Salesforce Tips for Multi-Year Renewal Agreements
- Review usage data to adjust licenses and avoid overpaying.
- Negotiate discounts based on long-term commitment.
- Include flexibility clauses for scaling up or down.
- Request a detailed breakdown of costs and services.
- Secure protection against future price increases.
- Clarify support levels for the agreement’s duration.
- Align the agreement with your business goals and growth plans.
Salesforce Tips for Multi-Year Renewal Agreements
1. Start Early and Build Your Strategy
Don’t wait until the last minute to plan your Salesforce renewal. Ideally, you should start preparing 6-12 months before the contract’s end date.
Early preparation gives you more negotiation leverage and ensures you’re not rushed into decisions.
Critical steps for early preparation:
- Review Current Usage: Understand what you’re using, how it’s utilized, and where you could optimize.
- Assess Contract Details: Determine the terms, including discounts, volume pricing, and escalator clauses (automatic yearly price increases).
- Define Business Needs: Identify what has changed since your initial contract. Are you scaling up or downsizing? Do you need additional Salesforce products?
Example: Suppose your organization adopted Salesforce three years ago when you were expanding rapidly. Things may have slowed today, and you might not need as many licenses. Reviewing this early allows you to adjust for efficiency before renewal.
2. Evaluate Product Usage and Shelfware
Salesforce products are not one-size-fits-all. It’s easy to end up with features you don’t use—referred to as shelfware. Before renewing, evaluate which products are being used and which add to your costs without value.
Steps to evaluate usage:
- Run User Reports: Identify which users are logging in and using the system and determine what features they are actively using.
- Check Feature Value: Not all paid features add value to everyone. Identify underutilized modules or features and reconsider them in your upcoming renewal.
Tips to avoid shelfware:
- Trim or Reallocate: If certain products are underutilized, negotiate to reduce their budget or reallocate them to more valuable features.
- Get Feedback: Talk to department heads about their specific needs. You may find that a product you’re paying for no longer aligns with the current strategy.
Example: Your marketing team may no longer use Marketing Cloud as much as they did initially. Knowing this, you could reduce the number of licenses or remove it from the renewal altogether.
3. Aim for Pricing Predictability
One of the main goals of a multi-year agreement should be to ensure pricing predictability. Salesforce tends to escalate pricing over time, and your objective is to avoid that.
How to manage pricing predictability:
- Negotiate Price Caps: Aim to cap annual price increases (e.g., no more than 3-5% per year).
- Secure Discounts: Request multi-year discounts in exchange for a longer commitment. More extensive upfront commitments generally allow you to ask for better rates.
- Lock-in Options: Salesforce might propose a discounted rate for a product bundle. Ensure the discount spans the entire contract period, not just the first year.
Example: If Salesforce wants to increase your costs by 7% annually, you could propose a maximum of 3%. That way, you’re not faced with an unexpected surge in cost during your second or third year.
4. Flexibility Clauses
Locking yourself into a multi-year deal could limit flexibility, especially if your business needs change unexpectedly. Make sure to negotiate for flexibility clauses.
Key flexibility clauses to consider:
- Downsize Rights: Negotiate the ability to reduce the number of licenses or scale back services after year one if needed. This is especially important if your business is in a fluctuating industry.
- Future Proofing: Ensure clauses are in place to accommodate future upgrades, changes, or product transitions without massive cost increases.
- Ramp-up/Ramp-down Models: Businesses often need time to implement and scale. Ask for a ramp-up model in which you only pay the total price once you fully utilize the system.
Example: Imagine a scenario where your business must cut back after year two. If you’ve negotiated a downsize clause, you could avoid paying for 50 licenses when you only need 30.
5. Understand What You’re Paying For
Salesforce pricing can be complex, with numerous line items and product bundles. It is vital to understand each cost and evaluate its necessity.
Consider these during renewal discussions:
- Breakdown of Costs: Ask for a clear breakdown of all services and features. This will help you identify unnecessary add-ons.
- Identify Critical vs. Optional Items: Certain features might be bundled, but you can always negotiate them separately if they’re not mission-critical.
Example: You could find out a “package deal” includes analytics features you don’t need. Understanding your line items could save thousands per year.
Read our Salesforce Negotiation Checklist.
6. Use Benchmarking for Leverage
Salesforce deals vary significantly from customer to customer. Conducting benchmarking is an excellent way to assess whether you’re getting a competitive rate.
Benchmarking tactics:
- Consult Peers: Ask other companies in your industry about their Salesforce terms to gauge whether you’re getting a fair deal.
