Transcript
Jose Fernandez (0:00)
Foreign.
Podcast Host (0:05)
Welcome to the Revenue Builders podcast with John McMahon and John Kaplan. This podcast is brought to you by Force Management. Today, a segment from our episode on compensation with Jose Fernandez. Jose is the former head of global sales development at Google. He's also held leadership roles at MongoDB and Intact. He's now the co founder and CEO of East Coast. This segment talks about compensation in a consumption model.
Jose Fernandez (0:33)
I mean when you talk about consumption now, and John, you mentioned that before, it presents its own challenges with respect to compensation. And remember in consumption basically you are trying to get that customer to use more of your product to engage and spend money on your product. I think one of the key that we see is that when companies transition from a licensing model, from a SaaS licensing model to a consumption model, they take a bit too much inspiration from the old model instead of thinking what are the advantages that this new model brings to us and how do we develop a go to market strategy and the compliance that amplify those advantages. Taking an example from a different industry, I was at Google for a while and I was managing the VDR team for Google Ads. Google Ads is one of the most successful consumption models in the history of business. They figured out that the three key advantages of our consumption model are one, that reduces the barriers to entry for a customer. You can get a new customer without asking them for a huge upfront commitment. Number two, that as much as you want that customer to continue spending and growing, the spend of a customer is directly proportional to the value that they get out of your product and your ability to communicate that value back to the customer. They need to get the value and they need to understand that they're getting the value. And number three, and maybe a little more controversial, is that if you have an amazing product, some of that consumption and some of that growth is going to be product led, meaning it's going to happen regardless of what the sales team does. So now you have, so now they build a go to market strategy and compensation around those three pillars. So for instance, I was part of the new business sales team that was in charge of bringing new advertisers and when you got a new advertiser, you got paid for the first three months of that spend. It has to be net neo somebody that hadn't spent with Google before. And here's the catch. Because we had to reduce the barriers to entry, the customer didn't need to agree to spend money. They just had to sign a paper that said I will start an advertising campaign by this date. Right when they signed that paper, they were transferred to a second team that was the onboarding team. And that onboarding team was in charge of that second principle, which was making sure that the customer was set for success and that they understood the value. So they were paid on points for helping the customer set up Google Analytics, helping the customer run a first really successful campaign, and helping the customer understand the ROI that they were getting from the product. Once that happened, they graduated to an account management team. And now he's tricked. Because forecasting in a consumption model is an analytical exercise, it's not fair to ask an account executive to forecast a number if it is an analytical exercise. We have the models and today there's even better models that will predict where a customer was going to land every quarter based on their trajectory. Basically, if they didn't have an account manager, the account managers were paid from $1 on that. But then if they changed the trajectory, then they got paid big time. They got big dollars for that. That was a good alignment of that strategy. And you might say, look, you have a first team here, like the team that brought the new logos and they got paid on the first three months of spend, but they didn't control it. So isn't that a problem? That team was in charge of getting advertisers through the door that were a really good fit and that will be getting a lot of value from the product and hopefully with the means to spend. To give you an example, we had talking about the big payouts, the typical quota for an account executive was about $400,000 per quarter. And I still remember one of them brought E commerce player at the time unknown, but they got a lot of funding and they were trying to make a bigger splash in the business. That advertiser spent in the first three months, $15 million. So that was a huge paycheck for that account executive. If you manage to get the right customer through the door, you can make a lot of money.