Commissions for Subscription Services in Salesforce — Implementation Considerations

From the commissions’ standpoint, subscription services are substantially different from traditional ‘widget product’ sales.

Subscription commissions are typically based on:

Monthly Recurring Charge (MRC) on which a commission is paid for as long as service is in use (“residual”)
Non-recurring Charge (NRC) such as installation, paid only once (“one-time”)

Also, MRC may be changed or a new NRC may be generated during subscription lifetime due to the following events:

Event	Description
Change	Add-on or feature change affecting product MRC.
Re-Term/Re-Rate	Change of term and, usually the MRC.
Replace/Move	Replace one service with another (or move a service to a different location, e.g., data center in another region), which may generate uptick or downtick in MRC as well as a one-time NRC.
Service Request	One-off service requests such as configuration audit, equipment replacement with one-time NRCs.
Cancel	Service cancellation, subscription no longer active.

All of these might affect commissions, e.g., replace needs to take uptick/downtick into consideration, service cancellation probably indicates that a residual should no longer be paid, re-rate will most likely reduce the residual, etc.

Furthermore, bookings (on which commissions are usually paid) may not necessarily reflect actual orders, if changes are allowed during order delivery (e.g., quote was generated for three services of which one was canceled).

There are multiple commission packages for Salesforce. Most of them take user-specified data points as inputs and apply calculation rules.

One of the key challenges is to define these data points and make sure that they are available for calculations.

Sourcing commission data

A typical opportunity to order flow within Quote-To-Cash (QTC) can be visualized as follows:

Commissions data can be sourced from closed-won CRM opportunities, orders or services or a combination thereof. The following sections discuss each option in detail.

Opportunities

Opportunities are the easiest to use (as not all SF implementations use orders and services), but have the following limitations:

Orders may get canceled (partially or entirely), which will not be reflected in opportunities
Charges on orders may be changed during implementation (e.g., construction fees in telecommunications)
Once a service goes into service, opportunity will not track when the service is canceled (and residuals need to be discontinued) nor pricing changes/re-rates

It’s easy to notice that opportunities are not very useful once they have been closed. In fact, it is a good practice not to update them after closing to enable accurate comparison of what was ordered vs. what was actually delivered.

Another challenge is that opportunities and quotes (associated with opportunities) usually are able only to quote new services, not other types of operations (Nextian extends standard Salesforce quoting to support this functionality).

Orders

Orders are better since:

They capture order cancellations; typically, an order will contain a line item which can be individually canceled (e.g., 1 out of 5 MPLS locations)
Orders will typically capture additional non-recurring charges, such as construction

Orders still suffer from the same problem as opportunities — they are short-lived (i.e., end when service is delivered, they complete and should not be used again) and don’t capture what happens to services post-delivery.

Subscription services

Subscription services on the other hand:

Track recurring charges along with change history/re-rates
Typically, they will also have a list of past orders (from new to disconnect) along with any non-recurring charges

What does that mean?

To implement a well-functioning commissions system in Salesforce, some sort of order tracking (for non-recurring) and service management (for recurring charges) are needed.

These go well beyond simple opportunity customizations and typically require at least a partial quote-to-cash implementation (CPQ to service).

Calculating commissions

Since commission plans can significantly vary from business to business, and become complex (commission roll-ups, rates, tiers, caps, goals, adjustments, quotas, etc.), it is generally a good idea to use a specialized third-party package rather than develop commissions software in-house.

There are multiple commissions packages available for Salesforce or working with Salesforce such as QCommission or Xactly to name just two.

All commission systems work more or less as follows:

Pull data snapshot from source system(s) 
    → Convert to internal format 
      ("commission-able" events/transactions)
       → Apply calculation rules 
          → Produce statements

Therefore, from the Salesforce perspective, the most important thing is to ensure that all the data points are readily available, and the data is correct.

For example, Nextian does not contain commissions module. Instead, it provides additional data points on quotes, orders and services so it’s easy to plug any user-selected commissions systems into it.

Conclusions

The biggest challenge implementing commissions in Salesforce is ensuring that all data points are available and the data is correct.

Depending on commission plans, customizing opportunities may not be enough and orders and subscriptions data may be required.

We recommend taking the following approach:

Define commission plans
Make sure that all inputs/data points to calculate commissions and prepare statements are available
Select commissions package for implementation
Ask for a proof-of-concept from the vendor
Roll out in stages (e.g., per product or sales team)

Nextian is a vendor of Quote-to-Cash (QTC) software for cloud and communications helping providers accelerate growth and increase customer lifetime value.

Contact us today to find out how we can help you!

Commissions for Subscription Services in Salesforce — Implementation Considerations