- Use Third-Party Consultants: There are companies specializing in IT contract negotiation. They can often help negotiate better deals by leveraging pricing insights from multiple clients.
- Research Online: Look for Salesforce pricing information others have shared—even forums can be a good resource.
Example: A consultant might tell you that most companies negotiate a 25% discount for your specific number of licenses. If your offer is 10%, you know it’s time to push harder.
7. Highlight Your Commitment
Salesforce values committed clients who will stay long-term. Emphasizing your willingness to commit to a multi-year contract can give you leverage to secure better pricing.
Tips to secure better deals based on commitment:
- Multi-Year Discounts: Remind Salesforce of the multi-year commitment and negotiate discounts or fixed pricing.
- Future Spend: Discuss your company’s growth and potential need for expanded Salesforce use. Vendors tend to sweeten the deal when they see potential for larger future sales.
Example: By indicating that your organization plans to increase licenses as your business grows, you can often persuade Salesforce to offer better pricing and incentives.
8. Align with Business Goals
Your Salesforce renewal should directly align with your company’s business goals. Be clear about what you want Salesforce to accomplish for you in the next few years.
Questions to align with your business goals:
- What problems are we trying to solve? Is it sales tracking, customer engagement, marketing automation, or something else?
- Is the current product mix working for us? Consider adding or removing products to better support your evolving goals.
- Can we integrate with other tools better? Make sure Salesforce integrates well with the different tools you’re using. For instance, if your company uses Slack or other CRM systems, this should be a point of discussion in the renewal.
Example: If your company focuses on improved customer engagement in the coming years, it might make sense to add Service Cloud and renegotiate Sales Cloud costs to achieve a balanced contract.
9. Consider Incentives and ROI Guarantees
Salesforce may be willing to provide incentives to close a multi-year deal. You can ask for such perks to add more value to your investment.
Incentives to consider:
- Free Training or Certifications: Ask for free training sessions or employee certifications.
- Additional Licenses: If your contract value is high, Salesforce might offer additional licenses at no extra cost.
- Product Credits: You could also ask for product credits to experiment with other Salesforce solutions.
Example: If you plan to onboard more service reps in the coming months, you could ask for extra Service Cloud licenses during the renewal as an incentive, saving costs.
10. Leverage Q4 Pressure
Like most sales-driven companies, Salesforce is pressured to close deals in Q4 to meet revenue targets. Timing your negotiations around Salesforce’s fiscal year-end can give you additional leverage.
Strategies for Q4 negotiations:
- Be Patient: If you’re already in Q4, delay finalizing until Salesforce reps are pressured to meet their quotas.
- Push for Additional Discounts: Use this internal pressure to ask for last-minute concessions or discounts.
Example: Start your negotiations in late Q3 and extend into Q4, requesting an additional discount or improved terms as the pressure mounts on Salesforce to close the deal.
11. Negotiation Team and Alignment
Ensure that your company’s team handling the Salesforce renewal is well-prepared. Your team should include:
- IT & System Admins: They understand the technical aspects and know what is being used and what isn’t.
- Procurement Specialists: These professionals are crucial in helping drive cost efficiency.
- Business Leaders: They can provide insights on alignment with company goals and needs.
Example: During the negotiation, IT might highlight unused features, procurement can push for price adjustments, and business leaders can emphasize future expansion needs to get the best overall deal.
12. Document All Changes and Agreements
Once an agreement is reached, ensure that all negotiated changes are documented in the contract. Verbal promises mean little in software agreements.
Tips for proper documentation:
- Get Written Confirmation: Always ask for written confirmation of any negotiated terms.
- Check for Ambiguities: Look for vague terms that could be interpreted differently.
- Review Renewal Clauses: Ensure no surprises on renewal dates and that all terms align with the agreement.
Example: If Salesforce agrees to limit annual price increases to 3%, make sure it’s explicitly mentioned in the final written contract, with no vague wording like “at Salesforce’s discretion.”
13. Negotiate Support and Services Packages
Salesforce offers various support packages. Negotiating the right one for your needs is crucial, especially when considering a multi-year agreement.
Support and Services to negotiate:
- Premier Support: Depending on your organization’s needs, Premier Support can provide faster response times and a more comprehensive service level.
- Custom Training Programs: If your team requires specific training, negotiate for a customized training program to be included.
- Implementation Services: If you’re planning to add new Salesforce products or services during the renewal period, ensure you negotiate for implementation support.
Example: If your company plans to use a new Salesforce feature, include training and implementation support at no additional cost. This can save money and help ensure a smooth rollout.
