Introduction to Salesforce Discount Negotiation

Introduction to Salesforce Discount Negotiation

• Understand Salesforce pricing structure.
• Focus on contract size and volume for discounts.
• Build strong relationships with Salesforce representatives.
• Time your negotiations around fiscal quarters.
• Show alternative vendor quotes to strengthen leverage.

Why Negotiating Salesforce Licenses is Important

Salesforce licensing costs can be a significant part of a company’s IT budget. Negotiating a discount can lead to substantial savings, which can then be used to fund other essential initiatives within your business.

Here’s why it’s crucial:

• Cost Control: Salesforce prices tend to increase over time. Proper negotiation can help mitigate these increases.
• Scalable Solutions: As your company grows, so will your need for Salesforce licenses. Negotiating now could save you a lot of money in the long run.
• Better ROI: By securing the best possible rate, you will maximize the value you derive from Salesforce compared to what you pay.

Critical Factors Affecting Salesforce Discount Negotiation

When it comes to negotiating discounts, Salesforce has specific considerations that determine how much flexibility they are willing to give:

1. Customer Size and Market Value
   • Larger Companies: Salesforce may offer better discounts if you represent a larger organization. Big companies mean bigger deals, which Salesforce is willing to accommodate.
   • Small to Medium Businesses (SMBs): You might find it challenging to get more significant discounts if you’re a smaller company, but there are still ways to get some benefits.
2. Deal Volume and Length of Contract
   • More extended Contracts: Salesforce prefers longer commitments, often providing more significant discounts for 3-year or 5-year deals.
   • Bundle Purchases: Bundling different Salesforce products, such as Sales Cloud, Marketing Cloud, or Service Cloud, can often increase the chances of a discount.
3. Timing
   • End of Salesforce’s Fiscal Quarter: The timing of your negotiation can make a significant difference. Salesforce sales teams have targets to meet, and you can get better deals if you approach them towards the end of the quarter.
   • End of Fiscal Year: The end of their fiscal year, typically January 31, is when Salesforce is most motivated to close deals, and discounts can be steeper.
4. Customer Relationship
   • Salesforce tends to give better deals to customers who demonstrate long-term potential. Building a good relationship with your Account Executive (AE) can secure a favorable discount.

Step-by-Step Approach to Salesforce Discount Negotiation

1. Preparation is Everything

Before approaching Salesforce, gather your data and set clear objectives.

• Understand Your Needs: Determine precisely what Salesforce products and licenses you need. Know if you require Sales Cloud, Service Cloud, Marketing Cloud, or a combination of products.
• Analyze User Requirements: Understand how many licenses you need and at which levels. Salesforce offers various types of licenses (full licenses, platform licenses, etc.), and knowing the mix that suits your business is essential.
• Set a Budget: Knowing how much you can realistically spend will allow you to determine whether the discounts you receive are enough. Always go into negotiations with a clear maximum price you are willing to pay.

2. Benchmark Pricing

• Leverage Industry Insights: Use resources like G2, Gartner, or peer companies to understand the market rates.
• Talk to Other Customers: If possible, network with other Salesforce customers to understand what discounts they managed to get. This can give you a clearer idea of what’s possible.
• Understand Salesforce’s Standard Pricing: Salesforce pricing is often opaque. Understanding the list price can be critical to determining how much of a discount you are getting. Always request detailed pricing from your Account Executive, including a breakdown of all potential charges.

3. Leverage Competition

Salesforce has competition in the market – Microsoft Dynamics, HubSpot, and Oracle are some examples. Make it clear to Salesforce that you are evaluating other options. It’s not uncommon for Salesforce to offer better rates when they know there’s a risk of losing you to a competitor.

• Use Trial Accounts: Set up trial accounts or request demos from competitors to show Salesforce you are serious about considering alternatives. A little competition can go a long way.
• Highlight Feature Comparisons: Point out specific features offered by competitors that Salesforce either lacks or charges extra for. This can create pressure for Salesforce to adjust its pricing.

4. Engage with Your Account Executive

The Account Executive (AE) is your main point of contact. Building a good relationship with them is critical.

