The key to properly negotiating with SalesForce is understanding how the organization works. SalesForce has a brilliantly designed sales system that is set up to maximize revenue from every account.
Many of the tactics used in its sales process and organization design are borrowed from other big players such as Microsoft, Oracle, SAP, etc. Our goal with this article is to give you a strong understanding of the SalesForce machine so that you can prepare accordingly.
Understanding how your sales rep fits into the machine
Maybe you like your rep, maybe you don’t. We see clients all across the spectrum in terms of the relationship they have with their rep. Regardless of what your relationship is, it’s important that you understand how your rep fits into the actual SalesForce machine.
The first thing you must understand is that your rep is at the bottom of the totem pole in SalesForce. They are the “in-the-weeds Salesperson” who is put out to handle tactical sales and execution.
By design, your rep is given limited information. They actually are never fully educated on what the rates should be or what discounts they can even provide.
Let me repeat that: Your rep does not even know what rates other companies of your size are getting other than those within their own portfolio.
SalesForce limits the amount of discretionary information it shares with its sales organization intentionally. The company does this many reasons, one of which is so that your rep can sell to you in a genuine and authentic way. If your rep knew that other companies were paying 30% less than you, they might feel guilty for charging you 30% more and/or fight harder for you to get a lower rate in the interest of closing the deal.
Think about this; if your rep doesn’t know that you are paying 30% above the most competitive rates, and instead actually believes you are getting a great deal, then they are going to explain this to you in an authentic way. They may tell you something like: “This is the best rate I have ever given a customer of your size.” This may very well be the truth, but that doesn’t mean it's the best rate that SalesForce can provide for a company of your size, etc.
Instead of thinking about your rep as the opponent in this negotiation, it’s important to understand how they fit into the organization.
Our goal in our 4-step negotiation process is to coach your rep in a way that organically sends the most effective messages up the totem pole (aka the "business desk") at SalesForce to ensure you get the best deal.
Understanding the “business desk”
In order to drive the largest positive impact in any negotiation with SalesForce, we need to work with the “business desk." The “business desk” is a somewhat secretive sales management team inside of the company that is intended to purely support your sales rep. Remember, sales reps are given very little decision-making authority. All official decisions that have any material impact on a client's rates are developed and approved by the business desk.
The concept of a business desk is not new nor unique in highly complex/profitable sales organizations. It was originally developed by companies like McKinsey and originally tested, validated, and further refined in firms like Microsoft. At its most basic and original function it was intended to as act as a quality/price control organization before the concept of Software as a Service (SaaS) was even conceptualized. Fast forward many years and it has developed into an elusive organization that ultimately acts as the "bad guy." In other words, it holds the rights to any decision making but will never officially interface directly with the customer leaving your sales rep to pass messages back and forth.
As a result, your goal in a negotiation is to train your sales rep on how to best communicate and send messages to his business desk that are going to help you achieve more out of the negotiation.
Yes, you heard that right. Your job in this negotiation will be to indirectly train your sales rep on how to work with their own organization to get you the best possible deal. That is, of course, assuming they actually want you to get a good deal…
Our goal is to empower you to send the right messages, at the right time, to the business desk in order to meet and/or exceed your desired objectives.
Your sales rep’s emotions
Sometimes your rep may get somewhat heated during the negotiation and say something like “I am doing everything I can to get this deal through for you but I just can’t go any lower.”
When your rep says something like this to you it’s important you keep a facts based demeanor and keep any emotional response in check. The company’s goal here is to humanize the sales organization and make you feel empathetic during the negotiation. Their emotional response will naturally distract you from the actual facts of the deal.
Please remember your rep may actually be a very honest person. Subsequently, their emotional response to any negativity within the negotiation is designed as part of the sales system. In other words, when your rep gets emotional about fighting for your discounts, that is SalesForce winning…a clear indication of the sales system producing the exact desired result.
This is why we call it the SalesForce machine. The dynamic between the client, sales rep, and business desk is brilliantly designed. The key here is to understand and identify these dynamics.
Divide and Conquer Tactics
Whenever we describe this tactic to our customers, we almost always hear; “Yep, that is exactly what they did.”
Divide and conquer is a brilliant, yet traditional, sales tactic that SalesForce has perfected over the years. The larger the client organization the more important and effective these tactics become for SalesForce.