14. Push for Innovation Commitments
With Salesforce’s regular updates and enhancements, you want to ensure you benefit from their latest innovations without additional cost surprises. When negotiating your multi-year contract, push for a commitment to provide access to Salesforce’s new features and upgrades.
Innovation considerations:
- Access to New Releases: Ensure your contract includes clauses that give you access to Salesforce’s new releases and features as they become available.
- No Additional Charges for Upgrades: Ensure there’s no extra charge for essential system upgrades.
- Beta Testing Participation: Get an agreement that allows your company to participate in beta tests for upcoming features. This can provide early insights and advantages.
Example: If Salesforce rolls out an AI-based analytics feature in year two of your contract, ensure your agreement allows you access without added costs.
15. Negotiate Payment Terms
While overall cost is always a key focus, payment terms can significantly impact your company’s cash flow. Be sure to negotiate terms that suit your financial cycles.
Payment terms to consider:
- Deferred Payment: Negotiate for deferred payment terms, which will allow your company to begin using Salesforce without immediate financial outlay.
- Quarterly vs. Annual Payments: Salesforce typically prefers annual payments, but if quarterly payments work better for your company’s cash flow, negotiate for this flexibility.
- Incentives for Early Payment: Sometimes, paying upfront can lead to additional discounts. If you can manage it, offer upfront payment in exchange for a discount.
Example: If Salesforce offers a 5% discount on upfront annual payment, calculate if this fits well with your cash flow plans. If cash flow is tight, a deferred payment might work better for short-term savings.
FAQ: Salesforce Tips for Multi-Year Renewal Agreements
What is the most important factor when negotiating a Salesforce renewal agreement?
The most crucial factor is aligning the agreement with your current and future business needs. This includes ensuring scalability, cost control, and access to the most important features to your operations.
How can I ensure I get the best pricing in a multi-year agreement?
Start by researching Salesforce’s pricing models and analyzing your usage data. Highlight your long-term commitment to Salesforce, as multi-year deals often qualify for volume discounts or additional incentives like free add-ons or premium support.
What role does usage data play in renewals?
Usage data helps you determine whether your current licenses are being fully utilized. For instance, if certain licenses or features are not being adopted, you can negotiate to remove or downgrade them in the new agreement, saving money.
Can I renegotiate mid-contract if my business needs to change?
Yes, you can include terms in your agreement that allow for periodic reviews or adjustments. These terms can provide flexibility to add, remove, or modify licenses as your organization evolves.
How do I handle price increases in a multi-year agreement?
Negotiate a price lock or cap for the duration of the contract. Salesforce typically allows annual price escalations, but you can request limits on these increases to maintain predictable costs.
What are key clauses to include in a Salesforce renewal agreement?
Key clauses should include price protections, flexibility for scaling up or down, clear service level agreements (SLAs), and early termination or renegotiation provisions. These clauses help safeguard your interests over the contract term.
How should I approach support terms in the agreement?
Ensure the contract clearly defines support levels, response times, and escalation procedures. If premium support is critical to your operations, negotiate for it as part of the deal rather than a separate cost.
What’s the best way to manage unused licenses?
Include provisions for reallocating or canceling unused licenses without penalties. For example, if you overestimated your team size, you shouldn’t have to pay for licenses you don’t need.
How do I prepare for renewal negotiations?
Start at least six months in advance. Review your current contract, assess your usage data, and identify areas for improvement. Research alternative solutions to use as leverage during negotiations.
Should I include future platform updates in my contract?
Ensure that your agreement includes access to new features, updates, or innovations Salesforce releases during your contract period. This avoids paying extra for upgrades later.
What can I do if Salesforce proposes terms that don’t meet my needs?
Push back and negotiate. Clearly outline your requirements and use competitors’ pricing and terms as leverage. Salesforce is typically willing to accommodate reasonable requests to retain long-term customers.
How can I avoid overcommitting in a multi-year agreement?
Focus on your current needs and growth projections. Avoid locking in unnecessary features or excessive licenses, as these can lead to wasted spending over time.
What happens if my business downsizes during a multi-year agreement?
If downsizing is possible, negotiate terms that allow for reducing licenses without penalties. Having an exit or renegotiation clause can protect in these scenarios.
How do I ensure my team gets value from the investment?
Provide training and resources to help your team fully utilize Salesforce’s features. Negotiate for onboarding support or additional training sessions as part of your renewal deal.
Are multi-year agreements better than yearly renewals?
Multi-year agreements can offer cost savings and stability but require careful planning to align with your business strategy. Yearly renewals provide more flexibility but often come at a higher overall cost.