• Be Transparent: Tell them about your requirements, challenges, and budget. The more they understand your needs, the more likely they will tailor a deal for you.
• Understand Their Motivation: Salesforce AEs work on quarterly quotas. Knowing this can help you time negotiations when they’re most eager to close a deal.
• Negotiate with Multiple Teams: Involve Salesforce’s Solution Engineers, Product Specialists, and your Account Executive. They can add valuable perspectives, leading to better pricing or additional features.

5. Create Negotiation Leverage

Here are ways to create leverage:

• Use Multi-Year Commitments: Agreeing to a 3-year or 5-year contract is attractive for Salesforce and can help you secure a more significant discount.
• Bundle Products: Negotiating for multiple products (e.g., Sales Cloud + Service Cloud) can often result in more fantastic discounts.
• Mention Future Growth: If your company plans to grow, mention your scaling requirements. In exchange for a potentially more significant purchase later, Salesforce may offer you lower prices now.
• Showcase Reference Potential: Offer to be a reference customer or provide a case study. Salesforce values customers willing to be advocates, which can often be used as leverage for a better price.

6. Push for Added Value

Discounts are not the only way to save money. Consider negotiating for added value.

• Free Training and Support: Salesforce training can be expensive. Ask for free training sessions for your employees as part of the deal.
• Free Access to Add-ons: If certain add-ons or features would enhance your use of Salesforce, request access to them for free or at a reduced cost.
• Implementation Credits: Salesforce implementations can be costly. Negotiate credits for the professional services that Salesforce offers.

Common Salesforce Negotiation Strategies

1. Ask for a Volume Discount

• Example: If you need 100 licenses, ask for a discount based on volume. Let them know the number could grow over time, making your account even more valuable to Salesforce.
• Consider Tiered Discounts: Ask for a tiered discount structure. For example, a 15% discount for the first 100 licenses would increase to 20% if you purchase over 200.

2. Negotiate for Price Protection

Salesforce pricing typically increases annually. Ensure that you negotiate price protection clauses that limit the percentage increase year over year.

• Example: You could agree to a maximum annual price increase of 3%, regardless of their standard hikes.
• Multi-Year Price Lock: Push for a price lock for at least 2-3 years, especially if you make a significant initial commitment. Price increases can quickly erode any upfront discount.

3. Secure Renewal Terms Early

Salesforce renewal costs are often an unpleasant surprise for customers. It’s best to negotiate favorable renewal terms during the initial contract negotiation.

• For example, ask for fixed renewal pricing for the next 3-5 years during your first deal.
• Negotiate Auto-Renewal Terms: Ensure that auto-renewal clauses are removed or modified to require active consent from your side. This prevents being stuck with unfavorable pricing.

4. Be Prepared to Walk Away

If Salesforce refuses to give you the discount you’re aiming for, be ready to explore other solutions. Letting them know you’re not afraid to leave can be a strong negotiation tactic.

• Engage with Competitors: Actively engage with competitive CRM providers like Microsoft Dynamics or Zoho. Having an active quote from a competitor can strengthen your bargaining position.
• Delay Your Purchase: If possible, delay your purchase or renewal. This shows Salesforce that you are not urgently dependent on them, giving you a stronger negotiation hand.

5. Request Trial or Pilot Periods

Often, getting a trial or pilot period can be extremely helpful in negotiations. If Salesforce sees that your business is seriously evaluating the product with the potential for large-scale adoption, they may be more inclined to provide discounts to close the deal.

• Trial as Leverage: Use a free trial to gain buy-in from your organization and demonstrate value, strengthening your position when discussing final pricing.

Mistakes to Avoid in Salesforce Negotiations

1. Not Understanding License Types

Salesforce has various license types, including full, platform, and even limited-use licenses. Ensure you know what each type provides so you don’t end up paying for features you don’t need.

• Research All License Options: Salesforce’s licensing structure includes Sales Cloud, Service Cloud, Platform licenses, and more. Variations include ‘light’ or ‘partial’ licenses. Choosing the wrong mix can result in significant overpaying.
• Clarify Usage Requirements: If some users don’t need full CRM functionality, consider platform or lower-level licenses.

2. Ignoring Additional Costs

Salesforce often involves hidden costs like support, data storage, or add-ons.

• Example: If you exceed your data storage limits, you may be billed heavily for extra storage. Be sure to factor these into your negotiation.
• Support Costs: Salesforce support comes in different tiers (Standard, Premier, and Signature). Understand what each tier provides, and factor this into your negotiation. Sometimes, you can negotiate a higher level of support at a lower cost.

