Tech/Software/Service Management

Why sales performance doesn’t really matter

Service Management

by Duncan MacRae| 21 May 2014

The majority of Software as a Service sales reps miss their quotas.

Hitting sales targets is considered irrelevant by the majority of Software as a Service (SaaS) firms, a new study by Xactly, a provider of cloud based incentive solutions has asserted.

Instead, the 'SaaS Industry Incentive Compensation Benchmark' found that expansion was the priority for most.
The study, based on empirical data, analysed the sales and incentive compensation patterns of SaaS companies to pinpoint the impact of compensation on sales performance.

Surprisingly, the study revealed that a large percentage of quota-carrying SaaS sales representatives are not hitting their goals: 79% of sales representatives miss quota and 14% never achieve even 10% of quota. Across the entire SaaS data set the average quota attainment is 58%. The data remained consistent regardless of tenure.

These patterns were consistent across all companies analysed - regardless of size or market. The report indicated that SaaS companies are prioritising growth rather than traditional sales performance. The report also found that SaaS companies with under $100m in sales are paying more in variable compensation relative to companies with more than $1bn in sales, on average 46% more. The report shows that smaller companies are paying $1,000 in variable compensation for every $22,000 in sales, compared to larger companies that pay $1,000 in variable compensation for every $36,000 in sales.

A sub-set of the data demonstrated an extreme dynamic where the traditional bell curves were inverted creating a bimodal distribution of performance, with high populations either overachieving or failing miserably.
On average 15% of sales representatives who were in their roles for at least one year made quota, and 5% didn't achieve even 10% of quota.

Similarly, on average 16% of sales representatives in their role less than one year made quota, and 19% didn't achieve even 10% of quota.

Xactly founder, president and CEO, Christopher Cabrera, said: "The data indicates that these SaaS companies may be responding to demands for growth with a feast or famine mentality, creating the risk of being too heavily dependent on top sales performers. This approach indicates that SaaS businesses may be tolerating underperformance and need to re-think their sales strategy to meet long-term company objectives of growth, retention and profitability."

The SaaS Industry Incentive Compensation Benchmark is the first in an ongoing series of Xactly reports. The data for each benchmark is accumulated and analysed from annual, anonymized sales big data within Xactly's enterprise cloud compensation platform, which calculates more than a billion transactions each month and more than $10 billion in incentive compensation payouts over the last two years. With terabytes of information flowing though Xactly's cloud compensation platform, data can be sliced by industry, role and company size, delivering new intelligence and best practices to customers across departments and industries.

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