Why refusing to pay for customer retention always backfires

By Phil Whitebloom, Founder of BeenThere Consulting Service

It Never Goes Well

Just this past week, I heard from a seasoned salesperson whose company kicked off the new fiscal year with an abrupt announcement: commissions would no longer be paid on renewals, expansion, or new sales to existing customers. No discussion. No real rationale. Just a decision.

I have seen this before. I have witnessed it, managed through it, and even been threatened with it over the course of my career in sales and sales leadership.

It never goes well.

Why an Executive Makes This Decision

There are real factors that create an environment where this can look like a winning solution.

Selling time is finite. When new customer acquisition slows, leadership may believe salespeople are spending too much time with customers they already know instead of creating new opportunities. Shifting incentives toward new logos can feel like a way to refocus effort.

There is also the belief that existing customers are more predictable. Renewals, upsells, replacements, and adjacent product or service sales can feel easier or even expected. From that perspective, paying commission on those sales may seem unnecessary.

Then there is margin pressure. Costs rise. Revenue feels tighter. Removing commissions not only on renewals, but on any new sales to existing customers, can appear to be a fast way to retain more profit.

These decisions do not come from bad intent. They come from pressure.

What This Is Not About

If your business only makes one-time, transactional sales where customers will never buy again, never renew, never expand, and never refer anyone, then this conversation is irrelevant.

That is not what we are talking about here.

We are talking about businesses built on ongoing services, renewals, service contracts, replacement cycles, additional products, adjacent solutions, and long-term customer relationships. We are also talking about customers who can become powerful referral sources, or quietly disappear when attention fades.

So Why Is This a Flawed Decision?

Because it breaks the mechanics that create predictable growth.

Any sale that requires a salesperson also creates a relationship. That relationship carries trust, context, and continuity. When you remove incentives for salespeople to stay engaged after the initial sale, attention drops by design. Conversations stop. Needs go unnoticed.

The assumption that existing customers are automatic buyers is also false. Renewals are earned. Upsells happen because someone asks the right questions. New solutions are sold because someone understands what has changed inside the customer’s business. When no one is rewarded for doing that work, it simply does not happen.

This decision also opens the door to competitors. Customers who feel less valued rarely complain. They explore options. Competitors are more than willing to step in, not only to sell something new, but often to replace what you have already sold.

And finally, this decision damages morale and retention among strong salespeople. When income potential is capped and relationships are devalued, top performers start looking elsewhere. Replacing them costs time, money, and momentum, and it almost always creates more revenue risk than the commissions leadership was trying to save. Just as importantly, it removes the strongest relationship between the customer and your company, the trusted salesperson who earned the business in the first place.

Strengthening your compensation program to match the real needs of your business is far more effective than cutting it.

Well-designed compensation plans align behavior with outcomes. They motivate new customer acquisition, reward customer retention, protect existing

relationships, and retain top sales talent. Cutting commissions may feel like control in the moment, but it often creates hidden costs that show up later as lost revenue, lost customers, and lost people.

Smart growth comes from alignment, not reduction.

So, What Do You Do Instead?

This is usually where the executive asks the right question.

All right. I still have these problems. What do I do now?

The answer is not choosing between new customer acquisition and customer retention. A properly designed, motivational compensation plan can do both. It can reward new customers, expansion within existing accounts, renewals, and long-term relationship building at the same time.

This is not theoretical. It is absolutely doable.

When done correctly, it creates a win-win-win.

A win for your customers.

A win for your salespeople.

A win for your company.

The challenge is that designing these plans well almost always requires an outside perspective. Compensation plans are powerful tools. Small design errors create big downstream problems. The longer this goes unaddressed, the more expensive it becomes to fix.

I have been doing this work for decades. I have successfully created compensation programs that motivate growth, protect relationships, retain top sales talent, and remain cost-effective. When aligned correctly, these plans become growth engines, not expense lines.

These problems do not fix themselves. You can put your business on a clear path to grow and succeed now, or you can stay on the current path, watch the results unfold, and make the call later, after the damage has already been done.

Final Thought and Next Step

Customer retention does not break because customers suddenly become disloyal. It breaks when attention fades, relationships weaken, and incentives quietly change behavior.

Compensation plans do not just pay people. They signal what matters.

When retention, renewals, expansion, and relationship management are no longer rewarded, growth slows, customers drift, and strong salespeople start looking elsewhere. None of this happens overnight. It happens predictably.

This is not a small issue. It is one of the most common and damaging decisions I see in sales organizations.

It is also one of the reasons executives call me.

When compensation aligns with how your business actually grows, results follow.

That is why people call me.

Contact Information:

Phil Whitebloom

🏢Founder, BeenThere Consulting Services

📩 phil@beentherecs.com

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