Reviewing Salesforce Renewal Terms and Rate Increases
- Check contract renewal dates and any associated terms.
- Review rate increase clauses and their conditions.
- Compare new rates with market averages and competitors.
- Confirm whether notice of rate increases complies with policy.
- Negotiate if rate increases seem unreasonable or unexpected.
Salesforce Renewal Terms and Rate Increases
1. Renewal Timeline
Salesforce renewals aren’t something to tackle at the last minute. Here’s why paying attention to the timeline matters:
- Notification Period: Salesforce usually notifies you about renewal 90 days before the contract ends. This window allows you to review your licensing, negotiate terms, and address changes.
- Preparation Time: Ideally, start preparing for your renewal 4 to 6 months in advance. The early bird approach gives you time to gather data and understand your options.
- Salesforce Deadlines: Salesforce’s end-of-quarter deadlines can create urgency. They often incentivize their teams to close renewals before the end of the fiscal quarter, meaning you can leverage timing for better deals.
Example: If your contract expires in March, don’t wait until January to think about it. Start analyzing your usage and planning in October or earlier.
2. Evaluating Current Usage and Requirements
A crucial step in reviewing renewal terms is taking a clear-eyed look at your current Salesforce usage:
- Active Licenses vs. Usage: Are you using all the licenses you’re paying for? Review each license type to check how many are genuinely needed.
- Example: You may be paying for 150 Sales Cloud licenses, but only 120 are actively used, with 30 remaining idle.
- Feature Utilization: Determine whether your team is using all Salesforce features. This might involve evaluating whether you need full-featured licenses or can switch to something less costly.
- Unused Add-ons: Salesforce offers several add-ons that might have been bundled during the initial contract. Evaluate each one:
- Example: Features like Pardot or High-Velocity Sales might sound helpful, but if you don’t fully utilize them, they add to your costs.
3. Identifying Rate Increases
Salesforce rate increases are expected but often go unnoticed until renewal. Here’s how to stay ahead:
- Understand Standard Increases: Salesforce typically enforces a 5-10% increase on annual contracts. Ensure you know what was stated in your original contract about rate hikes.
- Track Historical Increases: If you’ve been with Salesforce for a while, compile the previous rate hikes you’ve experienced. Use this to question the validity of a new increase.
- Question New Increases: If the rate increase seems out of line, challenge it. Salesforce is often willing to negotiate, particularly for long-term customers.
Example: You received a renewal offer with an 8% increase. If you’ve only seen 5% increases in previous years, this gives you leverage to negotiate it back down.
4. Leveraging Your Relationship with Salesforce
Relationships are crucial when dealing with Salesforce:
- Customer Success Manager (CSM): Your CSM is a valuable ally. They can advocate for you internally and help justify any discounts or changes.
- Account Executive (AE): Account Executives are motivated by renewals as they count towards their targets. Find out what incentives they have and leverage that during negotiations.
- Escalate if Needed: If you don’t get anywhere with your AE or CSM, escalate to their manager or the regional director. Higher-ups often have more leeway.
Example: Let’s say you’ve had a longstanding relationship with your AE, and they’re willing to extend a discount to keep your business. This could mean keeping your rate increase to a minimum or getting additional licenses for free.
5. Negotiation Tactics for Renewal and Rate Increases
Negotiating with Salesforce can be challenging but not impossible. Here are some tips to help:
- Leverage Market Alternatives: Salesforce faces intense competition, including HubSpot, Microsoft Dynamics 365, and Zoho CRM. Letting Salesforce know you are considering alternatives can give you a significant bargaining chip.
- Bundle for Savings: If you’re using multiple Salesforce products (e.g., Sales Cloud, Service Cloud), bundling can often lead to a discount.
- Multi-year Contracts: Committing to a longer contract can sometimes help reduce annual increases, though it ties you in for a longer period.
Example: Mentioning that you’re evaluating HubSpot might push your AE to offer a more significant discount to keep you from leaving Salesforce.
Read about common pitfalls in Salesforce renewals.
6. Be Clear on Terms: Hidden Fees and Legal Language
When reviewing your Salesforce renewal, it’s crucial to understand the terms clearly. Salesforce contracts are known for having some sneaky details:
- Auto-Renewals: Many Salesforce contracts include auto-renewal clauses. Make sure you know if and when these apply.
- Overage Fees: Understand any potential overage fees for exceeding API calls or data limits.
- Usage Caps: Some Salesforce licenses have usage caps or limits on certain features, like API call quotas or data storage. If you’re not careful, these could lead to costly overages.