3. Signing Long Contracts Without Flexibility

Long contracts can help you get discounts, but they can also lock you into inflexible terms. Ensure your contract includes options for scaling or adding more licenses at the same discounted rate.

• Example: If your company proliferates, you might want more licenses. Ensure you have pre-negotiated prices for such expansions.
• Negotiate Downgrade Rights: Flexibility isn’t just about scaling up. Ensure you can downgrade or reduce your license counts if your needs change. Being locked into a high-volume contract without flexibility can be costly if your usage reduces.

4. Overlooking the Importance of Data Residency and Compliance

Different countries have different laws regarding data residency and compliance. Ignoring these can result in unexpected costs or even fines.

• Example: If your data must be stored within the EU, and Salesforce’s standard solution doesn’t cover this, you may face extra costs for a specialized solution. Ensure that your contract covers such needs to avoid additional charges later.

FAQ: Salesforce Discount Negotiation

How can businesses approach Salesforce discount negotiations effectively?
Start by evaluating your business’s specific needs and identifying the Salesforce products that best align with your goals. Enter negotiations with a clear understanding of Salesforce’s pricing tiers, licensing options, and potential bundling opportunities.

Does Salesforce have fixed discount policies?
Salesforce does not have a one-size-fits-all discount policy. Discounts depend on factors like your organization’s size, the number of licenses, product bundles, and the time of year during Salesforce’s fiscal calendar.

Why is timing important in Salesforce negotiations?
Salesforce operates on a fiscal calendar, and sales teams are often incentivized to close deals near the end of quarters or fiscal years. Negotiating during these times can lead to more favorable offers.

What role does a multi-year contract play in securing discounts?
A multi-year agreement often increases Salesforce’s willingness to offer discounts because it guarantees longer-term revenue. Before opting for this strategy, ensure your business can commit to the terms.

Are there risks in bundling multiple Salesforce products?
Bundling products can provide significant discounts, but it may also lead to purchasing unnecessary features or licenses. Carefully evaluate whether all bundled components are essential for your operations.

How do competitive quotes from other vendors help in negotiations?
Presenting quotes from competing vendors, such as HubSpot or Microsoft Dynamics, gives you leverage. It signals to Salesforce that you are considering alternatives and motivates them to offer better terms.

What are “shelfware” issues, and how do they affect Salesforce deals?
Shelfware refers to unused licenses or features bought during the negotiation process. Overestimating your needs to secure discounts can lead to wasted resources and unnecessary costs.

Can small businesses negotiate Salesforce discounts?
Yes, small businesses can negotiate discounts, though they may not be as substantial as those offered to larger enterprises. Highlighting growth potential or willingness to expand your use of Salesforce products can strengthen your position.

How do renewal contracts impact Salesforce discount opportunities?
Renewals are an excellent time to renegotiate terms. If certain features or licenses went unused during the initial contract, you can request adjustments or discounts based on actual usage.

What is the role of usage reports in Salesforce negotiations?
Usage reports demonstrate how effectively you’ve utilized Salesforce tools. They provide a clear picture of your needs, which can help you avoid overpaying for unused features in future contracts.

Is it beneficial to involve a third-party consultant in Salesforce negotiations?
Experienced consultants can help assess your requirements, evaluate the fairness of Salesforce’s offer, and ensure you secure the best possible deal. Their expertise is beneficial for complex or large-scale contracts.

Does Salesforce provide special discounts for specific industries?
Salesforce offers tailored pricing for industries like education, non-profits, and healthcare. For example, Salesforce.org provides reduced pricing and specific tools for non-profit organizations.

What happens if the business needs to change mid-contract?
If your requirements evolve significantly, you may be able to renegotiate certain aspects of the agreement, like adding new licenses or adjusting product usage. However, mid-contract renegotiations require strong justification.

How does Salesforce handle discounts for global organizations?
Global companies often receive custom pricing based on regional needs and operations. During negotiations, discussing regional support, local compliance requirements, and currency considerations is essential.

Can payment terms influence Salesforce discount offers?
Agreeing to upfront or specific payment schedules can sometimes result in additional discounts. Discuss payment flexibility to find options that benefit both parties.