Abstract

The case ‘Sales Force Compensation Best Practices at HubSpot’ describes how sales compensation plans that were at the heart of HubSpot’s sales strategy, powered its growth from US$0 to US$100 million in just seven years of its founding. The case looks into the way HubSpot created the pay structure for its sales team and the timely alterations that it made in the structure to align with its strategic objectives. HubSpot’s first sales compensation plan in 2007 was directed at acquiring as many new customers as it could within a short period of time. The case looks into how the company decided to adjust the sales compensation plan in 2009 so as to align customer retention performance with commission. Next, the case describes how HubSpot again designed a new compensation plan in 2012 to encourage the sales team to increase the average contract length of customers for its subscription platform. This resulted in the average prepayment commitment from customers increasing from 2.5 months to 7 months. Finally, the case describes the general principles that HubSpot gathered from its experience of modifying the sales force compensation plans. HubSpot believed that its sales compensation plan had to be simple and clear for sales representatives. It believed that greater impact could be realized only through properly aligning the compensation plan with revenue. The company also believed that it was important to immediately reward the sales team.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Understand the need to align sales compensation plans with the strategic objectives of the company
• Learn about the importance of sales compensation plans to drive company revenues
• Understand the prerequisites for designing and implementing compensation plans
• Become aware of the interlink between the sales compensation plan and growth stage of the company
• Understand how sales incentives impact sales force behavior

Keywords

Sales Compensation Plans; Sales Force Motivation; Compensation Structure; Commission Plans; Customer Churn; Customer Life Time Value; Sales Force Management; Sales Organization