Seth Marrs: Hello everyone,
before we jump into the next
episode, the third of four
around usage-based pricing with
Chuck Lee, just wanted to let
you know the next two weeks
we're going to be taking off to
spend time with our families,
and I hope you're doing the
same.
The final, the fourth and final
usage-based podcast will be done
on the 7th of January.
Wanted to thank you all for
listening, and I hope you have a
great holiday.
Hello everyone, welcome back to
the Innovative Revenue Leader
Podcast.
This is the third in our
four-part series based on
usage-based sales.
So today we'll take another
practitioner's view on
usage-based, but we're going to
look at it from the perspective
of how to compensate for this
type of motion.
So, another hidden expert in
this type of sale and this type
of work is Chuck Lee, and he's
joining us today.
He's a seasoned sales operations
enablement leader with a really
strong track record of driving
revenue growth, modernizing
sales organizations, and
improving seller productivity
across payments, data, media,
and telecom industries.
Most recently, as the SVP of
Sales Operations and Enablement
for Corpay, he's led Salesforce
Strategy, Sales Planning,
Compensation Enablement for an
$800 million business, and it
has delivered major gains in
conversion, productivity, and
sales growth.
This is something that I know
firsthand because we have both
worked together.
So, Chuck, I really it's really
great to have you.
Great to talk to you again.
SPEAKER_01: Yeah, thanks for
having us, Seth.
Um it's been a great probably
five, six, seven years, God Lord
knows how long that we've been
working together, talking,
keeping touch.
So more than happy to jump in
here and talk about some of
these business problems that we
have talked through in the past.
Seth Marrs: Yes.
And I mean, I going back to
that, I mean, yeah, our our
history is is pretty long and
it's interesting because when
we're when we were tackling this
problem and talking about it
five years ago, it wasn't cool
then, right?
It was, I mean, uh to a certain
extent, like data providers like
Snowflake, AI have created this
new model that everybody's
talking about being the great
new thing that's gonna happen.
We were slogging away having
those conversations five years
ago before any of this stuff was
even discussed.
SPEAKER_01: Yeah, yeah.
I mean, I remember some of the
comp plans that we thought about
were like this is a super basic
comp plan, and well, like
actually they're way out in
front of the market, right?
Because of the way that the way
that we were we're dealing with
this big question of how the
heck do you pay the person for
selling this thing?
Seth Marrs: Yeah, when you
didn't technically sell anything
yet, and that that's the problem
everyone's trying to trying to
solve with this.
So, like when you think about
like this, this is talk about
the process side, but like the
the compensation side is really
challenging, especially when you
get a finance person in the room
versus a salesperson, because
best practice would be I pay
them up front and let them go
sell something else.
But the reality of this is I'm
very hesitant to pay somebody
for no what when no money's
actually coming.
So you did a project a few years
ago around this that led to
significant overachievement.
Can you talk a little bit about
that project?
Kind of what what made it
successful and just a little bit
more because it it was we worked
together on it, and there were
some really interesting things
that came out of it that allowed
you to be successful.
SPEAKER_01: Well, no, uh I'll
say that this is an area when
we'll talk about it where we
fell into the consumption trap.
So you know, and you get and and
always the question is in this
consumption stuff is how long do
you keep that new business
seller in in the deal?
So on this particular, you know,
and we've we've got this out in
the I think we've you've got a
blog that you linked out before
about this for more details and
information.
So, you know, nothing new here.
The core issue that we had was
we have a pretty scaled-up
inbound sales team, and um we
had a team dedicated to
converting inbound leads, and
this was a huge lever in our
sales plan.
So we got into this thing and we
were just kind of stuck, you
know, like we could not get, and
always, you know, like the sales
plan for next year, we're gonna
unlock all this value by
unsticking the conversion rate.
So, you know, we we did a lot of
stuff, and I think there was a
whole bunch of things that kind
of hit at once um that helped
here, but we put in lead
scoring, we did a lot of work
around duplicate leads.
Um, we put in a new sales
methodology, and I think all of
that was incremental help.
But what really levered the
thing up was we looked at the
comp plan and I was like, oh,
goodness gracious, two, you
know, there were two big bad
things there going on.
Number one was do you think
you're doing the right thing by
the seller by having this idea
of, hey, we're gonna give you an
extended amount of time to
convert the lead?
