A friend of mine asked about differences in customer acquisition cost (“CAC”) relative to new customer acquisition, upsell, and expansion. When I said there’s loads of material on why expansion CAC is less than new logo CAC with respect to marketing costs, he said what he was really interested in were differences in sales comp plans and their effect on CAC.
We narrowed our conversation down to the two comp plans of Account Executive, a role typically responsible for new customer acquisition, and Account Manager, a role typically responsible for upsell and expansion.
I’ve seen a handful of differences between AE & AM comp. Using an AE comp plan as a starting point, AM roles typically have:
- 30-50% of AE on-target earnings (OTE)
- 70-90% of AE quota
- Less-aggressive OTE split with 60-70% going to base
Then there are different ratios in the sales units – e.g. all the people supporting the different sales roles. The AE:SE ratio may be 2:1 or 3:1 while I’ve seen as high as 8:1 for AMs. AE Managers might have 4-6 AEs while AM Managers may have as many as 8-10 AMs. All of this has a major impact on the cost of doing business (inclusive of CAC).