Eight best negotiation tactics from the “Spend smarter workshop”
Vendr's senior and principal SaaS consultants share top tips, from looping in a champion to understanding the benefits of early renewals and the risks of auto-renewals.
If you're in the software market, these effective negotiating tips can help you get the best deal possible.
In a recent webinar, Vendr’s senior SaaS consultant, Audrey Ellinghouse, and Vendr’s principal SaaS consultant, Raven Howard, shared their successful negotiation strategies, in response to attendee questions, that help customers. These experts explain how to get the most out of software purchases, from new contracts to renewals.
Here are the top 8 insights from Vendr’s SaaS consultants.
Loop in a champion.
[25:07] Given that there should always be a price comparison when negotiating, how do you balance showing internal stakeholders, such as project managers and estimators, that you can find value beyond just price?
Raven: It's challenging when that happens. From Vendr's perspective, we like to loop in our champion to explain the value and why it's essential for their company to apply scrutiny during new purchase or renewal conversations at a high level.
But I think typically, the result of that happening is: they've gone through manager approvals and a lot of internal steps, and they're kind of like, “Oh, there's another step from here.”
So it helps to come in with empathy and provide the benefits. For example, you could have an additional budget for other tools, or we could get you more included in the negotiated agreement for the same price.
And on the flip side, explain some of the risks of not applying scrutiny. SaaS pricing is often inflated. If the process is rushed, sometimes security and legal steps can be missed, which could put the company in the wrong position and at risk of an audit.
So, explain the deal at a high level and provide context.
Communicate with empathy.
[27:27] So, how can you communicate in a way that maintains the integrity of the relationship with the vendor?
Audrey: You should understand what's needed and build rapport before and after you make the ask, and continue on that. Follow up on questions and be invested in the relationship, not just the deal.
Often, we have ongoing relationships with suppliers that we work with time and time again. That stems from one of Vendr's most significant values: "kindness as a service.” Our buyers ensure we do our best to maintain a relationship between the supplier and the customer.
Expect several ‘no’s.
[29:17] What are alternatives if SLA terms are favorable, but they're unwilling to drop their pricing?
For software companies without firm policies, the salesperson often positions a deal as non-negotiable.
So I would get them to tell you no several times before you accept that there's no further negotiation possible. For Vendr customers, we usually give at least a heads-up about companies or specific plans that aren't necessarily negotiable.
Prepare for business negotiation 90 days in advance.
[30:48] How long should companies prepare for negotiations before a contract expires?
Audrey: I always say around the 90-day point is the sweet spot.
A 90-day window can offer us leverage in negotiations. Not only can this help us prepare the purchase itself and ensure that there is no opt-out period for things like auto-renew, but also we can position the renewal or new purchase more favorably.
Raven: Regarding engineering tools, 90 days is also a best practice, assuming it's just an easy swap over.
But intensive migration might be required for more embedded applications. So I would start those conversations as soon as possible.
The benefits of early renewals include identifying that you're running into overages or that your pool of funds will expire soon.
There's no downside to engaging as early as possible.
Discounts for multi-year contracts may vary.
[32:45] Can you get huge discounts by pre-paying multi-year contracts upfront?
Raven: There's no north star for a three-year deal.
It varies from company to company, just like general discounting and pricing do.
It should be significant. Then I would get the one-year offer as low as you think you can before exploring a three-year offer.
Sales reps often position a three-year deal as the only option or try to nudge you in that direction. But I would always assume one year.
Positioning with company policies can also be helpful. If you don't have any, you can make them.
For example, if they initially give you a 10 percent discount, counter with a policy that says, “For three-year deals, there needs to be at least a 20 percent discount.”
Or, try positioning your counteroffer with the policy that “A 12-month contract is standard for everything. We need to get special approval if we do a three-year deal.”
I rarely see any company wanting to prepay outside of one year, and I don't think the discount is usually worth it from a cash flow perspective. Suppose you are in an excellent cash flow situation, then good for you. There could be something to explore there. But again, it would be case-by-case, depending on the deal.
It’s also best to avoid multi-year deals on new purchases because you can never predict if the first year of the relationship will be mutually beneficial.
Be consistent and persistent.
[34:54] Can you provide some tips for negotiating out of auto-renewals?
Audrey: I always say simply enough, ask them to remove it.
It can be difficult. But in the end, with persistence and consistency, auto-renewal clauses usually removed.
In one instance, I've seen a supplier “ghost” or disappear from communication until the contract auto-renewed. That essentially creates a loss of control over your contract regarding making changes, negotiating uplift, etc.
The bottom line is consistency. Remember that Vendr keeps track of auto-renewal status, and our team ensures that it's not overlooked or missed.
We try to work with you to be proactive, start the renewal process 30 days earlier, and opt out of an auto-renewal clause if that's something you can do.
Deadlines given by sales reps should not be heavily relied on
[37:49]. How do I know when sales reps are bluffing, mainly when referring to a time-based discount?
Raven: As a sales rep, if you ask your manager for a discount, they come back with, “When can they sign, and when can we make it contingent on that date?” So that's just the best practice in sales.
Those deadlines can sometimes be honest, like the end of the fiscal year.
I would just ask, “Why that day in particular? What happens if we sign the next day?”
I can think of only two deals negotiated where the discount was not honored after [the deadline], even during fiscal year-end. So I would put little weight into the deadlines that a sales rep gives you.
Ask the supplier to find solutions and put the negotiation on their plate.
[43:40] What if I realize I didn't purchase everything I needed in a new contract and need to revise it? Is there anything I can do to negotiate then?
Audrey: This mostly depends on where you're in the purchase process.
So if the purchase, whether a new purchase or renewal, has been very recently executed, we've seen situations where the supplier may agree to void the signed contract, amend it, and re-sign it.
This common negotiating tactic works if you have signed over the last week, not months later.
So if the supplier isn't willing to void a contract if they have already executed it, Vendr can work with your team to add a volume of specific products or certain modules to your contract and negotiate them, depending on the specific scenario.
Another tactic is putting it on the supplier's plate.
Ask, “Is there anything I'm missing?” Ask them to find out what may need to change in the contract.
Putting it on them sometimes will allow some wiggle room [for reps] to understand from your perspective, not price gouge you, and give you some room with creating a win-win situation.
How Vendr takes the stress out of your software negotiations
With Vendr, you can streamline your procurement process, reduce the time and effort required for negotiations, and ensure you get the best possible deal.
Vendr provides valuable insights and data-driven recommendations to help you make informed negotiation decisions, including market analysis, vendor insights, and real-time pricing comparisons – leading to win-win outcomes with every software purchase.
Vendr works closely with your negotiator team, and offers a comprehensive solution for handling price negotiations for your software stack. With its robust platform and customizable workflows, Vendr can help you negotiate good deals, streamline your procurement process, and reduce the time and effort required for negotiations.