And in our case, we said into
month two, which is because you
may get the lead the last week
of the previous month, and
there's you know, I only got a
chance three times to call the
person.
We're penalizing the seller for
that all these things.
Um, but that threw this little
curveball in there, which had
the seller thinking to
themselves, that old lead's the
one I really got to call into
because it's about to go away.
I'm about to lose my last
chance.
Seth Marrs: Ah, so call like
that were least qualified.
SPEAKER_01: Right.
And the Lord, we are least
likely to close anyway.
I mean, they may have been super
qualified, but they're just old,
you know.
So they may have already been on
with another provider by then.
Um, and then we paid our sellers
on consumption
post-implementation.
Now, the idea was you're not
gonna get into the deal.
We have a whole other team
that's gonna work on the
consumption side of the thing.
We want you to focus on this
motion.
You throw that into top plan and
just know that you're gonna get
what you pay for.
So, what we so what we were
paying for was sellers to call
the oldest leads and sellers to
call existing customers.
So you can imagine double-edged
sword here.
Number one is we're not we're
looking for every reason to the
world not to call the newest
lead, which has the best
conversion rates.
And then in a high velocity
sales motion, you really kind of
want to simplify the thing and
have the seller locked in.
I don't make a whole lot of
decisions on am I calling this,
am I calling that, am I calling
that thing over there?
I'm calling what's in front of
me, yeah, and I'm getting paid
to call what's in front of me.
If I'm have if if every sell,
you got a hundred sellers and
each one can make their own
decisions, you're introducing so
much variability to what should
be a pretty much of a machine.
So, you know, so we simplified
the heck out of the plan.
We stripped it way down, kind of
went to a point space thing.
I mean, we got out of the
revenue thing.
We just said, hey, look, all the
technology, everything we've
done, let's get this seller
focusing in what's in front of
them.
And I mean, you know, we
probably saw 40% lift and 40-50%
lift in conversion rates, not,
you know, as a percentage
increase.
Seth Marrs: Yeah, I mean, and
one of the parts I was really
interested around that is you
kind of had to filter out the
noise about what a seller
wanted.
Because what they were telling
you they wanted was more credit
for stuff outside of the month.
And what you wanted was what you
realized is I just want you to
call the most, the the earliest
leads and to get whatever you
can get closed for the month.
And it inverted it back to focus
on closing the month versus
focus on keeping the
opportunity.
SPEAKER_01: Well, let's be
clear, all the seller wants to
do is make more money.
So the problem is inside of the
comp plan, we're putting all
this noise in there that
distracted them from uh trying
to figure out how to make more
money.
You know, they were getting into
these reports about how the
consumption was working, and you
know, you had one seller calling
in, another seller calling in.
And when we started
double-clicking there and
started cleaning the thing up,
what you found out was the only
reason they cared about all
those reports, all of that, was
because we were paying them to
care.
You know, you'd strip that part
out and say, Hey, look, what
happens if we didn't pay for you
that for you that anymore?
Would you even want to ever look
at that report again?
They're like, Are you kidding
me?
You know, managers are looking
at the reports, managers are
calling into the accounts.
I mean, you just had all this
noise in the ecosystem.
It took a little bit kind of to
get them off the idea of the
oldest lead, but again, they had
uh volume wasn't an issue.
So, really, what happened was
the other complex, you know,
complicating factor here was uh
capacity.
So you only had so much
capacity, so it's literally like
we were sacrificing a new lead
for an old lead.
And so once you took that old
lead out of there and all the
capacity focused up front, and
you paid them on these units, so
you just had to kind of back
into the match of complicated
because you're dealing with you
know kind of um digital demand
flows and what is the right
quota target.
So again, here we go into you're
rolling out a new plan,
interlock with sales ops, sales,
enablement, um, constant
rebalancing of quotas a little
bit where you're kind of looking
at it.
Do we look at it monthly?
Do we look at it quarterly?
Hey, how are we doing here?
You know, kind of the 50-60
rule, or about half the people
at plan, okay, it's working, you
know, because our plan's linked
to on target earnings.
So we know at least if they're
kind of we have that 50-60
percent at the month at plan,
you're kind of gonna be coming
in at OTE.
But I'll tell you, like, it's
hard because someone's demand
would just go up, and you're
like, oh shit, 80% of the team
exceeded, you know, and then
sometimes the very next month it
might dry up, and you're like
the the kind of so it kind of
falls into a quarterly thing.
