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I work for a software company and we licence the software on a "per user" basis.
The price we charge is "flexible" ....like any other business, large volumes get discounts.
A perennial problem we face is small clients telling us, effectively, "we should get a volume discount because this small number of users is just a trial and we'll be doubling/trippling/quadrupling* the user's when the trial is done".
We know they are lying, they know they are lying and user numbers will not be increased anywhere near this (if at all). This whole charade goes round and round until the sales team capitulate and end up selling deals which haemorrhage money.
What tactics (apart from calling their bluff) have you successfully used to avoid this crap?
(As background, the internal costs of implementing the software for each client does not vary significantly so whilst the costs aren't fixed, it does take much longer to recover the costs from smaller clients. Sales rarely sell enough service hours to cover the true overhead either, but that's another story...and we don't bill on hours consumed basis either. BTW: it's not my company so not my rules!)
* depending on how brazen they are...
Er. Better discounts on subsequent purchases so they're getting heavier discounts down the line to offset the higher initial costs they'll pay. This could be readily written into a contract or quote. If they were serious they'd bite your hand off. Don't discount professional services; it should be a profit centre if your PS delivers value to customers - you don't pay your employees less for smaller jobs do you so why should you sell them at less? Again if you're charging T+M you shouldn't lose out but it it's fixed price / outcomes don't take all the risk - pass it onto the customer in the form of increased PS cost and a watertight statement of work. Don't ever do capped T+M - lose/lose.
Why not offer a retrospective discount? you pay for what you use now, if you increase the users you get them cheaper.
eg £100 for 10, £150 for 20. They buy 10 for £100, if they increase to 20 in a few months they only pay the extra £50.
Yep offer them the list price and then give them the offer a discount (in terms of lower cost on additional licenses) when they get to be a bigger user. Or the brutal way - control your sales staff better and tell the small companies the blunt message "you are too small to get a discount".
Er. Better discounts on subsequent purchases so they’re getting heavier discounts down the line to offset the higher initial costs they’ll pay.
This, with or without discounts based on their installed base/that they are a returning customer etc
Better sales training.
Recognise that they are trying to get the best deal they can. Does your company insist on paying your suppliers the highest price they will accept? That's business. The problem is once you begin to offer discounts it is difficult to stop. Volume discounting is almost never about actual cost per unit dropping and very much about landing bigger fish. Do a top down analysis, is your volume discounting practice paying off at any level?
As others have said back loading can be useful. Start with a discount, gradually declining unless billable hours for support or number of license s used grows.
I’m on the other side of the fence, although I usually just pay the asking price. It’s mad.
Anyway, it’s likely your Sales Team just wants to do a deal and move on to the next one, Sales often find themselves stuck between customer and emmployer and allowing them to offer these sorts of discounts will only encourage it. You’ll have to decide how strong your competition is to know if you can ban it.
I think someone else said it first, but if there’s more users coming down the road insist they pay the full price now and offer to sell the future seats at the combined user price.
Just tell them the price and if they don't like it go elsewhere if they can find it cheaper.
I will add that I have no sales training, ran a buisness successful or otherwise, and my approach might (probably) end in disaster. But I just hate time wasting chancers who want something for nothing.
Or offer a useable amount of licenses on a 30 day trial basis and give your sales people scope to increase the licenses on the trail or increase the length, but only at the end.
Really if your software is good, and it’s market position competitive it shouldn’t be so much of an issue.
Small companies aiming to pay same unit cost as bigger companies (that may well be their competitors) non-shocker.
OP - in all seriousness, feel free to drop me a PM. I was coaching on exactly this subject this week so have fresh teaching notes I'll be able to share with you after the weekend 👍
Some good ideas but unfortunately I don't have leverage on any of this. This post was more of a rant that some development work I promised for a flagship client was pulled and instead some custom work for a tiny client replaced it (a client so cheap their users are still on Vista!).
FFS!
(Edit, ah, sorry, just saw you don't have power over it)
Yeah, get your sales people to offer them the better deal later, when their user numbers have increased.
I know freelancers who deal with "do this cheap and there'll be much more work down the line" in a similar way, and flip it to say they'll charge full price on the first job, then outline the discounts they'll give on repeat/subsequent work. Gets rid of liars quick.
Just have a clear pricing structure 1 is £xx, 10 are £yy, 1000000 are £zz. Personally I really hate secretive pricing. Probably excusable in your business but really frustrating on websites with POA or builders merchants who feel that everybody wants a discount so they have a crazy high list price.
Sales need to get discaplined.
Your management needs to tell them to do one or be fired for not working out what is a priority.
But a nice chart does always help - revenue by cutomer/size etc.
Oh and what is the sales bonus paid on?
In your position in the past I did the work for the flagship client anyway while doing just enough of what I was supposed to be doing tomorrow the wolves at bay. Strange how I got little thanks when the flagship client started jumping up and down and I had a rabbit to pull out of the hat 🙄.
I'm not saying your sales people are right but referring to paying customers as lying time wasters isn't the best sales strategy either...
I’m not saying your sales people are right but referring to paying customers as lying time wasters isn’t the best sales strategy either…
Ha, that was one of our old salespersons catch phrase...he doesn't work here anymore...
I'm not not sure what can be done as I'm not involved in the sales side at all but we're in a very competitive market selling a product aimed at enterprise level clients so smaller clients don't necessarily see the value we offer (and therefore have pricing expectations based on more basic offerings from our competitors).
Enterprise level clients don't generate sales queries everyday....
I’m not not sure what can be done as I’m not involved in the sales side at all but we’re in a very competitive market selling a product aimed at enterprise level clients so smaller clients don’t necessarily see the value we offer (and therefore have pricing expectations based on more basic offerings from our competitors).
Easy. This is a training issue for sales and the inbound team. Inbound lead qualification is failing here on 2 counts - firstly, the wrong type of customer for the current product offering is coming too far down the funnel without being filtered, and secondly, this filtration data isn't being fed back to the product team (i.e. "57% of inbound leads are asking for a X product we don't currently sell, which is causing price friction but also lost opportunity as we don't have the right product for that 57%").
Then, the sales team have what I'll guess are some far too simple KPI's that is encouraging poor sales behaviour, focusing on deal closes and a top line revenue figure rather than profitable deals.
Like I say, this is an easily fixable training issue.
I’m in software sales myself and can sell on a similar basis. Maybe I’ve missed a point, but why arent you saying “fine, as the numbers increase I can drop the per use price on sliding scale” but the initial price is the initial price? Don’t keep dropping it, a race to the bottom is a waste of time.
The next piece you said yourself - the real issue is your Sales people need to be educated to sell the value at the price point, not be arguing about per user rates. Personally I’d (and I do) have about 4 x the amount of deals spinning to make my target numbers, so if a client said to me “lower the price or I’m not buying” after I’ve worked with them on a clear business case / value proposition I’d effectively shrug my shoulders an move to the next one. If they really want to buy, they’ll be back or you give them enough time to stew and call them back with one final ultimatium - then walk.
If they buy a trial, what happens after the trial period... Locked out of the software or it still runs?
Agree with the expansion discount as above...
Not software but we charge "trials" of anything beyond what we consider to be samples (volume and size) at full list price, then credit them in full against the final order based on receipt of an order for X products.
Alternatively they place an order for non trial usage at standard discounts and don't get the refund later.