What is usage-based commission?
Usage-based commission is commission calculated on what the customer actually uses and pays for, such as per user, transaction, shipment or gigabyte, instead of on the contract value in the agreement. It suits companies with usage-based pricing, where revenue is only known once the customer has used the product.
With usage-based pricing, the contract value at signature says little about what the customer ends up paying. That is why it can make sense to move the commission basis from signature to invoiced usage.
Common models
| Model | How it works | Advantage |
|---|---|---|
| Commission on committed minimum | Commission at signature on the amount the customer has committed to | Fast payout and simple calculation |
| Commission on invoiced usage for a period | For example 10% of invoiced usage for the first 12 months | Rewards customers who actually use the product |
| Minimum plus usage above minimum | Commission on the committed minimum at signature, and on usage above it when invoiced | Balances fast payout with real value |
The second model resembles residual commission, but the amount moves with usage instead of following a fixed subscription.
Example
A customer commits to a minimum of $1,500 a month. The rep earns 10% of invoiced usage for the first 12 months.
| Month | Invoiced usage | Commission (10%) |
|---|---|---|
| Month 1 | $1,500 | $150 |
| Month 2 | $1,800 | $180 |
| Month 3 | $2,000 | $200 |
In month 3 the rep earns $2,000 × 10% = $200. That is $50 more than commission on the minimum alone.
Challenges
- Hard to predict: the rep does not know up front what the deal will pay. Show commission continuously so the rep can follow it.
- Delayed payout: commission can only be calculated once usage has been invoiced.
- Who owns the growth? Does usage grow because the customer grows, or because an account manager worked for it? Decide when usage growth counts as expansion.
- Fewer clawbacks: because commission follows invoiced usage, there is less need for a clawback when the customer uses less.
FAQ
What is usage-based commission?
Commission calculated on the customer's actual usage, for example per user or transaction, instead of on the contract value that was signed.
How do you set quotas with usage-based pricing?
One option is to set the quota in committed minimum or in invoiced revenue for a period. What matters most is that quota and commission use the same basis.
What if the customer uses less than the minimum?
It depends on the plan. If commission is calculated on the committed minimum and the customer pays the minimum regardless, commission is unaffected. If it is calculated on actual usage, it falls.
Usage-based commission in Prowi
Prowi calculates commission live from CRM and invoice data. For example, Prowi reads invoices from e-conomic and invoice lines from Fenerum, so commission can follow what the customer is actually invoiced, and reps see the amount in the mobile app. Book a demo.
In Prowi
Every term on this page is a rule you can write into a commission model in Prowi. The model reads the deal from HubSpot the second it closes, applies the rule, and the rep sees the result on their phone before the day is over.