And what was interesting there
was the idea of managing quotas
and that, you know, it's what
are you doing with the quota in
this use case?
In this use case in this
dynamic, it worked okay with us
because it was tied to this kind
of inbound motion, and um, the
really what drove the number is
the amount of money you're
spending in the market on
digital spend.
So, you know, as we're dealing
with the quota and adjusting it
month over month, that was kind
of getting some intense
conversation, but we gave back.
So the thing was is we increased
quotas, but we also lowered
them.
It just depended on how do we
make sure this thing is dialed
in where half the teams that
plan, yeah, but not doing
retroactively.
So, anyway, that was it was a
lot of fun.
Seth Marrs: Yeah, so I mean, but
balancing in that way that the
that's really important because
it allowed you to hone in,
you're paying on a much tighter
timeline.
It would never, I mean, the the
industry that you're working in
is was very volatile to the
market.
So you have demand, so you had
to do it monthly, and by tying
it that way, it allowed you to
have a lot tighter quotas.
But you did something that a lot
of companies don't really think
of.
Their companies are really good
at increasing quotas, they're
really bad at decreasing them.
But the reality is if you get
really in tune with the market,
you're going to increase and
decrease them over the course of
the year to get the best quota
levels.
Right.
Makes sense.
Okay, so in a typical con like
one of the differences in a
typical contract-based plan, the
seller usually is credited at
the point of PO and they move
on.
With usage-based plans, there
are two other points that are of
significant importance when you
do this.
One is to get the comp the
customer to start using the
product, and then the other one
is to ramp the sales volume to
forecast.
So can you talk a little bit
around how you dealt with both
of those?
How do I get you to start using
our product?
And then also, like, what do you
do to push a seller to be able
to hit a number that you put
into their into their quota on
the ramp for for the spend?
SPEAKER_01: Right.
So this is a really this is
another tough one.
Um because the underlying issue
is the most difficult area of
sales.
Sales is a very challenging job.
Um, God love our sales teams out
there.
And the most difficult area
generating revenue is displacing
the incumbent, no matter what
the incumbent is, the status
quo, um you know, primarily
status quo, right?
That's what I'm trying to
displace out of there.
So if I'm in as a seller and
you're not careful here, and you
pay them only for the kind of
the front end thing.
I've seen this trap.
I have seen this trap.
You pay them for the front end
thing, this is super um easy for
them to kind of push the easy
button and position the solution
as a backup or a trial or for
just part of this portfolio.
So you just have this huge risk
where you know you'll see, hey,
our the only thing we need to do
is generate this front-end thing
and and and don't worry about
it.
Well, guess what?
The they pushed the easy button
and they didn't do the hard work
of making the change argument to
the entire buying team, you
know, and that's really where
the hard work comes in.
So miraculously, you start
seeing the volume pick up
because people are pushing the
easy button, they found out it's
pushing the easy button, you see
the consumption drop off.
Seth Marrs: So then it just
turned and even if you have a
good customer success motion,
you're still stuck because they
didn't really want to buy it to
begin with, they only wanted to
start, and with usage-based,
it's easy to start, especially
if you have a backup, and I can
just buy it and put it on the
shelf and use it if I want to,
use it for whatever.
SPEAKER_01: So little
department, one user over there.
Me as a pilot, just put me in
under the the seat, and I'm
right there in the seat, and
it's really just all you did
persuade was chuck in sales ops
to do it off over here road, but
like I got the subscription, you
know, but you didn't get the
entire logo behind me.
I mean, no matter what your CSM
team's doing, they're banging
me, and I'm like, that does this
thing doesn't even exist behind
me, right?
So um the cut so one way to
think about it is and you need
to kind of it it gets more
challenging if you have a less
mature business.
The more mature, this easier is
if you've been selling the
solution for a while in it in a
different way where you
understand how buyers typically
rant.
And so if you have a good model
over how buyers typically rant,
you know, you that then the
question starts turning to is
like kind of what's the window I
want my new business seller to
be in here for?
Because you're definitely gonna
have to get the thing started.
You know, you're gonna be with
them to get it started because
until they start, this whole
thing is vaporware.
So you gotta be with them until
they actually start consuming
it.
