Alexa, CEO of Pocus, hosts Product-Led Sales (PLS) AMAs with PLS experts to share best practices, frameworks, and insights on this emerging category. These AMAs are an opportunity to ask PLS leaders any question - ranging from hiring to sales compensation to tech stack - in a low-key, casual environment.
The PLS AMAs are for members of the Product-Led Sales community, the go-to-place to learn, discuss, and connect with GTM leaders at product-led companies. The goal of the community is to bring together the most thoughtful and innovative GTM leaders to build the next generation of sales together.
Interested in joining? Request an invite here.
Introducing AJ Bruno
Today we had the pleasure of talking with serial successful business founder and lifelong flying enthusiast, AJ Bruno.
AJ is the co-founder and CEO for sales compensation management platform QuotaPath, the host of an exciting new series called Value Props where he interviews sales professionals while flying his Beechcraft Baron 58 (with his commercial pilot’s license, of course!), and an experienced leader in all things go to market — with a special focus on sales compensation.
In this recap we’ll focus on some of our favorite discussions about:
- What sales compensation looks like at QuotaPath, and how it’s developing
- Where sales comp trends are moving, and why having a guiding business metric more valuable than ever
- How to develop sales compensation plans around usage-based pricing
- The beauty in creating a culture that naturally incentivizes value
Trend Alert: Sales Comp is Changing, Time to Hone in on Your North Star Metric
We kicked off our AMA session with AJ by discussing current sales compensation trends.
For AJ, the main trend he’s seeing right now is that the old compensation models aren’t performing as well as they used to in today’s changing world — and that fact is causing a ton of disruption within organizations.
“I think the main trend is that no one is understanding sales comp well right now. It used to be very straightforward. But in the last two years, that's all gone out the window, for a lot of reasons. Now it seems like every quarter, companies and teams are trying to look for the best way to incentivize their teams. Part of it is market driven, with an influx of capital. Part of it is just the talent space, with remote culture and new inside sales teams that never existed previously.
“So sales comp is changing a lot. Every quarter, sometimes even inside the quarter, some of our customers are changing their comp plans in search of the best way to incentivize their team — and to keep people and attract new talent, as well.”
His advice in this time of shifting sales comp? Companies need to realign with their North Star Metric.
“I just finished a book called Amp It Up by the CEO of Snowflake. Within the first ten pages he talks about sales compensation, and I thought that was interesting. When the author showed up at Snowflake in 2019, he realized they were using a very traditional B2B sales comp model, even though the product works on a usage-based model. So he got rid of that immediately. And the other thing he did was get rid of their MBO (management by objectives) approach, because he recognized it just misaligns everyone and causes them to work in silos."
“One of the best things I’ve seen lately is companies realigning to that one metric that matters the most. And we do that, too, at QuotaPath. Our entire company, sales and beyond, has a bonus based on a financial target. It’s just really important that the entire organization is rowing in one motion.”
- Choose a North Star metric to align every team on a single overarching goal
- Only after choosing a North Star Metric can you start to think about aligning sales compensation
What Sales Compensation Looks Like Today at QuotaPath
Speaking of knocking down silos to get your whole organization to row in the same direction, we wondered how that trend has impacted sales compensation at QuotaPath.
AJ was happy to give us some insight into how they think about compensation not just in sales but in departments across their company.
Following his own advice the company has:
- An overarching North Star Metric for every team (Net Revenue Retention) that determines company wide bonuses
- Each team then breaks down that NSM into their own specific goals that align to compensation
What’s unique to QuotaPath is that their sales and non sales teams have similar compensation models.
“I’ll give you an example of specific guiding goals within a department. Marketing has MQL (marketing-qualified lead) generation and conversion goals to hit, and PQL (product-qualified lead) goals within that. So, marketers are comped based on how many PQLs and MQLs they can generate and convert into opportunities. They’re driven by that, in addition to that North Star Metric.”
Knowing our community is mostly made up of GTM leaders in the product-led growth (PLG) space, we dug a little deeper to find out where product fits into the compensation mix for AJ.
“I’ll be the first to flag that we're not a traditional PLG company. We're more like Datadog, who uses a sales-assist motion. We have enterprise level customers who expect enterprise-level, white-glove service. And then we have down–market customers who are more self-onboarding and self-upgrading. And we've just changed our pricing to create a customer journey that maps to the size of the organization a lead is in. Just did that last week, actually."
“This is so funny, our VP of finance recently read your [Pocus’] newsletter and came to me and my co-founder, who runs product, and said ‘Hey, product's going to need a number soon.’ As in, a specific PQL goal against which the product team can be comped."
“So thank you, your report was definitely helpful there. We’re not fully developed when it comes to our product and growth compensation model yet, but we’re working on it.”
