Why Salesforce Commerce Cloud Negotiations are Different

What is Commerce Cloud

The Salesforce Commerce Cloud is one of the fastest growing segments within the Salesforce ecosystem of products and services. The Commerce Cloud provides an enterprise grade e-commerce solution that which is a direct competitor to e-commerce heavyweights including, but not limited to; Shopify, Magento (Adobe), SAP, Oracle, just to name a few.  

Since about 2018, Salesforce has highlighted the e-commerce cloud as a strategic growth channel for its existing customers. In other words, Salesforce has focused on deploying their “land and expand” sales strategies to deploy the e-commerce platform amongst its Sales and Service Cloud customers. There are clearly significant customer experience opportunities that can be enabled when e-commerce is connected directly to your CRM.  Ironically, the TNG team is engaged by both new and existing Salesforce customers to assist with commercial negotiations related to the on-ramp and off-ramp of Commerce Cloud. Our clients seem to either love or hate the Salesforce Commerce Cloud depending on their specific use case. No matter where you land on the love/hate spectrum, it’s important to understand key negotiation opportunities/risks that are specific to the Salesforce Commerce Cloud.  

History of SF Commerce Cloud

Salesforce acquired Demandware on June 1st, 2016 for $2.8 Billion USD. Some say that Salesforce was “forced” into the acquisition based on a synergistic customer portfolio (with Demandware), a lackluster homegrown solution filled with development challenges, and a competitor landscape (including Oracle, Adobe, etc.) who were making significant strides in the space.

In our opinion, Salesforce acquired Demandware primarily to purchase a pre-existing retail customer base that can be cross-sold Salesforce native functionality like Sales and Service Cloud. Salesforce had historically been lacking both North American and European retail customer penetration so this allowed an easy on-ramp.  Fast forward to 2021 and Salesforce is still lagging (compared to their normal market penetration) in retail customer acquisition globally. Furthermore, we have seen many legacy Demandware customers transition away from the Salesforce Commerce Cloud and migrate over to easier-to-use platforms like Shopify. Having the e-commerce competitive landscape in mind is important when exploring/negotiation a commercial relationship with Salesforce either as a new or existing customer.

Why these negotiations are different

Salesforce typically organizes their sales team by industry, region, and product line (cloud). Their sales team incentives are consistently changing but are largely established by industry and product line. Furthermore, customer pricing is influenced based on industry, annual contract value, and customer revenue. To be most effective at any commercial negotiation it’s important to have as much data as possible. This includes identifying the supplier’s interests and best-in-class rates on a product-by-product basis based on your unique footprint. We call this our Right Price Benchmarking service which is included as part of our Full Negotiation Service or also offered as a standalone product for those that just want the data.  Salesforce, and for that matter all e-commerce solution providers, are fully aware that switching costs from one e-commerce platform to another is an undesirable expense. They know that once they get you onto their platform that you will need to be really upset to create a reason to leave.  The fact of the matter is that plenty of customers do leave Salesforce’s Commerce Cloud for one or multiple reasons. Our research, and real client experiences, have identified one consistent trend amongst those looking to leave: Out of control run costs.  No matter whether you’re a new or existing customer to Salesforce it’s important to be as prepared as possible when engaging Salesforce. Take a look at the section below for some key insights specifically related to negotiating a Salesforce Commerce Cloud contract.

Key Insights/Tips

Now that you understand the history and key motivations related to Salesforce’s Commerce Cloud you should be able to apply the below key insights most effectively.  

• Salesforce is heavily focused on capture net new retail customers. Your Salesforce sales team is heavily incentivized to find and convert customers on existing e-commerce platforms.
• If you are a current Salesforce customer and exploring the Commerce Cloud, be focused on “lift and shift” credits from Salesforce that help mitigate any change costs. Depending on your situation, you can negotiate credits to be applied immediately, over the contract term, via discounts on other products, etc.  ​
  • It’s very important you conduct a thorough assessment of your options and the overall total cost of ownership impact of your potential options. For example, a one-time credit on the Commerce Cloud license fees may produce far lass benefit to your organization than a % discount on your existing license footprint with Salesforce.
• It’s important to understand who has decision-making authority inside of Salesforce. It largely depends on what you’re asking for, the overall relationship impact, and the attractiveness of you the customer. The only way to successful navigate the Salesforce ecosystem is to hire a firm that deals with Salesforce everyday and has ex-Salesforce employees (excuse the shameful TNG plug).  
• Literally 90% of current Salesforce customers that engage TNG are paying for more digital capability than they need. Those same customers are also overpaying for licenses that that they don’t even need. It’s very important you conduct a Right Sizing assessment to ensure you’re only procuring what you need.  
  • Specific to Commerce Cloud, this includes forecasting your Gross Merchandise Value (GMV) projections for each contract year.  
• Similar to the above point, our research empirically proved that 100% of our customers (no matter new or existing Salesforce customers) have committed to higher revenue targets than needed in the interest of “getting the best deal” without TNG support;  
  • This creates a material risk to the Salesforce customer when they don’t hit those targets.  
• Generally speaking, a longer contract term will drive a lower GMV price point;
• ​Even if you feel very confident in your GMV projections, focus on usage and price-point flexibility within your Commerce Cloud contract to eliminate surprises and capture cost savings if revenue actuals exceed projections.  
  • Note: If you are in an industry that is undergoing significant industry consolidation (M&A activity) then you should provide yourself the flexibility to acquire and/or divest mid-contract with Salesforce.

​Negotiating with Salesforce is more of an art than a science. It’s important that you understand all of the facts before negotiating with Salesforce. Please feel free to contact us for some additional helpful tips as you start to explore the Salesforce Commerce Cloud.  (And yes, we’re happy to help even if you’re in the 19th hour of negotiations 😊)