And then let's just say that we
know that you know, I put in a
forecasted deal value of X,
whatever the deal value may be.
And typically in that kind of a
deal, we know based upon history
that it takes, you know, three
to four weeks to kind of get the
thing to ramp up.
Yeah, maybe that's the amount of
time you want to put the seller
in there for, right?
I mean, there's no easy answer
here.
There's no e there's like you're
really stuck with this bouncing
act, but take a lot, take need
some good modeling to understand
ramp time, and then um you kind
of got to keep looking at it,
you know, because I'm paying the
seller this way.
So my assumption is they hit
this ramp period, it's gonna
annualize in a way.
So I'm gonna go ahead and pay
you for that nut.
And if for something reason this
thing drops off and your model
starts not predicting the future
very well, then you got to come
back in and say, okay, we got to
get this thing modeled right.
So you've got to have right, I'd
say the one of the most
important parts here is like
really good partnership with um
your data teams or FPNA,
wherever that kind of thought
process would live.
Who are you partnering with to
make sure these models work
right?
And I would always say, like,
probably not great to have that
sitting in sales.
You know, you want to have
someone to keep you kind of
honest on things, and you know,
that's where FPNA is great
because they're always gonna
kind of, you know, be the market
reality or the data reality
that's kind of like, well, you
know, we're kind of making sure
this number's dialed in and
we're bringing that rate down,
or we're gonna bring it up, like
it's actually doing better, like
the customer success motion is
working better, or the seller is
doing a great job in this three
weeks, and this thing is ramping
faster and and it's sticking
better.
So, you know, we want to make
sure that whatever we're doing
in the sales motion is
accurately reflected in what we
believe the deal is gonna
deliver, and that takes constant
refreshing, and you want to have
a good feedback loop.
If the deal's doing better,
we're gonna pay you more over
time.
If the deals are doing worse,
we're gonna pay you less, or
we're gonna adjust the motion in
some way.
Seth Marrs: Yeah, and and these
are fundamental things that you
see across any usage-based
company.
One, the start is usually the
one of the one deal, not the
contract signing.
And like in SAS, contract
signing deal one, because now
you're committed to the
contract.
In usage-based, the best
practice is when they start
using the product, the clock
starts.
And then the other best practice
you were talking about is you
need to determine the ramp
times.
That's when the seller needs to
be involved.
Once it ramps to a level, that's
a great time to hand it off.
So, doing the analytics to
understand it takes six weeks,
12 weeks, whatever, and then
giving a target based on
analytics to be able to do that,
huge best practice.
And then the other piece is
getting them out once that one
that once that's done.
SPEAKER_01: I want to shift and
talk about another thing that I
see, which is oh, and by the
way, one more piece in there the
communications, the SLAs, the
way you document back and forth
between all these people when
you have multiple people in a
deal at the same time becomes
absolutely critical.
So I just wanted to put that in
there.
Like that whole thing falls
apart if the people aren't
talking, if the whole process is
kind of like not looking at from
the top down, but it's like this
wobbly thing, we're standing up
as we do it.
That is not great.
Seth Marrs: Yeah, it creates
some of the challenges you talk
about.
If you get a rogue element
that's doing something different
in that process, then you wonder
why quotas get all screwed up
because now you have half the
team doing one.
Yeah, it makes total sense.
So here's here's an approach
that's come up multiple times
that I want to get your take on.
So some companies, especially
smaller companies, will pay in
perpetuity.
So I'm just gonna pay you 2% on
everything that you generate for
as long as that person is a
customer.
And like I've always talked
about that as something that is
you you really want it sounds
great in practice, but it's one
of those weird things where it
the sellers hate it when it
starts and love it when you hate
it.
They hate it at the beginning
because they have to ramp up,
but once they've ramped up and
have all this, they they love
it.
How like how do you see the like
just pay as you go and just
never take a person off?
Might as well just give them a
percent.
I mean, they've earned it.
Like, what what's your take on
that?
SPEAKER_01: Well, first of all,
it depends upon how are you
planning your business around
what you expect that role to
deliver.
Seth Marrs: Yeah.
SPEAKER_01: So if you have a
business plan set up.
Where you have this kind of new
business acquisition machine
that's taking care of that.
Because what's going to happen,
and I don't care where you are
or what you're doing, you're
asking the sellers building a
book.
