Business and Management

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The HubSpot.com Sales Incentive Plan Written and copyrighted by Gary Dessler, PhD. Two graduates of MIT’s Sloan School of Management founded
HubSpot.com about 12 years ago.126 HubSpot provides special cus-tomer relationship management (and other) software and systems aimed at helping clients use online content to attract potential custom-ers to their Web sites, something known as “inbound” marketing.127 When the founders started HubSpot, their sales challenge was straightforward. At that point, the company only had about 100 cus-tomers, so they had to acquire as many customers as they could, as quickly as possible. Therefore, they focused their first sales compensa-tion plan on what that plan’s architect refers to as “hunting” for new customers. That first plan gave HubSpot salespeople a base salary, plus $2 dollars up front for every $1 of monthly recurring revenue they brought in from clients. Knowing that some clients might well leave, the sales compensation plan included a four-month claw back clause. In other words, if a client left for any reason within the first four months, HubSpot took back that entire commission from the salesperson. It was a straightforward sales compensation plan, and in less than six months HubSpot zoomed from 100 to 1000 customers, and its revenues jumped from $300,000 to $3 million. So far so good. However, a problem soon became apparent. HubSpot had a big
client retention problem. Way too many clients were dropping the service (mostly after four months). HubSpot’s usual procedure was to assign each
new client to a postsale consultant. That consultant was responsible for setting up the new client’s service, and training its staff in how to use HubSpot software and services. Management first assumed that some postsale consultants were doing something to turn their clients off, and that that accounted for the client churn. But after analyzing client reten-tion rates, it was apparent that the postsale consultants were not the problem: client churn for all postsale consultants was about the same. Management therefore turned to analyzing client churn among salespeople, and there they found the problem. Some salespeople had more than 10 times the client churn than others! For some reason, some salespeople’s clients remained long-term customers, while others left in droves. Some salespeople were doing a better job than others, in terms of the types of customers they focused on and what they told their clients HubSpot could accomplish for them. Management believed that modifying the sales compensation plan
was the way to solve the problem. The question was, what exactly should the new sales compensation plan look like?