Negotiation & Your Business Growth Strategy: Did You Know that Price and Terms Are Linked?
Enterprise customers too often want to make up their own terms (i.e rules) regarding how they use your software service. As a result, you really need to think about linking price with terms as part of your business growth strategy. How does this work? Well, let’s go through it.
1) De-Linking Price and Terms
Most enterprise customers try to de-link price and terms (negotiate price first and later hit you up for a bunch of custom terms). I have even seen them have separate negotiating teams for negotiating price (usually the IT business owner) and for negotiating terms (usually the purchasing and legal departments ). So if a customer tries to separate price and terms, your job is to keep them linked!
2) What Happens When They Are De-Linked
When price and terms are de-linked the customer has no incentive to end the negotiation, as you are just giving and giving terms and getting nothing in return. Since the price has been agreed to your customer is actually incentivized to keep asking for more (and better) terms. This is what I call “going through the grinder,” as that is what it will probably feel like.
3) What Happens When They Are Linked
When price and terms are linked the customer is more likely to have a real discussion of what its needs are. Why would this be the case? Well, if a customer wants a specific term in a SaaS agreement and say it costs more $, then the customer will either decide to pay for it or pass on the request. Either way, the incentives are in place to get the deal closed, as the terms that matter will be addressed early and the ones that don’t will be skipped.
- For example: If the customer wants you to place your source code in escrow, then maybe you can provide source code escrow if the customer is willing to pay for it. Now the parties are having a real discussion around the issues rather than a made up set of terms the customer wants simply in order to get an advantage in the SaaS agreement (i.e. one-sided customer favorable agreement).
Do customers really think this way? Look at the quote below (this is a quote from a company that hired International Computer Negotiations (ICN) to help educate them on how to negotiate with companies like yours).
Yep, your customers are trained and prepared before negotiating with you.
So as you can hopefully see, whether you link price and terms really does matter. When developing your business growth strategy, you have to think about these kind of practical negotiation tips.
Here are some more real world examples:
- “If you want x term, we can do it, but it will cost y $.“
- “If you want that discount, we can provide it, but we need a two year commitment to our SaaS service to give you that kind of price.”