So whenever you say those words,
building a book, I'm building a
book, I'm tending to the farm.
Here I come with Choice Land,
USA.
Um, also pretty much easier to
sell into an existing deal than
a new deal.
So as long as your whole kind of
motion is set up that way and
you've got someone else worrying
about the new business, it can
be fine, you know.
But if you really expected that
AE and their AEs, and we expect
them to generate new logos, and
it I see it all the time.
I talk to a lot of people out in
the market that are in these
smaller businesses that are
expanding, and it is a trap
because you start with that new
business acquisition engine.
You're not necessarily thinking
through the revenue engine in a
way of what do we do with this
thing, kind of as it goes and
becomes an account.
How do we reckon with those
motions to upsell and
cross-sell?
But we're just going to keep
that person in the deal.
They kind of always had them,
they know each other very well.
It's a relationship is formed
and all those good things.
Again, nothing wrong with it,
unless you expect them to be a
new business hunter.
And then you have a business
model, all of a sudden it's
like, whoa, whoa, what just
happened?
Our logos aren't coming in.
We've got a bunch of hunters on
the farm.
And if you think about like the
hiring profile, so the whole
world is completely different.
I I've seen the thing like, oh,
we're great, we're hiring for
the hunter farmer, you know,
which is like, I don't even
understand my hiring profile.
One is resilient, the other is a
problem solver.
You know, I mean, you just start
getting into these things.
Hey, how do we develop that?
You know, one of them really
needs to be expert at how do I
work into a deal and sell.
Another one, and AM, it's really
important for them to know how
to work the problems that come
up inside of the company.
Seth Marrs: Yeah.
SPEAKER_01: So one of them, I'm
the face of the company into the
buyer.
The other one, I'm the face of
the buyer into the company, you
know.
So like it starts getting to be
really difficult.
How do we develop them?
Uh, and then you can put it into
the comp plan, you're like, oh,
you're asking me to figure out
in how I pay these people, which
is no big deal.
It's only the absolute most
important thing in their life.
So because we've decided to have
this, this not could do the, you
know, it's actually like we've
chosen as a company not to do
the hard work of figuring this
out.
Yeah, we're gonna stick it in
the comp plan, we're gonna let
the seller be the decision
maker, and we're probably gonna
make it be where none of us are
ever really happy because
they're gonna figure out the way
to maximize earnings is gonna be
in the farm.
I don't want to maximize
earnings.
Seth Marrs: Yeah, and and it's
it's interesting, right?
Because it sounds good in price,
it's a it is 100% a trap.
It sounds good because at that
point, your AE that's hunting,
you want them to go build the
business, and you don't have a
lot of the business to build,
but then when the AE is
successful, that great AE is now
an AM, and they're just sitting
back in the amount of new
business they could generate on
a plan like that to it's just
nowhere near as much as they're
gonna generate on the larger AM
bucket that they built.
SPEAKER_01: Yeah, I'm looking
for the book.
Uh I'm looking at my bookcase
there.
Well, was it predictable
revenue?
Was it the book way back when
it's like, why do we have SBRs?
And it was kind of like the same
story of I need someone doing
this lead gen because once I
start getting into a deal,
that's all consuming for me.
And this is just the same story,
just another extension of it.
You want to see something this
is always the classic thing
because you're trying to build
the prospecting muscle, and the
um you want everybody like we're
doing all this stuff to make
sure.
Really, the whole reason you're
doing call blocks and for all
this kind of stuff is the
distractions called, I'm working
the farm.
Oh, we got to take all those
distractions of the farm away
from we're gonna force you to
call every day from 9 to 10
because we don't want you to get
into the farm and we know the
farm is calling, is beckoning
you there.
I mean, and and by the way, the
the thing I talked about before
with implementation in the deal,
where I'm sticking with it for a
while, brings up the same
issues.
That's why you got to be really
careful of like how long do we
let them stay on the farm for?
Because even then, even while
I'm implementing it, I'm kind of
you know, I'm hoeing the dirt
and getting the thing ready to
go.
I'm I'm not out there hunting,
you know.
Seth Marrs: Yeah, yeah, yeah.
And that's where you're most
valuable to a large extent.
There's a reason why retention
is an easy, it's much easier to
retain your customers than it is
to build new ones.
Thank you so much for for
joining.
Really appreciate it.