Compensation Models for a “Land and Expand” Go-to-Market Strategy
In today’s competitive marketplace, companies are increasingly adopting a “land and expand” strategy, aiming not just to acquire customers but to grow their revenue within those accounts over time. This approach necessitates a nuanced compensation structure that aligns with the specific roles involved in the sales process. This article explores effective compensation models for Sales Development Representatives (SDRs), Account Executives (AEs), and Account Managers (AMs), highlighting how they can be incentivised to book customers while maximising expansion opportunities.
Understanding the Roles
Sales Development Representatives (SDRs)
Primary Focus:
SDRs are responsible for generating leads and qualifying prospects, laying the groundwork for successful sales conversions. Their goal is to secure initial meetings and hand over opportunities to AEs.
Account Executives (AEs)
Primary Focus:
AEs take over from SDRs, working to close deals and onboard new customers. Their focus is on demonstrating the value of the product and securing contracts.
Account Managers (AMs)
Primary Focus:
AMs are tasked with nurturing existing client relationships, ensuring customer satisfaction, and identifying upsell and cross-sell opportunities. They are pivotal in the “expand” phase of the strategy.
Compensation Models for Each Role
1. SDR Compensation Structure
Base Salary + Commission for Booked Meetings:
- Base Salary: A competitive base salary of €30,000.
- Commission for Booked Meetings: SDRs earn 10% of the deal value for each qualified meeting booked, leading to an average commission of €1,000 per meeting if the deal value is €10,000.
| Percentage (%) | Round Number (€) |
|---|---|
| Base Salary | 30,000 |
| Commission | 1,000 |
Incentives for Expansion Opportunities:
- Accelerator for Quality Leads: If a booked meeting leads to a deal over €15,000, SDRs receive an additional €500 bonus.
2. AE Compensation Structure
Base Salary + Commission on Closed Deals:
- Base Salary: Offer a base salary of €40,000.
- Commission for Closed Deals: AEs earn 15% of the deal value upon closing a new customer. For a deal worth €20,000, the commission would be €3,000.
| Percentage (%) | Round Number (€) |
|---|---|
| Base Salary | 40,000 |
| Commission | 3,000 |
Greater Incentives for Expansion:
- Compensation Multipliers for Renewals and Upsells: If an AE closes a deal with a renewal term, their commission could increase to 20% for any additional revenue generated from expansions within that account. For instance, if the expansion generates €10,000, the commission would rise to €2,000.
- Accelerators for Exceeding Quotas: If an AE exceeds their quota by 20%, they could earn an additional 5% on all expansion deals closed that month.
3. AM Compensation Structure
Base Salary + Performance Bonuses:
- Base Salary: A competitive base salary of €45,000.
- Performance Bonuses for Retention: AMs receive a €1,500 bonus for maintaining customer satisfaction scores above 90%.
| Percentage (%) | Round Number (€) |
|---|---|
| Base Salary | 45,000 |
| Performance Bonus | 1,500 |
Enhanced Incentives for Expansion:
- Revenue-Linked Bonuses: AMs earn a bonus of 10% of any revenue growth from existing accounts. If an AM increases the annual recurring revenue (ARR) by €5,000, they receive a €500 bonus.
- Cross-Sell Incentives: For every successful cross-sell worth €8,000, AMs could earn a 12.5% commission, resulting in a €1,000 bonus.
Incorporating SPIFFs
In addition to the regular compensation structures, implementing SPIFFs (Sales Performance Incentive Fund) can motivate sales teams towards achieving specific company goals. For example, if the company launches a new product and sets a target of securing 50 meetings within the quarter, each SDR who books a meeting could earn an additional €200 SPIFF. This reward is not directly revenue-linked but encourages proactive engagement with new products, aligning with the land and expand strategy.
Conclusion
In a “land and expand” strategy, compensating SDRs, AEs, and AMs requires a thoughtful approach that aligns their individual roles with the company’s growth objectives. By implementing compensation structures that reward not only the acquisition of new customers but also the expansion of existing accounts, organisations can foster a culture of collaboration and drive sustainable revenue growth.
Incorporating accelerators, compensation multipliers, and SPIFFs into the compensation plans creates an environment where sales professionals are motivated to think long-term, focusing on nurturing relationships and maximising the value derived from each customer. As businesses continue to evolve, refining these compensation strategies will be key to ensuring success in a competitive landscape.
Variable Compensation design with BearOps
At BearOps, we assist organisations in having the honest, challenging conversations that leadership needs to engage in to effectively challenge the status quo. Do you have the right person for each role? Is the role definition accurate to begin with? Are you incentivising the right behaviours that align with your overall business objectives?
Once we clarify these priorities, we dive into compensation modelling based on your desired outcomes and available levers. It’s crucial that compensation plans are transparent and easily explainable to your staff. Every sales representative should clearly understand how and when they are being compensated, without unnecessary fluff or jargon. If a sales manager can’t explain the compensation structure confidently, then it needs to be reevaluated.
We’re happy to work in a traditional spreadsheet format or help you implement dedicated variable compensation software. This software can dynamically pull data from your CRM and accounts system, model payout scenarios based on your pipeline, and provide a transparent experience for your sales representatives regarding their compensation.
Have questions or want to discuss your compensation model for your own sales force? Reach out and let’s talk
