As such, they will be looking to speak with different stakeholders at all levels of your business with the intent of gaining as much intelligence about your needs as possible. To properly prepare for, and counter, these tactics we recommend establishing a negotiation team 6 months prior to any planned contract renewal/execution. Within this team you should include business, souring, and legal stakeholders that have decision-making authority on behalf of your organization.
As part of the planning process, the negotiation team should create a working group of business stakeholders that can provide inputs into the needs and wants of the organization.
2. Perform a thorough review of the current contract prior to renewal
Part of our standard client onboarding process is a meticulous review of their current contract. While this may seem like common sense, it’s amazing how many prospective clients we speak with that never think of conducting this initial due diligence. Since our entire team originated from large organizations, we actually understand why this happens…initiative overload!
Before we accept a new client, we ask them whether or not they have reviewed their current contract to determine if they actually received the products/services that were under contract within the current term. On average, only about 35% actually completed this step prior to engaging our firm. After we conduct the analysis, we on average find that 60% of our clients do not actually receive/activate the products/services that they pre-paid for as part of their original contract negotiation.
Subsequently, we suggest you review all special contract terms that are part of your expiring agreement that may impact your contract renewal (i.e. price protection, etc.).
3. Prepare for a Proactive Negotiation
A proactive negotiation can enhance your leverage with Salesforce. As stated earlier, we recommend a 6-month runway to ensure the most leverage. If you are a renewing customer, Salesforce will generally start engaging your business stakeholders 3-4 months prior to your natural renewal date. Getting ahead of this stakeholder engagement will only help your organization. To ensure organization, we suggest developing a communication plan that directly advises each level of the organization what to expect, what to say, and when to say it.
4. Negotiate a 3-year TCO
Our clients commonly come to us asking about what price they should be paying for a specific product or service. Through years of experience, we advise clients to focus on the Total Cost of Ownership (TCO) for the entire contract instead of becoming fixated on a specific line item on the proposal. Like many other major software companies, Salesforce incentivizes its sales reps differently depending on the product or service. Instead of becoming fixated on a specific price point for a Sales Cloud license we suggest focusing on the net contract value. In other words, identify a TCO that you are comfortable with from a price-to-value standpoint and focus on driving the most value for your needs within that spectrum.
We commonly obtain a 10 – 15% value increase by negotiating a net TCO vs. that of a line item rate basis. This, of course, is easier said than done but we wanted to share this facts-based article for you to consider as you embark on your Salesforce negotiation.
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