Sales teams are often compensated based on revenue generation, but not all revenue contributes equally to a company’s bottom line. Some customers drive high-margin, long-term business, while others drain resources and provide low profitability. Yet, many organizations still incentivize all sales equally, leading to misaligned priorities and wasted effort on unprofitable accounts.
The solution? Customer stratification. By categorizing customers based on profitability, relationship longevity, and cost to serve, businesses can design an effective sales compensation strategy that rewards the right behaviors—driving profitable growth while maintaining sales motivation.
To understand the impact of customer stratification, let’s explore how it improves sales compensation strategy and how HR and sales leaders can implement this approach effectively.
What Is Customer Stratification in a Sales Compensation Strategy?
Customer stratification is the process of categorizing customers based on their financial and strategic value to the company. As a result, organizations can determine where sales teams should focus their time and effort to maximize profitability within their sales compensation strategy.
The Five Main Customer Segments
| Customer Type |
Profitability |
Relationship |
Cost to Serve |
Sales Strategy |
| Core |
High |
Long-term |
Low |
Increase loyalty and customer lifetime value |
| Opportunistic |
High |
Short-term |
Low |
Maximize sales volume, increase pricing |
| Focus |
Moderate-High |
Long-term |
Moderate |
Optimize service costs, maintain growth |
| Marginal |
Low |
Short-term |
High |
Convert to Core or reduce service effort |
| Service Drain |
Low |
Sustained but unprofitable |
High |
Minimize engagement or eliminate |
Each category presents a unique opportunity for sales teams, yet not all should be incentivized equally within a sales compensation strategy. Consequently, organizations must align their compensation structures accordingly.
Aligning Sales Compensation Strategy with Customer Segments
1. Prioritize Profitable Customers in Compensation Plans
A strong sales compensation strategy should reward sales reps for bringing in customers that contribute to long-term profitability. To align incentives with customer value, companies should consider the following:
- Higher commissions for selling to Core and Opportunistic customers who generate high profits.
- Bonuses for customer retention when sales teams expand Core relationships.
- Lower commission for Service Drain customers, discouraging reps from spending too much time on low-margin accounts.
2. Reward Relationship-Based Sales
Sales reps should be motivated to grow long-term customer value, not just close quick deals. To achieve this, companies can implement:
- Bonuses for multi-year contracts and long-term agreements.
- Incentives for increasing customer lifetime value, measured by repeat purchases or upsells.
- Higher payouts for expanding existing high-value accounts.
3. Encourage Profit-Driven Selling
Not all sales are created equal—some contribute more to margin and sustainable growth. Therefore, companies can steer sales behavior by implementing:
- Tiered commission rates: Higher rates for high-margin products, lower for low-margin items.
- SPIFs (Sales Performance Incentive Funds): Short-term incentives for selling high-value or strategic products.
- Profit-sharing elements: A portion of commission tied to deal profitability rather than just revenue.
4. Discourage Unprofitable Sales
Reps should be incentivized to close the right deals, not just chase volume. For this reason, compensation plans should include:
- Limited commission for high-cost, low-margin customers.
- Disincentives for excessive discounting that erodes margins.
- Account qualification requirements to ensure reps target the right customer segments.
Best Practices for Implementing a Sales Compensation Strategy with Customer Stratification
1. Use Data to Classify Customers
Leverage historical sales data, profitability analysis, and customer relationship metrics to categorize customers accurately. Additionally, finance and operations teams should collaborate to determine cost-to-serve and gross margin thresholds. As a result, companies can ensure they allocate sales efforts effectively.
2. Communicate Compensation Plan Changes Clearly
Sales reps need to understand why compensation plans are changing and how they benefit. Provide training and real-world examples to show how they can maximize earnings under the new model. Furthermore, clear communication reduces confusion and increases adoption.
3. Regularly Review and Adjust Compensation Plans
Market conditions and customer behavior change over time. Therefore, companies should review compensation structures annually and adjust incentives based on business priorities and profitability goals. In addition, conducting periodic assessments helps ensure alignment with evolving business needs.
4. Align Sales Compensation with Corporate Strategy
A sales compensation strategy should reflect the company’s long-term financial and strategic objectives. If the goal is profit growth, sales teams should be rewarded for selling high-margin products and retaining profitable customers. Ultimately, an aligned compensation plan ensures that sales efforts support overall business goals.
Final Thoughts
A well-structured sales compensation strategy shouldn’t just reward revenue—it should drive profitable, sustainable growth. By incorporating customer stratification into a sales compensation strategy, organizations can:
- Prioritize high-margin, long-term customers.
- Motivate sales teams to expand profitable relationships.
- Reduce effort spent on unprofitable accounts.
- Align sales strategy with business profitability goals.
As businesses continue to refine their sales models, implementing a strategic, profitability-focused sales compensation strategy will be essential for long-term success.
Want to learn more?
Discover how MorganHR can help your organization build a strategic, profitability-focused sales compensation strategy that keeps sales teams motivated while driving long-term success. Contact us today to explore customized solutions for your sales compensation strategy challenges.