I had the pleasure of attending SxSW last month, and it was quite a unique experience. One of the presentations I enjoyed was a panel of companies that grew rapidly and some of their tips, tools, and tricks. One of the speakers was HubSpot’s Dharmesh Shah. The presentation on HubSpot’s growth was fascinating, but I’ll cut to the meat that I found most interesting. (By the way, I’m happy to say that Dharmesh along with some other awesome people will be here in Atlanta this week for the EO Nerve conference starting Wednesday. Very pumped!!)
HubSpot is obsessive about managing by data. They have gone so far as to create a metric for themselves called the Customer Happiness Index. As part of this, they started tracking was how many customers close their account in the first 6-months of signing. I don’t remember the exact number, but it was higher than they liked, so they dug a little deeper. What they found was that a high proportion of accounts that closed within 6-months of starting the relationship were won in the last 5 days of the calendar month. So new contracts won in the first 25’ish days of the month were almost guaranteed to be long term customers while those in the last 5 days had a slim chance of sticking around. Odd, right!?
What they discovered was the sales rep incentives and compensation were causing them to push customers harder to close at the end of the month without as much regard to their fit for each other.
Their solution was the most fascinating part. They changed the sales team incentives in two ways:
- If you sign a customer and they close their account within the first 6-months, you will pay back every penny of commission on that customer. (I assume commissions were paid monthly).
- If your overall customer base as a rep has over X% of customers that cancel in the first 6 months, your commission amount goes down for your entire book of business. (wow!)
What I love about this is that it shows the need for genuine passion for a relationship from your team. I don’t think this is just a B2B concept, or a sales team motivation issue, or even a transaction-size issue… this applies any time you are selling anything to anyone! Genuine passionate energy for what you are selling is critical. In cannot be faked, and if it does, the results will not be pure. Everyone involved in the relationship will know it, and it will be a hard lesson learned.
So my takeaway is this: Be careful where energy is forced. Be mindful of when you and your team are being genuine or when you are motivated by something that is external and perhaps not pure. And be careful.