- Discount Clauses: Watch out for discounts in the initial term that disappear during renewal unless you explicitly negotiate to keep them.
Example: Your initial three-year contract included a 20% discount, but it’s not automatically renewed. Salesforce might let this lapse unless you catch it.
7. Evaluating Changes in Your Organization
Before renewing, consider how your business has changed:
- Team Size: Have you expanded or shrunk your team? This directly affects how many licenses you need.
- New Departments: A new team could benefit from Salesforce, or a different team no longer needs access.
- Evolving Business Needs: Maybe you no longer need the Marketing Cloud but need to focus more on the Service Cloud. Ensure your licensing reflects these needs.
Example: If your sales department grew by 25% last year, it might make sense to add more licenses—but make sure they’re at a negotiated rate.
8. Requesting a Detailed Usage Report
You have the right to know how you are using Salesforce resources. Requesting a detailed usage report helps in:
- Identifying Gaps: Are all licenses being used to their fullest?
- Spotting Overuse: Are some features being overused, leading to unexpected costs? For example, frequently exceeding API limits could indicate a need for additional integration solutions.
- Adjusting User Roles: Understand which roles are not providing value. A user with full access could be downgraded to a more economical license.
Example: 25 users haven’t logged into Salesforce in over 6 months. Those licenses might be unnecessary and worth cutting to save money.
9. Rate Increase Justification – Is it Reasonable?
If Salesforce is raising your rates, ask for a clear explanation:
- New Features: Are there new features or benefits included in this rate increase? Make sure it’s something of value to you.
- Cost Increases Across the Board: Are similar companies seeing the same rate increases, or are you being singled out?
- Documentation: Get any rate increase in writing, along with the reasons.
Example: If Salesforce cites a rate increase due to new AI features, and your company doesn’t plan to use these, you have grounds to negotiate a lower increase.
10. Preparing for Negotiations with Salesforce
A structured approach to negotiation can make a big difference. Here’s how to go about it:
- Have a Negotiation Team: Involve stakeholders from finance, IT, and business operations. They provide insights from different angles—finance looks at cost, IT looks at technical needs, and operations looks at daily impact.
- Know Your Limit: Establish a ceiling for your willingness to pay before starting negotiations. Know what’s acceptable and where you will walk away.
- Get Competitive Quotes: Approach a Salesforce competitor for a pricing quote. You don’t need to switch, but a written offer helps negotiate.
Example: Let’s say Microsoft Dynamics offers you a solution that’s 20% cheaper. Mentioning this can make Salesforce reconsider a steep increase.
11. Finalizing Your Renewal – Double-Check Everything
Once you believe you have an acceptable offer, it’s time to finalize:
- Review Discounts: Make sure any negotiated discounts are spelled out.
- Double-Check Licensing: Ensure the contract accurately reflects what you need—no more, no less.
- Legal Review: If possible, have your legal team review the final terms. Salesforce contracts can be complex, and you want to avoid any surprises.
Example: If Salesforce offers a multi-year discount, verify if this discount applies for all years or just the initial term.
12. Post-Renewal: Keeping Tabs for the Next Cycle
The best way to stay ready for future renewals is to keep track during the year:
- Quarterly Review: Evaluate Salesforce usage quarterly to ensure your licenses remain relevant.
- Create a Renewal File: Document everything about your negotiations, rate changes, and usage to facilitate future renewals.
- Feedback to Teams: Engage your teams to understand if they need specific features or if Salesforce is failing somehow.
Example: Your service department may find a particular add-on invaluable, which helps justify keeping it for next year. They may also mention issues that you can use as negotiation leverage.
13. Understanding Salesforce Renewal Offers and Promotions
Salesforce sometimes offers promotions or incentives during renewal periods. Understanding these can help you make an informed decision:
- Discount Extensions: Salesforce may offer to extend an initial discount or create a new one to secure a multi-year commitment.
- Bundled Promotions: Salesforce often bundles additional features or products to sweeten the deal. Evaluate whether these add genuine value or are just extras you don’t need.
- Limited Time Offers: Salesforce might create a sense of urgency by providing a limited-time offer, especially at the end of their fiscal year or quarter. While some of these offers may be beneficial, it’s important not to let pressure tactics cloud your judgment.
Example: If Salesforce offers a 15% discount for committing to a 3-year renewal before the quarter ends, weigh this offer carefully against the potential flexibility you lose with a longer-term lock-in.
14. Considering Third-Party Advisory Services
If Salesforce renewal and licensing complexities are overwhelming, consider consulting third-party advisory services:
- Licensing Consultants: Consultants with Salesforce experience can help analyze your needs versus your contract. They can pinpoint wasteful spending and identify the best options for your situation.
