A well-designed customer success commission plan can help to motivate and retain top-performing customer success representatives while ensuring that customers receive the support and guidance they need to be successful. Learn more about how to build a winning customer success commission plan, keeping both customer and employee interests at heart.
A customer success commission plan rewards customer success representatives for:
- Achieving and maintaining high levels of customer satisfaction, retention, and loyalty.
- Building strong relationships with customers.
- Ensuring that customers are getting the most value from the products or services they have purchased.
It typically includes a base salary but also consists of performance-based bonuses, incentives, and other rewards that are tied to specific customer success metrics (think: customer satisfaction ratings, customer retention rates, customer lifetime value, and more).
In this article, I’ll cover what a customer success commission plan is and how you can create one in six easy steps.
Let’s get started!
What is a Customer Success Commission Plan?
A customer success commission plan is a compensation plan designed to reward customer success managers or representatives for achieving customer-related metrics such as customer satisfaction, retention, upsell, and cross-sell.
There are typically three types of customer success commission plans:
1. Base only
In this plan, the customer success manager receives a fixed salary or base pay without any additional incentives or commissions.
2. Base + Bonus
This plan includes a base salary plus a bonus payment, which is usually tied to achieving specific targets or objectives related to customer success metrics.
3. Base + Variable
This plan combines a base salary with a variable commission or incentive payment that varies depending on the customer success manager's performance.
The variable commission is typically tied to specific customer success metrics, such as customer retention or upsell/cross-sell rates. It may be structured as a percentage of revenue generated or as a flat fee per customer success goal achieved.
Pro tip: The type of customer success commission plan you choose will depend on your company's goals and budget, as well as the customer success manager's responsibilities and performance expectations.
How to Build a Customer Success Commission Plan?
Let’s take a look at six steps for creating an effective customer success commission plan:
Step 1: Build out your variables
Building a customer success commission plan involves considering various factors and variables that impact the success of the customer success team, like:
Additionally, when designing the plan, make sure to align it with the company's goals and objectives and incentivize customer success representatives to achieve those goals at every step of the way.
Step 2: Determine your compensation split
Another integral part of a customer success commission plan is determining the compensation split:
Here are a few steps to do that
- Determine your overall budget and establish how much money you have available for this purpose. This will depend on your company's overall budget and financial goals.
- Decide on the commission rate you will offer to your customer success team.
Note: The commission rate is the percentage of revenue that the team member will earn as a commission.
- Consider the customer success team's role--the more crucial the role, the higher the commission rate should be.
- Look at industry standards to determine the commission rates of other companies and offer a reasonable, competitive rate.
- Determine the performance metrics such as customer retention rates, upsell/cross-sell success, and overall customer satisfaction.
Once you have determined your compensation split, you can use this information to build out the rest of your customer success commission plan.
Step 3: Identify the KPIs
The next step in building your customer success commission plan requires a thorough understanding of the key performance indicators (KPIs) that measure the success of the customer success team. These include:
Focus on creating a commission plan that rewards team members for achieving these goals.
For example, you might offer a bonus to customer success team members who achieve a certain level of customer satisfaction or who increase the company's NPS score.
Step 4: Compensate for the behavior you want to encourage
Building a customer success commission plan which rewards specific behavior requires you to:
- Define the goals and key behavior to encourage, such as retaining customers, increasing upsells, and improving customer satisfaction.
- Identify the metrics and benchmarks to measure success, such as customer retention rates, revenue generated from upsells, and customer satisfaction scores.
- Decide on the commission structure and establish eligibility criteria for the customer success commission plan, such as tenure with the company, specific job responsibilities, or meeting certain performance metrics.
- Develop clear guidelines for the customer success commission plan, including how commissions will be calculated, what behavior will be rewarded, and how disputes will be resolved.
- Monitor the effectiveness of the customer success commission plan and make adjustments as necessary, such as changing commission rates or eligibility criteria based on feedback from employees and customers.
Step 5: Create finite goals
This step involves setting finite goals that are specific, measurable, achievable, relevant, and time-bound (SMART).
This means creating targets that are quantifiable and have a clear deadline. For example, a SMART goal might be to increase customer retention by 10% within the next six months.
Building a customer success commission plan that includes finite goals requires:
- Careful planning, including setting specific and measurable objectives.
- Determining the commission structure and eligibility criteria.
- Creating clear guidelines.
- Monitoring and adjusting the plan continuously.
Step 6: Determine the on-target earnings (OTE) split
One of the key steps in developing a commission plan is determining the on-target earnings (OTE) split.
Here are some steps to help you determine the OTE split for your customer success commission plan:
- Define the roles and responsibilities: Customer success can encompass a wide range of activities, including onboarding, training, support, and retention. Depending on the specific responsibilities of your customer success team, you may need to adjust the OTE split to reflect their contribution to the company's goals.
- Establish the revenue targets: These targets should be based on a combination of factors, including customer retention rates, upsell and cross-sell opportunities, and customer satisfaction scores.
- Determine the total compensation package: It includes base salary, bonuses, or commissions that are tied to specific performance metrics.
- Set the commission rate: Depends on a variety of factors, including industry standards, the competitiveness of your market, and the complexity of your product or service.
- Finally, you can determine the OTE split by dividing the total compensation package by the commission rate. This will give you a sense of how much of the customer success team's earnings will come from commissions and how much will come from the base salary.
Want to know more?
Read our eBook on how to compensate success teams to maximize revenue.
On a Final Note
Clearly, a customer success commission plan can be a powerful tool for incentivizing and rewarding your team.
However, it's important to design a plan that aligns with the company's overall goals and values and to ensure that the commission structure is fair and transparent.
To do so, companies should consider factors such as the team's responsibilities, performance metrics, commission rates, and payout schedules. It's also important to communicate the plan clearly to your customer success team and provide ongoing training and support.
If you want to take charge of your sales performance or improve your commission plans, leverage ElevateHQ – a 'smart' tool for smarter commissions.
Book a demo today to automate your customer success commission plan the right way!