The concept is simple: Build as many stakeholder relationships as possible at various levels inside the client organization with the overall objective of obtaining as much information as possible. Use this information to extract conflicting stories of the organization’s wants and needs so that the client may potentially buy more than they need.
If you are a smaller account under $300k per year, you may not see this happen. But as your annual spend reaches $500k or $1M+, these tactics will most certainly be used as a way to grow your account.
Understanding Divide and Conquer Tactics
Let’s explore a simple example of how this routinely plays out in a client organization…
Imagine you are in IT Procurement and hold the responsibility of negotiating your company’s SalesForce contract renewal.
As your renewal starts to get closer, you may suddenly experience that SalesForce has, without your direct knowledge;
Best of all is that those taking the above actions may not actually be your direct sales rep but rather their superiors who have the sole purpose of gathering as much intelligence about your organization as possible.
With this momentum, SalesForce will commonly know more about the needs and wants of its client organization more than their client contact (aka you!). They will use this information to their advantage and create organized chaos and confusion in your organization.
Further expanding upon our original example, let’s explore the output of these tactics:
CEO - Your CEO is taken out to a basketball game where the higher ups at SalesForce paint a picture of what your organization could look like with added functionality and full adoption of SalesForce. They gain his buy-in and suddenly your organization has pressure coming down from the top to roll out SalesForce to the entire organization.
CFO - With this new pressure coming down, your CFO is left scrambling to figure out how to create budget for these additional SalesForce expenses which were not in the original budget. Your CFO talks directly with SalesForce and they start getting creative on cash flow. They offer to move your renewal to January, instead of September, to utilize multiple fiscal year budgets.
CIO - Your CIO is furious because the CFO is now going to pull funds from his operational budget. Your CIO had planned to use these funds for other business critical initiatives that need to be completed this year. Subsequently, he’s also upset that SalesForce is talking with his colleagues and keeping him in the dark. This creates and emotional response and your CIO reaches out directly to SalesForce. SalesForce then begins meeting with your CIO directly and discusses their overall IT roadmap.
VP of Sales - When your VP of Sales speaks to SalesForce, he shares his ideal vision and requests more functionality and training for his team to increase adoption.
Sales Reps – When a few of your top performing Sales Reps are contacted by SalesForce, they further explain how it would be great if they received deeper support, had additional customizations, and more functionality.
SalesForce Admin - Your SalesForce Admin is the primary business stakeholder providing requirements to IT Procurement and also responsible for the outcome of the negotiation. They now have conflicting messages coming from every stakeholder in the organization…
What does your SalesForce Admin do in this situation? They ask SalesForce: What do you think I should do?
As a result, SalesForce is now running the negotiation. They are telling you what to buy and when to buy it. At this point, you have lost control of the negotiation and SalesForce has essentially “won the game.”
If you let SalesForce divide and conquer without the proper planning and communication strategies, you will lose significant value creation opportunity.
An Aligned Organization is a Rarity
The situation we just described to you is extremely common in both large and small organizations. Most organizations suffer from what many of us know as “initiative overload” and simply do not commit the time or resources to align on forward looking business (not just IT) plans for leveraging strategic platforms such as SalesForce.
SalesForce knows this and leverages this lack of alignment to create growth opportunities.
It is exceptionally rare to find an organization that is: 1) actually aligned; 2) has a plan for how they will use SalesForce over the next three to five years (aligned to its business objectives).
As part of negotiation preparation, we drive clients to curate this planning and alignment so that you know what you need before even starting the negotiation.
Our proprietary tool for doing this is something we call the Salesforce Roadmap (catchy right!? 😊). At a high level, this is simply a detailed list of “what you need” and “when you need it.” Again, you need to be clear on the “what” and the “when.”
If you don’t create your own Salesforce Roadmap, then SaleForce’s Divide and Conquer techniques previously discussed will likely create an overinflated roadmap for you. Subsequently, if SalesForce creates the roadmap for you, then you are left on your heels saying “Wait a second….is this what we actually need or is this just what they are telling us that we need?”
The SalesForce.com Fiscal Year
Another very important thing to understand about SalesForce is that their Fiscal year ends on January 31st. Now at first you may say, “That’s kind of odd…why would anyone make their fiscal year end January 31st?”
Once again, this is done by brilliant design.
SalesForce is an expert at working with Corporate America. It knows that most companies operate on a standard calendar fiscal year (January-December). Subsequently, most budgets are solidified sometime between October – January which opens up a new (potentially larger) budget.