- Variable compensation isn’t only for sales teams, in a PLG world every team might have responsibility for milestones along the way to the North Star Metrics
- Marketing, Customer Success, Support and Product teams can all have their own specific goals that roll up into the North Start Metric
How to Design Sales Comp Around Usage-Based Pricing
As many of our readers have probably experienced, it can be really difficult to create a fair sales compensation plan when you’re employing usage-based pricing (something we talked to Kyle Poyar about in a previous AMA) because it's not very predictable.
So we had to ask AJ — any tips on where to start when it comes to creating a sales compensation plan that aligns with usage-based pricing?
AJ shared a recent example where a Usage-Based Pricing model pushed the company to realize that they would rather staff a customer success/support team to handle expansions instead of a traditional sales team with new business acquisition goals.
“I'm advising a company that's in the cloud computing space. They have around 500,000 users and because of the product they have no predictability in forecasting. So I’ve talked a lot about usage-based pricing and sales comp with them. We worked really hard to realize that they don't need salespeople in the traditional sense, they need customer support driving expansion."
“With a usage-based pricing model, expansion may be the best place to start. It just doesn’t work to base compensation off traditional new business or ARR. And instead of sales, I think customer support or account management roles would be my focus up front. Especially if you have users that churn constantly and you just need to figure out what those signals are to expand accounts.”
Of course, every company will need to approach this differently based on the structure they prefer. AJ has seen some companies abandon sales to go full product-led, and that’s worked great for them. However, for companies that want to hold on to that sales GTM, it all goes back to that North Star Metric.
“If you're working with usage-based pricing with a sales-led team, I think it goes back to what I said at the beginning: what is that metric that matters?"
“From there, you can start thinking about how that metric impacts sales compensation. Is there an opportunity for team-based compensation? And especially if you're just getting started, can you align the entire company's goals to the team?"
“In addition to thinking through these questions, look at sales rep behaviors and mindset to see if they're influencing any of the metrics that you're measuring. Once you do that, then you can start to go through and say ‘OK, here's the one activity that sales has an absolute influence on.’ That's where you’re going to put your dollars."
“If you have a traditional sales model, you might have to start with a SPIF ( sales performance incentive fund) to experiment with comping based on this North Star Metric until you’re able to get buy-in from the CRO, or finance, or the CEO, or whomever.”
- Aligning compensation to Usage-Based pricing will go beyond sales reps hitting goals but also looking at their behaviors
- If you’re new to UBP - again you need a North Star Metric to align sales compensation because traditional models like new business closed/ARR will be harder to forecast
- Start with a SPIF to experiment with compensating based on your North Start Metric
Incentivizing Behavior by Way of Culture — A Beautiful Thing
As our AMA wound down, the conversation turned toward a common goal among PLG orgs: adding value. What is it that incentivizes teams to create feedback loops and take other actions that create value but don’t necessarily end in sales, upsells, or expansions?
For AJ, that kind of behavior transcends direct monetary compensation. It’s simply a product of a healthy company culture.
“In a PLG environment, we’re looking for user delight. How do you add value to create those moments? How do you discover them? And then how do you amplify them?
“We have a channel at QuotaPath called ‘Good Vibes’ that really is just our sales team talking about those moments of delight. I remember a story there from a couple years ago, where one of our customer support reps was looking through an account and found where a user had created a goal called ‘pay off my grandfather's mortgage.’ That’s a really cool moment. These moments that show our value and show user delight exist inside our app, so we do everything we can to bring them to the forefront.
“So it's not necessarily always about monetization or compensation plans that directly align with creating and amplifying value. It has to be ingrained in the fabric of the company.
“Striving to add value is a goal that has to live and breathe in the fabric of PLG organizations. And what I think really makes PLG companies hum is having people who take those delightful moments and bring them to the forefront of the organization. Ultimately, this is what creates this feedback loop that gets back to the product team and the engineering team. It’s just this beautiful thing.”
- Don’t just incentivize revenue driven activities, in PLG, adding value to the user journey is perhaps even more important than the “sale” so use compensation to incentivize the right behaviors
- Incentivizing behavior goes beyond a compensation plan, it has to be in the DNA of the company and in everything you do
Dive Deeper Into Sales Comp and Beyond with Our PLS AMA Series
If all that talk about North Star Metrics caught your eye, we have to give one more shout out to our awesome conversation with Lenny Rachitsky, former Airbnb product manager, about North Star Metrics and how to use them to determine sales-readiness in our PLS Playbook.
And if you’re ready to dive deeper into hot topics like sales comp and other crucial elements of the rapidly-developing Product-Led Sales world, the best way to get front-row seats to the conversation is by joining the Pocus community!
Join our free, invite-only Slack channel today for access to AMAs as well as tons of valuable PLS content, Q&A sessions, job openings, and more.