Why Salesforce Commerce Cloud Negotiations are Different

Salesforce is good at negotiating. So your chances of getting a good deal are enhanced by understanding how they look at a deal and their goals. Your Salesforce Account Executive will lead the team you are negotiating with, in close coordination with his or her manager. This team is your path to getting the best overall deal. And while they are trained to maximize Salesforce revenue, they won’t get paid unless you make a purchase. So if you ask the right questions, and provide information that can help them get to a discount level you are comfortable with, this is the win-win situation all are striving for.

​The remainder of this article provides some guidelines and background that will help you to get there.

1. Salesforce sales teams earn commissions on incremental revenue

Account Executives (also called “reps”) and their management are paid based on incremental revenue, not total revenue. If you don't buy additional licenses (or spend additional money), they don't earn commissions. More specifically, if your total spend this year is not more than last year’s, they don’t earn commissions this year. They are indifferent to whether you purchase licenses for more users, add-ons licenses for existing users, or you swap out one type of license for another, as long as the total spend is more. This is actually a good thing for the customer because it gives you more leverage and allows you to adjust your purchasing to your needs. ​​

2. Salesforce AE’s are paid when the deal is signed

SF reps and management are paid in advance for the 12-month value of whatever you are deploying now. While they will ask for a longer contract such as three or five years, they are open to a shorter term, since most, if not all of their commissions are based on first-year revenue only. This varies from year to year, but the first year is always more important.​

3. Timing matters

Salesforce's fiscal year ends in January. While this may seem strange, it is actually quite intentional. They can work with a customer the entire year to justify a new purchase, and wait until that customer's new fiscal year starts in January when the budget becomes available. And since the sales team gets paid on an annual quota they are quite happy with January deals. This often leads to very large February commission checks! But it's not only the end of the year that matters, as management and reps are often encouraged through bonus payments to close deals at the end of a quarter.​Customers can take advantage of this quarter and year-end effect by asking for and often getting discounts that would otherwise not be available.​

4. Discount authority is distributed

There are many articles in the public realm indicating that the rep has no power, and all of the decision-making lies with a special team that has the authority. This is not quite correct. Your rep has access to a discount/approval matrix indicating what level of discount is available, by license and quantity, and what organizational level is needed to approve it. They know how much of a discount they can get approval for, and whom they need to get that approval from. In general, each level of management has a specific level of discount they can approve. So for example, for a given size deal, your rep may be able to offer you a 10% discount without additional approval. His manager may be able to approve an additional 5%, and each level of management above can offer some additional discounting. The special approvals team is involved only when a deal requires additional discounting, beyond what a given size of deal and management level can approve. A good rep knows how to work this structure, and will do so to get you the best deal they believe they need to have to get your signature. ​So while the rep doesn't necessarily have the authority to grant you the discount you might want, they are your advocate and absolutely control the path to get you a better deal. So keep pushing and asking for more - as you get closer to year-end or quarter-end, more of the management will be interested in helping your rep get you a bigger discount. And it is highly likely that your rep’s manager (Salesforce calls the first-line sales manager a “Regional Vice President”, or “RVP”) is fully knowledgeable about every deal, so going above the rep does not necessarily get you better discounts.​

5. Discounts depend on both deal size and customer size

Larger deals and larger customers generally get larger discounts. The combination of order size and customer spend leads to the discount they might offer you for a particular purchase. For example, a $100k purchase from a customer spending $2M annually will likely get a larger discount than that same $100k purchase from a customer spending $500k annually. Conversely, a $2M customer making a $10k purchase may get a larger discount than a $100K purchase made by a new customer.​While deal size determines the discount level, customer size determines where the discount level for the deal starts.​

6. Consolidating purchases increase your discount

Salesforce loves it when you make lots of little purchases. Each one is considered as if it were the only purchase you are making, and thus separate individual purchases lead to higher overall spend (see #5). When you are about to make a purchase, be sure to consider if any other groups in your organization are doing the same, as well as purchases you might be making in the short term future. If you can consolidate the orders into a single request, your deal size goes up, and your discount level will likely improve.​

