Usage Based Pricing and Your Sales Motion

It’s March now and the vast majority of sellers have their quotas for the year. What I’ve been hearing from quite a few sellers is how scary quotas look this fiscal because the company is moving to a usage based commission structure. 

When I hear this I generally ask one question: did they teach you a new version of MEDDIC at SKO, or are you still using a qualification framework that focuses on transactions in a world where now your comp model is tied to usage and outcomes? Regardless of the enablement, the model is here and it is time to help sellers get the most out of this new approach to pricing. 

Usage based pricing, also known as consumption based pricing, is taking the software world by storm, and as OpenView points out, public markets are rewarding usage based companies with valuation multiples at 50% of their peers that aren’t usage based. But qualification frameworks are lagging behind. Most are stuck in the 90s even though that’s three decades ago and the approach to building and selling software has changed dramatically since then. The following slide attempts to put some shape around just how drastic this shift has been for software buyers and sellers: 

As motions shift, the methodologies need to follow. We are focused on helping sellers move to a world where the customer is in the product even before they are Closed Won and where the most commission might come after the first transaction. 

The new world calls for understanding and knowing multiple buyers, while they are in your product, how to best manage success with your customer, which leads to more product usage/consumption and leads to bigger commission checks. You can make the argument that the new sales model—from the 2000s to now in the slide above—is a bigger shift than the sales motion of moving from on-prem to cloud selling. At least both of those motions focused on a transaction and now the seller has to focus on not just the transaction but also usage and expansion. 

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At Variance, we are focused on helping sellers evolve their methodologies to deal with the modern-day motion. Whether it is CROs evaluating how to add a product led growth motion to the sales team or it is a sales team under competitive pressure to switch to more of a consumption-based model, we are here to help. We believe your need for Variance becomes critical as you have more stakeholders in the sales process in both the pre- and post-sales motion. Our focus, like yours, is on maximizing revenue and your commission check.