Yes, you can negotiate your contract with Salesforce.
Much like other large IT and SaaS vendors, Salesforce expects you to negotiate. Most customers do not know they can negotiate IT contracts or are hesitant to do so out of fear of compromising the business relationship. Some customers do attempt to negotiate but are largely unsuccessful because they do not know how to navigate the complicated process.
It is possible to achieve a margin of reduction anywhere from 15% to 50% in your Salesforce contracts. In our experience, the most successful negotiations focus on mutual value rather than a lower price.
Salesforce, by design, has developed its sales organization so that the customer-facing account representatives do not fully understand where rates should be per client. These individuals are the clients’ day-to-day contacts and have some local knowledge from their book of business, but they do not always have the full picture.
The sales system runs through a “business desk” or “deal desk.” The business desk is Salesforce’s decision-maker, with the account representative serving as something of a middle-man on your behalf. Read more about the business desk system.
How does Salesforce determine pricing?
First, it is important to clear up misconceptions about seasonal pricing. Many of our clients have been conditioned to believe that you must negotiate with software vendors at the end of the vendor’s fiscal year. They are operating under the assumption that the vendor is hustling to meet its annual or quarterly sales goals and is highly motivated to offer deals. This is an expensive and erroneous assumption. Salesforce, for example, has monthly targets as well; they change depending on how well certain sales verticals are performing and which products are selling.
In general, Salesforce pricing is consistent with most SaaS organizations in that the more volume you have, the lower your price will be. However, there is no standard pricing for Salesforce. There is no “best in class” rate across industries; if another company is paying less than you, that means nothing at face value. In fact, sales teams at Salesforce are trained to rebut those concerns.
In addition to the number of users, Salesforce pricing varies wildly based on three primary variables: industry, annual contract value (the amount of money you pay to Salesforce each year), and the customer’s (your) annual revenue.
Consider this example: Two companies, one in manufacturing and one in life sciences, have roughly the same annual revenue and roughly the same annual contract value. The main differentiator is the industry; this could mean price points vary as much as 30% to 40%. Why? Salesforce operates using a type of value-based pricing model, where prices are set based on a customer’s perceived value of the solution. Industries like manufacturing and consumer goods with relatively small profit margins tend to see lower Salesforce costs. It is unlikely an individual sales rep would see this, being siloed into his or her own industry vertical.
Other factors that can lead to additional fees is the number of custom objects, permissions, profiles, developer support, integrations with Outlook or Gmail, dashboard creation, customizable reports, custom objects, external apps, lead scoring, and other additional features.
What are Salesforce’s prices?
For the most part, Salesforce products are priced on a per user/per month or per digital capability /per month basis, billed annually. Customers who need additional Sandboxes, Shield, Platform Encryption, etc. will also experience variable pricing which is calculated on a percentage basis against a set of core SF products (like Sales/Service Cloud licenses). Salesforce calls this “derived pricing” and, contrary to what your account team will tell you, it’s highly negotiable as it delivers a high commission incentive. Publicly, Salesforce will tell you these products are 30% of net contract value. The “should cost” percentage of these derived products are reliant on the 3 variables described above with a specific emphasis on your product mix and annual contract value with Salesforce.
Below you will find the “list pricing” for Salesforce. On average, through proper negotiation you can save 15-75% off of these list prices.
Salesforce CRM Pricing (See also: add-ons)
Salesforce CMS: $10,000/org/month. Build connected content and digital experiences at scale
How much does a Salesforce implementation cost?
A Salesforce implementation will cost on average 10-30% of your annual spend with Salesforce for a standard implementation. The primary factors that will cause the cost of your Salesforce implementation fees to vary is the amount of custom integrations, configuration services, and custom objects required by your organization.
To learn more read our article about How much does a Salesforce implementation cost?
How do we get a Salesforce discount?
Discounts through organizational growth:
Organizational growth is the greatest leverage a company can have when negotiating discounts. Whether a company grows organically by adding more employees or capabilities, or inorganically through mergers or acquisitions, the need for more user licenses is an excellent starting point for negotiations. When company growth leads to both new users and new products, the opportunity for more extensive discounts increases.
Discounts through product expansion:
Companies that do not have planned organic or inorganic growth can build leverage by opting for some new or trending products.
If you are just purchasing a basic CRM platform for lead, contact, & opportunity management, then you will likely struggle to receive a large discount. Although Salesforce routinely offers discounts on cross-industry platforms such as Einstein for analytics. It is discounted because it has not been widely adopted and few implementations have been successful. When Salesforce is actively pushing Einstein or another specific product, there are massive sales incentives and greater discounts. These discounts can be leveraged to negotiate further discounts in core licenses.
While Einstein is promoted across industries regularly, other industry-specific platforms may be incentivized at different times of the year. Without inside knowledge, it is impossible to predict or know what products will be incentivized at what time. Because we work with Salesforce constantly, The Negotiator Guru has a much clearer picture of the Salesforce landscape. Our active client engagements and professional relationships with former Salesforce employees allow us to work on your behalf to move through the negotiation process.
How do we manage Salesforce cost over time?
Once you have successfully worked with TNG to negotiate your first contract, what happens when renewal time comes around? Clear, established ownership of Salesforce within an organization plays a critical role in managing costs moving forward.
Salesforce’s ideal customer is one with multiple business units where needs and goals are not aligned across functions. No one is leveraging spend or standardizing rates/terms. Salesforce sales reps plan for an annual 10% increase in revenue from every customer, so customers should expect to be presented with the latest and greatest tool or app when sales conversations begin. When each business unit works independently with Salesforce, it is far more likely a company will pay for more software than it needs.
TNG recommends a centralized authority that manages the overall relationship with Salesforce but particularly the tactical management of licenses. An internal Center of Excellence that can manage the entire Salesforce instance from an enterprise perspective, move licenses around as necessary, ensure products are being used appropriately, and continue refining and adjusting the Salesforce roadmap along the way.
Our negotiation process is driven by a simple concept: right size, right price. Similar clients should pay the same price for the same product, know what rates they should be paying in comparison to their peers, and know what to look for in software contracts to eliminate potential issues before they arise. Salesforce has hidden much of this process in the shadows, making it challenging for companies to make informed investments in technologies.
Curious if there is an opportunity for cost reduction within your IT spend? Contact us at email@example.com for an initial free consultation.