Sales Force Compensation Best Practices at HubSpot
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Case Code: CLMM147 Case Length: 6 Pages Period: 2006-2020 Pub Date: 2020 Teaching Note: Available |
Price: Rs.200 Organization : HubSpot Industry :Technology & Communications/ Countries : United States Subject: Marketing Management |
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.
Issues
- 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.
Introduction
HubSpot, an American developer and marketer of software products for inbound marketing, sales, and customer service, was founded by Brian Halligan and Dharmesh Shah in 2006. Its revenues grew from US$0 to US$100 million within just seven years of its founding. The increase in revenues was attributed to the best practices in hiring and training and the compensation plans created for the sales teams at HubSpot by Mark Roberge (Roberge) who joined the company as Vice President, Sales, in 2006.
Roberge believed that sales compensation plans should be at the heart of its sales strategy. HubSpot adopted three different sales compensation plans on its way to reaching US$100 million in revenues. As an early-stage start-up, its top priority in 2006-07 was to increase its revenue and the sales compensation plan rewarded the sales team for customer acquisition.
Keywords
Sales Compensation Plans, Sales Force Motivation, Compensation Structure, Commission Plans, Customer Churn, Customer Life Time Value, Sales Force Management, Sales Organization
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