- Negotiation Experts: Due to their specialized expertise, consultants familiar with Salesforce negotiations can often secure better deals than your internal team.
- Software Usage Audits: Hiring an auditor to look into your Salesforce usage can help ensure you’re not paying more than you need to and give you robust data to leverage during negotiations.
Example: A third-party consultant might discover you could move 20 users to a lower-cost license tier without impacting productivity, saving thousands annually.
15. Protecting Your Company from Future Rate Hikes
After negotiating the current renewal, consider strategies to safeguard your company from unexpected rate hikes in the future:
- Lock-In Rates: When signing a multi-year contract, try to lock in the rates for subsequent years to avoid unexpected increases.
- Annual Price Caps: Negotiate a yearly cap on rate increases, such as 3-5%, giving you more predictability in your budgeting.
- Clauses for Flexibility: Consider contract clauses that allow you to reduce or downgrade licenses mid-term. This is especially useful if your company goes through a downturn and needs to cut costs.
Example: If you can negotiate a 5% annual cap on rate increases instead of being subject to potentially higher variable increases, this provides security for long-term financial planning.
16. Knowing When to Walk Away
Sometimes, despite all efforts, the renewal terms may not align with your organization’s budget or goals. Knowing when to walk away can be a valuable tactic:
- Alternative CRM Solutions: Prepare a list of alternative CRM solutions that can provide similar functionality at a lower cost. Solutions like Zoho CRM, Pipedrive, or Microsoft Dynamics might offer the features you need at a more affordable rate.
- Partial Migration: If Salesforce is becoming cost-prohibitive, you don’t need to migrate everything. Consider moving some departments to a cheaper CRM while keeping core teams on Salesforce.
- Cost-Benefit Analysis: If the cost of Salesforce licensing exceeds its benefits, it may be time to consider switching providers seriously. Don’t be afraid to quantify your CRM’s impact and hold Salesforce accountable.
Example: If Salesforce insists on an increase that pushes your budget 30% higher with no additional benefits, it may make sense to pilot a minor team on a different CRM to see if it fits better with your needs.
17. Real-World Case Studies of Salesforce Renewal
Hearing real-world examples can provide insight into what has worked for other companies:
- Case Study 1: Mid-Sized Tech Firm: A tech company with 200 users negotiated down a 10% rate increase to 5% by leveraging competition from Microsoft Dynamics. They also secured ten licenses at no cost by agreeing to a multi-year contract.
- Case Study 2: Retail Business: A retail company using Sales Cloud and Marketing Cloud was offered a substantial discount to add Tableau. However, they realized their teams wouldn’t use it enough to justify the additional cost and instead negotiated a 15% discount on their existing licenses.
- Case Study 3: Non-Profit Organization: A non-profit successfully avoided a rate increase by pointing out they were early adopters of Salesforce and emphasizing their long-standing loyalty. The AE managed to push for a renewal without any rate changes, citing their commitment to supporting non-profit clients.
FAQ: Reviewing Renewal Terms and Rate Increases
What should I look for in renewal terms?
Look for changes in pricing, service scope, and contract duration.
Why do rates increase during renewal?
Rates often rise due to inflation, market demand, or added features.
How can I understand the notice of the rate increase?
Check if it explains reasons, percentages, and effective dates.
Is it possible to negotiate a rate increase?
Yes, especially if you’re a loyal customer or have alternatives.
What happens if I miss the renewal deadline?
You might automatically continue the contract or face penalties.
Can I cancel a contract due to high rate increases?
Yes, if your agreement allows early termination under such terms.
How much notice should I get for rate changes?
Usually, it is 30-60 days, but this depends on the contract terms.
Should I compare competitors before accepting a renewal?
Absolutely, to ensure you’re getting fair pricing and value.
What are hidden fees to watch for in renewals?
Look out for admin charges, service upgrade fees, or taxes.
How do I challenge an unreasonable rate increase?
Contact the provider, present market research, and negotiate.
What legal recourse do I have against unfair rate hikes?
Consult your contract or a legal advisor for potential actions.
Are there benefits to renewing despite rate increases?
Yes, such will include continued service or loyalty discounts in the future.
What happens if I don’t respond to a renewal notice?
Your contract may auto-renew, or services may be interrupted.
How do I request a detailed breakdown of rate increases?
Contact customer service and ask for a formal explanation.
Can I switch providers after receiving a rate increase?
Yes, as long as you’re not locked into a non-cancellable term.
