Part of negotiating a good contract is, of course, getting a good price. Price negotiations are presented here in a separate section because they are very important. Discounts are Meaningless"Save 50%." Is that a good deal? Yes, if the pre-discount price is reasonable and customary. No, if the pre-discount price is unknown or irrelevant. Since you typically don't have access to the vendor's price list (and if you think you do, it's time to remember the miracles of desktop publishing ” anyone can create a price list these days), discount levels are meaningless. Forget the discounts: focus on the net price. Use Good Old CompetitionIf you are negotiating prices, you've fallen in love with a particular tool, right? I have yet to experience a CRM purchase where there is not a clear differentiator between candidate #1 and candidate #2. In other words, CRM decisions are rarely based purely on financial considerations. Even if candidate #2 is a big step down from candidate #1, make sure you keep it alive enough to give you a firm quote. Share the interesting tidbits of that quote with your preferred vendor to activate some competition. For instance, if candidate #2 is throwing in the customer portal for free, inspire candidate #1 to do the same. Understand the Sales Rep's CompensationSales reps are always compensated on license sales, often on sales of implementation services (but sometimes at a lower rate) and sometimes on the first-year support fees (often at a lower rate). They always have a license sales quota, but that's not always true for services. Most will be flexible in proportion to their compensation. Play the ClockCRM vendors, like other enterprise software vendors , are known to be much more flexible around the end of their fiscal quarters , and even more at the end of their fiscal year. While you may not be able to schedule your purchases so precisely, it doesn't hurt to try. This is even more true for large purchases. If you are planning a large purchase, you really should schedule it for the end of a quarter. It could mean an additional 10% discount, or more. Negotiate Now, Buy LaterDoes it make sense to purchase licenses before you need them? It might. It's a matter of balancing two opposite facts: larger purchases get bigger discounts, but maintenance is usually charged for all licenses from day one (we'll revisit the latter below). If you anticipate needing licenses for additional products or additional users within a year to eighteen months, it's probably cheaper to purchase them right away to get a better price. But if future purchases are uncertain or may occur in more than eighteen months, it's usually better to make them when needed rather than incurring the maintenance fees. You can go for the best of both worlds by negotiating the price of add-on purchases within the contract. It's best to agree on a specific price for add-on purchases, for instance to stay with an established per- user price for a given timeframe. For distant purchases, or purchases of future products that are not yet priced, the best you can do is to get some level of discount. Since price lists are not published you'll have to trust the vendor to apply the discount, but it's better than nothing. Site LicensesFor large purchases, or purchases that will grow large over time, you may want to negotiate a site license that gives you the right to use all the vendor's products for any number of users. There's typically no price list for site licenses so plan for a long (but usually fruitful) negotiation. Make sure you understand what products are covered under the agreement. The vendor is unlikely to give away all future products but should be able to offer reasonable guarantees if products are renamed or discontinued. Focus on Maintenance and SupportIn the long run, support and maintenance fees can be higher than the cost of the licenses themselves . Just do the math: if the support fee is 20% of the license fee, in five years you will have paid more in support than in licenses. (If you must consider the time value of money, please whip out your spreadsheet and add some reasonable inflation number to the support fees ”you will find that your sophisticated computations yield a result that is awfully close to five years). Therefore, it pays to be very clear about support pricing. Ask the following questions:
Pay LateNo, I'm not suggesting you be late on your payments, but rather that you negotiate extended payment terms. For large purchases, you should be successful, although you should expect to pay at fixed dates rather than dates linked to your successful implementation or deployment of the tool, as discussed above. Odds and EndsThe big-ticket items are described above, but there are some areas where you can get some leverage, usually without much of a fight: training credits, membership to the user group , and executive sponsors. Vendors, especially the smaller ones, often throw in some free training to sweeten the deal. Make sure that you can actually use the training. For instance if the free training is for vendor-site classes and requires extensive travel you may find that a fee-based class at your site is actually cheaper (and, unfortunately for you, the training credits won't transfer over to training at your site). Also check the waiting lists. Often free training is available only on a space-available basis, which may translates to not in this lifetime. Finally, check on expiration dates. Complimentary user group memberships may be negotiable if the user group is controlled by the vendor. Check to see whether this includes registration to the meetings. You will most likely have to pay for travel expenses. And then there are the executive sponsors. An executive sponsor is an executive who is assigned to maintain a good relationship with your organization. Beyond that no one really knows what an executive sponsor does (but it sounds good, doesn't it?). Ask for details. It's never a bad thing to have a good rolodex including someone you can call if you run into trouble. Take the executive sponsorship but don't expect much from it, and certainly don't give up on other important negotiation points because you have an executive sponsor. If you have a choice, I recommend selecting someone as high as possible in the hierarchy for the maximum amount of leverage. I would also pick someone based at headquarters since that's where the action is with escalated issues. Are Used-Car Buying Techniques Worthwhile?Some people think that hardball negotiation is best. Ask for the world, they say, be ruthless , and you'll get the best deal. While such tactics work well when buying used cars , I'd stay away from them when buying a CRM system, especially for a large purchase. For starters, an overly tough negotiation strategy may prod the vendor into a similar behavior, perhaps fostering unreasonably stringent terms in areas of the contract that you are not focusing on. More importantly, by squeezing out the last drop you may alienate the vendor when in fact you need a build a strong partnership for a long time. Don't destroy the goodwill that will get you responsive , cheerful help during the implementation and for the life of the support contract, in ways that cannot be regulated in a contract. And finally, vendors who are willing to give in to harsh demands may be desperate. If the vendor says yes to everything, will it stay in business for the long term ? |