How to structure your sales compensation plan to deliberately undersell

I think this is a particularly rose-tinted glasses view of the sales process, which sells underquoting as a great thing for your customers that they will love (&#x27;When you tell them they need to pay more, they will love you and will recommend you to others!&#x27;).<p>In reality, &#x27;land and expand&#x27; is almost universally hated by customers and this just appears like an excuse to under-quote to win the commercial point on an RFP and then screw the customer over when there is some lock-in later down the line.<p>How about neither of these - how about selling solutions that you honestly believe are right-sized, being transparent about the sizing&#x2F;requirements assumptions you have made, and then being flexible contractually if reality turns out different? This is how you <i>actually</i> build trust and consumer satisfaction, not by deliberately underquoting.

In my consulting business, I&#x27;ve found the opposite strategy to be true.<p>I, if anything, deliberately slightly overbid&#x2F;oversell. Then when I deliver the product that they asked for less than I quote them, I get REAL word of mouth, glowing recommendations.<p>I also have found that this practice really weeds out the people that would otherwise give me endless problems like delaying or fighting payment, poorly defining their requirements, changing their mind dramatically half-way through, or failing to take my advice on things that will give them legal problems or cost them an enormous amount of money down the road. (And then come back and try to blame me for them not taking my advice.)<p>I also have the budget to deliver what they actually need at the quality they actually want.<p>Being proud of deliberately misleading people in a way that negatively impacts them feels really gross to me.

I think there are two conversations going on at the same time. One is &quot;per project&quot; fee, where charging less upfront to charge more later on is just ... wrong. I don&#x27;t think the article is about that case.<p>Yet, in SaaS world, when you sell per seat to a large company, you can either: 1. get a small deal &#x2F; a few seats, and then expand (because your product is great) 2. try to land as big of a deal as possible from the get go.<p>The typical sales comp structure is forcing salespeople to go for #2, as they don&#x27;t get as much money for expansion. My understanding is that the article is arguing for changing the comp structure to make #1 as exciting as #2 for the sales person. And that is the whole point. The chances to get the deal, and time to get the deal when sales person goes for #1 are much better than in case #2. IMHO: Makes a lot of sense.

Off topic, this site is pretty much unreadable on a 2020 iPhone SE. The fixed sized header takes up 40% of the screen. On load I can&#x27;t even see the entire headline, let alone any of the article. My phone isn&#x27;t even 2 years old, and my wife still uses the old SE that is much smaller.<p>Why is this stuff still so hard?

It&#x27;s not explicitly mentioned in this way here, but I feel like the underlying assumption is something like &quot;If you think they need the $20k plan, and you sell them on $10k, they&#x27;ll increase to $20k based on usage then expand into $30k [(this is basically the chart in the article)] - but if you sell them on $20k, they&#x27;ll stay there.&quot;<p>I don&#x27;t see why you would intentionally undersell. How does that have any bearing on whether or not they expand into higher tiers, or whether or not they refer new customers to you?

Sales compensation is one of the most interesting, difficult and high leverage things a company can get right.<p>The way I&#x27;ve traditionally thought of &quot;under-selling&quot; is:<p>- You have multiple teams that could <i>maybe</i> use your product, and you can <i>maybe</i> get their common manager to sign off on many seats - But you start with the team most likely to be successful, sell just those seats. Once they are firing on all cylinders they&#x27;ll be very helpful training the other teams - Negotiate the discounting curve for the extra seats ahead of time and agree on expectations for timelines - Co-term the new seats, make it very easy to expand - But of course customer cash is king, and if they want to do procurement exactly once and are ok with seats sitting idle for a while, that&#x27;s what you&#x27;ll do<p>One of the great strengths of the SaaS billing model is how you can map the buying process to the the actual use of the tool.

&gt;&gt;There’s a trade-off to this commission plan: the company may pay both the customer success managers &amp; the AEs for expansion. Also, if customers expand by themselves, salespeople may receive commissions without expending more sales effort.<p>Managers often try to minimize these trade-offs, and it is insanely myopic.<p>Just because a customer increases their spend without an explicit action by your rep does not mean that you should pocket the commission for yourself&#x2F;dept&#x2F;company. Even if the rep actually did absolutely nothing, allowing an occasional &quot;unearned&quot; commission will build loyalty &amp; motivation. More likely, it&#x27;ll get your reps to focus more on customers who are likely to eventually expand, and also doing the kind of ongoing &#x27;soft&#x27; follow-up and account maintenance&#x2F;monitoring that makes customers more likely to up-convert.<p>Management, if anything, should be about seeing the long view and incorporating it into the plans. Why it is so rare to do so continuously amazes me.

Also known as sandbagging... Just a way to game the next round&#x27;s valuation if you find strong demand.

Problem is if venture capital is valuing companies as a multiple of revenue then management has an incentive to juice revenue <i>right now</i> because every dollar of revenue will increase the value of their stock by that multiple which is (1) often quite high (10-40) and (2) likely a more profitable strategy for management than the incremental cost of annoyed customers.<p>Not to say this sales structure isn’t good. It sounds good. I’m just not sure it changes one of the biggest incentives to aggressively sell with a shorter term time horizon than some subset of shareholders might have.

The reality of this strategy is that as soon as the customer realizes you undersold them, they will take their business elsewhere unless your offering is so unique and tough to reproduce.