7. Consider near term future demand in your current purchase

As an extension to the previous point to consolidate your purchases, this can be extended to include purchases that will likely be made in the next few months or even the next year. Providing this to the account team will allow them to provide several options to you, and you will be able to see larger discount levels that might be available to you. This will likely include making the full year’s purchase upfront, which will lower your cost per license, but potentially increase your short-term spend. The downside of advancing purchases before you need them is that there will be licenses that are unused for part of the contract term.  You can then compare which is better for you, both in the short term and the long term, since your renewals will start from a lower price per user. You may find that even though some licenses are unused for a time, your overall cost is lower, especially when you consider the cost of several years in the future. Most good account teams will be able to provide you sufficiently better deals to make this worthwhile for you to make the purchase up front. And since you have already paid for the licenses, the faster you can deploy them, the more you will benefit, without incurring additional costs.​

Bonus - Not all licenses need to be activated concurrently

Let's say you are planning on deploying 900 licenses in the next 12 months, with a schedule of 300 in month 1, 300 in month 4, and 300 in month 7.You will almost always get a better price if you purchase all 900 at once, rather than 3 purchases of 300, but you will end up with licenses that you are paying for and not using for some of this time. Conversely, if you make three purchases, you are not paying for anything prior to actually deploying them, but the cost per license will be higher.​A better option is often available that combines the best of both. You can agree to purchase the 900 licenses in a single order but delay the activation dates for the licenses you will not be activating in the next few months. Your order form will have three line items, one for each activation date. But since your discount will be based on the full 900 license purchase, they will all be less expensive, and you are not paying prior to when you need them! Salesforce calls this a “staggered deal” structure.

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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) ​Work.com

• Workplace Command Center: $5/user/month. Manage the complex process of opening your business and getting employees back to work safely in the COVID-19 environment
• Emergency Response Management for Public Sector: $300/user/month. Prioritize and mobilize emergency resources
• Emergency Response Management for Public Health: $450/user/month. Protect communities and provide personalized patient care at scale
• Contact Tracing: $200/user/month. Protect your employees and customers from the risk of infection

Small Business Solutions

• Essentials: $25/user/month. All-in-one sales and support app
• Sales/Service Professional: $75/user/month. Complete sales/service solution for any size team
• Pardot Growth: $1,250/org/month. Suite of marketing automation tools for any size team

Salesforce Sales Cloud Pricing

• Salesforce Essentials: $25/user/month billed annually. All-in-one sales and support app
• Lightning Professional Edition: $75/user/month. Complete CRM for any team size
• Lightning Enterprise: $150/user/month. Deeply customizable sales CRM
• Lightning Unlimited: $300/user/month. Unlimited CRM power and support

Salesforce Service Cloud Pricing

• Essentials Edition: $25/user/month billed annually. All-in-one sales and support app
• Professional: $75/user/month. Complete service CRM for any team size
• Enterprise: $150/user/month. Customizable CRM for comprehensive service
• Unlimited: $300/user/month. Unlimited CRM power

Marketing Cloud

• Customer 360 Audiences
  • Corporate: $12,500/org/month. Give mid-sized businesses tools to unify and grow data assets
  • Enterprise: $50,000/org/month. Help large-scale organizations unify, segment, and activate all data
  • Enterprise Plus: $65,000/org/month. Enterprise edition plus Premier Support
• Loyalty Management
  • B2B: $30,000/org/month. Incentivize channel partners and distributors with a B2B loyalty program
  • B2C: $35,000/org/month. Launch and manage more dynamic and personalized B2C loyalty experiences
  • B2C Loyalty Plus: $45,000/org/month. Run multiple loyalty programs on a single platform
• Pardot (up to 10,000 contacts)
  • Growth: $1,250/org/month. Fuel growth with marketing automation
  • Plus: $2,500/org/month. Dive deeper with marketing automation and analytics
  • Advanced: $4,000/org/month. Power innovation with advanced marketing automation and analytics
  • Premium: $15,000/org/month. Enterprise-ready features with predictive analytics and support

Email, Mobile, Web Marketing

• Basic: $400+/org/month. Personalized promotional email marketing
• Pro: $1,250+/org/month. Personalized marketing automation with email solutions
• Corporate: $3,750+/org/month. Personalized cross-channel strategic marketing solutions
• Enterprise: Ask for a quote. Sophisticated journeys across channels, brands, and geographies

