As for overages, if they are not a direct impact of adoption driven by an AE then why am I paying the AE?

BillyHoyle

Tycoon

1

Senior Account Executive

Yea, maybe should have added context that I work a mix of new logo and existing. But it's def shocking that no one here feels like the other side has a case.

Revenue_Rambo

Politicker

2

Director, Revenue Enablement

Completely agree with @poweredbycaffeine.

You shouldn’t be comped on the overages. I say this even after having been the beneficiary of getting comped on them.

Too many reps just sit back and collect on this type of plan instead of engaging customers, educating them on their options, and working to put an upgrade in place. Worst I’ve seen is that reps get paid on an over and only after that do they try to double dip and hit them for upgrade.

The best comp plans incentivize behaviors the business wants to see from the sales reps. Paying overages incentivizes laziness.

Sunbunny31

Arsonist

2

Sr Sales Executive 🐰

Agreeing with you and with pbc.
I've worked in SaaS deployments before it was called SaaS (remember ASP, anyone?) and uncontracted overages were never paid out. Online consumption orders became a thing, and reps weren't comped on those either. At the time, the theory was those were the long tail or orders too small to warrant full sales cycles or contracts other than online T&C with CC.
Yes, as a rep you may have gotten that first deal, but after that, it's been hands-off, right? So it's not cutting into your effort level and taking away from other deals you're working (which would be a valid reason to want comp), and your customers are successful. How you win here is by getting them as references so that you can move on to bigger and better things and not worry about some consumption dollars you're missing out on. Go get those whales instead.

jefe

Arsonist

3

🍁

Agreeing with everybody here as well.

Incentivize what reps can control. Full stop.

Phillip_J_Fry

Opinionated

1

Director of Revenue

My previous org didnt comp on overages. So I created a dashboard that was sent monthly to all reps to show them what accounts were over their license count and by how much. Accounts that breached their limit 3 months in a row needed to be aggressively outreached to about their overages and right sizing.

In almost every case, upgrading their licensing was less expensive than paying the overages and the client was happy to take that route. It ended up creating a 20%+ uptick in upgrades each year, with the reps being comped on this.
Paying a rep because an account mistakenly went over or just needed extra licenses for one month, seems silly, because the rep did 0 work.

BillyHoyle

Tycoon

1

Senior Account Executive

Yea, but wouldn't the argument here be, why are you compensating reps for losing the org revenue?

Phillip_J_Fry

Opinionated

0

Director of Revenue

In my opinion, right sizing a customer forms a better relationship with the customer as many folks can feel like they're getting nickel & dime'd. I would take a customer that is more likely to be loyal for years over a short term profit increase.

Kosta_Konfucius

Politicker

1

ERP Sales

Are overages charged at a higher rate than normal? Could you sell additional long-term lincenses to them allowing you to get comped on them?
Unfortunately, everywhere I work you get paid on the original contract

BillyHoyle

Tycoon

1

Senior Account Executive

Yea, for sure. My team spends a bunch of time selling these deals in lieu of selling more strategic deals because they are WAY easier to close.

Sunbunny31

Arsonist

2

Sr Sales Executive 🐰

Aha, the meat of the problem.
Unfortunately, comping them on online sales isn't the answer to stopping this problem either; it will cost your company more money in commission revenue due to the higher price tag on overages.
You'll want to incentivize the behavior you want them to follow. That could be to pay a NN deal at a higher % than existing business addendum contracts. Or to lower the % for existing business addendum contracts. Your business wants new logos - that's got to be a huge part of your growth strategy. That's what you really need to incentivize.
Are there any plans to get CSMs or AMs to handle add on revenue and right-sizing customers? That would eliminate a lot of this.

Pachacuti

Politicker

1

They call me Daddy, Sales Daddy

the counter-argument will be "should they take money away from the reps if the client doesn't perform?" if the answer is yes, there you go.

BillyHoyle

Tycoon

0

Senior Account Executive

While overages are charged, not hitting the contracted threshold(floor) does not result in savings

MRK47

Tycoon

0

Head of Growth

Admittedly, while I don't have full context but in principle, I sit on the side that only rewards AEs for revenue they have directly influenced/generated.

Taking a simplistic view, there are 2 reasons for an overage....either the AE initially sold a lower value contract / tier vs customers likely or potential usage (maybe for justified velocity reasons but still, money was left on the table) or customer has had a really positive ownership/adoption experience (provided by CS) leading to increased utilization...in either scenario, should the AE be rewarded?

Similarly for #2, you could argue the demand for add-ons is driven more by the CS/AM team (does the AE engage with the account after closed won?). In my previous life, there was a compromise in that additional revenue earned from a new account within the first 6 months after conversion was paid (at a lower % rate as was shared with the CSM) but only in the case of expansions (diff SKU added) - this allowed for scenarios where clear attempts were made by the AE to upsell to highest tier / multiple SKUs (preferred behavior) at original conversion but for justified / differing reasons, was not possible.

Given unpredictability of overage / add-on demand, also hard to factor into comp plans / quota & forecasting models. Also creates friction between ICs where % of reps may earn more than others through no input of their own...really just blind luck with account distribution.

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