By moving your renewal to January, SalesForce is now able to…
Think about this…by placing their fiscal year end at January 31st, SalesForce now has a great excuse to say “Let’s renew early because we will be able to provide the greatest discount right before our fiscal year ends.”
In most cases, SalesForce will naturally incentivize you to renew early with a January effective date. While this may seem like a no-brainer, we regularly advise all our clients to take advantage of this offer only when you forecast significant growth/decline in your account.
The Difference Between a New and an Existing Salesforce Customer
It’s very important to understand that SalesForce treats new and existing customers very differently. Unsurprisingly, sales performance incentives are very different for both segments.
When you are negotiating your first purchase with SalesForce your rep is incentivized to sell you as much as possible. While this may seem like common sense it’s important to know that this particular incentive is extremely high. Since selling a new customer is always harder than a renewal, SalesForce designs its compensation structure so that reps see a significantly higher sales commission from new customer accounts.
The SalesForce machine has been developed in a way that promotes and incentivizes year-over-year growth in your account. This may be common sense to some, however, what you may not expect or realize is that prior to any renewal discussions from even occurring, SalesForce has already booked (planned for) a 10% increase in your account.
This is how SalesForce operates and is a standard expectation across all of its business lines. In other words, if SalesForce were to maintain the status quo on current rates and license counts (aka 0% increase), then your sales rep’s performance metrics would be negatively impacted.
Subsequently, one of the worst scenarios for SalesForce is if your contract is reduced in anyway at renewal…even by one dollar. (Yes, we actually have a funny client story about this…)
Even if you’re dropping a service like Pardot or Premier Support, SalesForce will automatically fight to get those funds reallocated to other licenses or add-ons (“lift and shift”). SalesForce incentivizes its sales reps to identify and execute these budget “lift and shift” opportunities at renewal time in underutilized accounts with nearly as much intensity as net new revenue.
Understanding SalesForce’s Products and Services
Forgive our play on words here but what you must understand about SalesForce’s different products and services is that they are hard to understand.
Many of our customers who have now been with Salesforce for 3, 5, 10+ years often complain “It seems like they keep changing the license tiers or product names. It’s just confusing and I don’t really understand why I am paying more for what seems like the same thing.”
Once again, this is by design and taken right out of the Microsoft playbook.
Think about it like this…Imagine your renewal comes up and you have been purchasing X product or service for the past 3 years. Your rep now conveniently informs you that “We have actually discontinued that specific product and it has now been rolled into product Y. You will maintain the capabilities of our legacy product X but with enhancements that will help you get more from the platform. As a result of these new enhancements your license cost has increased, the new price is Z.”
You were just thrown a curveball and suddenly are unable to compare apple-to-apples. Instead of focusing on the price of that new product, you are focused on what it is, and if this is a right fit. This is revenue generating distraction impacts both large and small customers.
SalesForce sales incentives vary by product and service
It’s important to understand that sales incentives vary across SalesForce’s different products and services. This is done for a variety of reasons but the most common example being new product/service introductions are typically incentivized with higher commissions. As a result, it is natural for sales reps to push new products to renewal customers.
In addition to new products, high commissions are paid for “land grab” product/service lines. When we say “land grab” we mean a product or service that breaks SalesForce into a new department inside of your organization. A few common examples are:
SalesForce fights hard to make these land grabs for a few key reasons:
Whenever you are considering offering up a “land grab” to SalesForce (expanding into different product lines, departments, etc.) please know you have a great negotiation opportunity. This leverage can be used to lower your overall total cost of ownership if navigated correctly.
The Bottom Line
The “SalesForce machine” is a brilliantly designed sales system. The first step to understanding how you can reduce your rates is to know what you are up against. A few key takeaways:
Our goal with this article has been to educate you on the key points of how the SalesForce machine operates. Based on significant current and prospective customer requests, we will be writing additional articles that do a deep dive into the many facets of successfully negotiating with SalesForce.
To our current/past customers: We sincerely appreciate your continued trust and partnership!
To our new/prospective customers: We hope these articles help you understand the landscape of the SalesForce negotiation process. We look forward helping you extract the most value from your specific SalesForce relationship. (Disclaimer: We only accept those clients in which we know we can help).
Want more information on how we can help you reduce your SalesForce.com expenses? Contact us here or via e-mail at Dan@TheNegotiator.Guru.
We reduce your IT Software expenses by 10-50% through contract negotiation.