Social Studio

• Basic: $1,000/org/month. Start your social media marketing journey with listening and engagement
• Pro: $4,000/org/month. Listen, publish, and engage across social networks
• Corporate: $12,000/org/month. Social marketing and social customer service for companies with multiple brands or products
• Enterprise: $40,000/org/month. Maximize results at scale across teams, brands, and geographies

Advertising Studio

• Professional: $2,000+/mo. Power audiences across digital advertising with CRM

Datorama

• Starter: $3,000+/org/month. Begin your marketing intelligence journey and unify, visualize, and activate your marketing data
• Growth: $10,000+/org/month. Grow your marketing intelligence platform across all campaigns, channels, and platforms
• Plus: Ask for a quote. Complete marketing intelligence across regions, brands, and business units

Google Marketing Platform

• Google Analytics 360: $12,500+/org/month. Turn insights into action with Google Analytics 360
• Google Analytics 360 + Optimize 360: $17,500+/month. Test, adapt, and personalize with Optimize 360

Salesforce CMS: $10,000/org/month. Build connected content and digital experiences at scale

‍Commerce Cloud

• B2B Commerce: Quote request
• B2C Commerce: Quote request

​Platform

• Starter: $25/user/month. Build custom apps that fuel sales, service, and marketing productivity
• Platform Plus: $100/user/month. Extend Salesforce to every employee, every department, and transform app dev for your entire organization

​

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.​

Conclusion

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.

​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;

• Invited your C-Suite to a basketball game with courtside tickets;
• Reached out to IT Department heads to discuss their 1-3 year growth objectives;
• Initiated a direct connection with your VP of Sales;
• Identify and reach out to your top Sales Representatives to explore how they could further use the tool;
• Invite your colleagues to a “wine and dine” evening for relationship building purposes, etc.

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…

• The CEO wants to implement the full vision;
• The CFO doesn’t have the budget;
• The CIO is pissed off because his IT budget is getting pulled and Salesforce still doesn’t integrate properly with their ERP;
• Your VP of Sales wants more functionality and training;
• Your Sales reps wants more customization and new functionality.

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 over-inflated 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 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…

• Influence your fiscal year budgeting conversations through proposals;
• Be flexible with payment terms enabling the ability for clients to use two fiscal budgets for a single subscription year; and,
• Have increased control over its own fiscal year budgeting, forward looking market statements, and investor relations.

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.New CustomersWhen 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.

• Watch out: Initial Footprint -Naturally, the larger initial footprint a software supplier has in your organization the harder it is for you (the client) to leave. No matter whether you hire an external advisor or conduct the negotiation by yourself please be cognizant of the fact there is a natural tendency to overbuy in the 1st year in the interest of capturing the “greatest discount.”
• Note: Based on customer demand, we will be writing a separate article specifically focusing on New Agreement Customers titled “Top 5 Tips When Negotiating a New Salesforce Agreement.”

​Existing Customers

‍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.

• What this Means - While you may be going into the negotiation wanting to keep the same rates or even reduce them, Salesforce has established a negotiation baseline that is 10% above your current budget. As we will discuss further in future articles, this increase may come in many different forms…some obvious and others not.‍
• Note: Based on customer demand, we will be writing a separate article specifically focusing on New Agreement Customers titled “Top 5 Tips When Negotiating a Salesforce Renewal Agreement.”

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.” Sound familiar?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 serviceIt’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:

• Pardot is a land grab into your marketing department; and
• Service desk is a land grab into your customer service department.

Salesforce fights hard to make these land grabs for a few key reasons:

1. It makes them stickier within your organization;
2. It gives them more contacts which creates further opportunities for their divide and conquer approach; and,
3. It gives them an entirely new department where they can land and expand organically.

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:

• Your reps do not know the true rates for comparable companies;
• The “Business Desk” is the only decision-making authority;
• The “Divide and Conquer” approach is the most commonly used, and most successful, sales tactic by Salesforce to drive sales growth;
• The Salesforce fiscal year ends January 31st. This enables the use of multiple fiscal year client budgets to fund growth;
• New and existing (renewal) customers are treated very differently and should use a completely different negotiation approach;
• Sales incentives vary by product and service. “Land Grab” products often carry a higher incentive as it expands their footprint in your organization.

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.