The Salesforce CRM Renewal Dilemma

Negotiation Best Practices when Renewing Salesforce

Summary

• When the Salesforce CRM renewal comes due, customers have at least two options; grin and bear the price increase or negotiate something different.

• Salesforce customers using the CRM software's innovative capabilities will find the inevitable price escalations acceptable and complete the renewal without much exertion.

• Salesforce customers not using the CRM software's pioneering capabilities will find the price increases further contribute to a price premium that does not deliver an effective ROI. They may seek to negotiate the CRM renewal or consider an alternative.

For many Salesforce customers the Customer Relationship Management (CRM) software renewal is a routine event. They renew their CRM subscription at a slightly increased price. CRM price escalations are minimal if they previously locked in contractual protections such as price caps. If they didn't, CRM price increases are likely to be higher.

But for other customers the CRM renewal comes with a surprise that creates a quandary. They are told they need to upgrade to the next CRM pricing tier, or their initial CRM purchase was some type of sweetheart deal that is now expired. Price escalations often range from 15 to 50 percent. Unless they negotiated a CRM software contract that limits CRM price increases what choice do they have?

Suck it Up Buttercup

Well, there are two options most pursued. Salesforce customers can reluctantly accept the price increases because they feel they have no choice, or they can reassess their CRM alternatives and negotiate the CRM software renewal.

The first option is easy. It may be uncomfortable, especially where budgets are tight or for companies engaged in cost cutting. But when seemingly left with no alternative it's the easy choice.

An Alternative Response

The second option is not so easy because to engage in meaningful and substantive negotiation the customer must be prepared to walk away if they cannot negotiate an acceptable agreement. Sure, they can bluff and suggest they will walk away. But it's quite likely the Salesforce seller will call their bluff. Expert negotiators pursue CRM negotiation strategies built on real options and not on pretense.

Reassessing Your Options

Salesforce is the market leader. The company projects itself as an innovator. Customers know Salesforce is a higher priced CRM system but that's an acceptable investment to achieve big goals such as digital or business transformation. Well, at least that's the thinking at the time of purchase.

But now it's three years later and the customer isn't the trail blazer they thought they would be. They are not using those groundbreaking and disruptive capabilities that justified the price premium at the time of purchase. In fact, the customer is using the standard features available from pretty much any CRM application.

For these customers, they may be paying a 50 percent or more price premium without corresponding benefit.

I spoke with two CRM analysts from Gartner and Forrester. They shared something I've also seen. Many Salesforce customers buy into the company's vision, maybe even into the hype. But that hype later dissipates over time. One analyst advised she takes about 300 CRM client inquiries per year and about three quarters are Salesforce customers saying they have been using the CRM system for 3 or 5 years or so, but are only using basic contact, account and case management. They are already paying a price premium and are now being pushed into higher pricing. They are struggling with the renewals as they are only using generic or commoditized CRM processes.

Salesforce customers using basic CRM software processes must ask themselves if they will step up to social engagement, digital transformation, artificial intelligence, platform services or other Salesforce capabilities that may justify a premium brand and price.

If they will the investment is a good one that will likely contribute to a positive ROI. If not, they are overpaying and will continue to throw good money after bad.

This issue is most prevalent with small and midsize businesses, companies without much IT support or companies who are technology followers.

Time is Not Your Friend

But here's the thing. To switch CRM software, you need significant lead time. Time to find the best alternative and time for implementation. Without this lead time you are back to option one and left with no alternative.

The cloud has facilitated switching CRM systems more easily. From a purely tactical perspective implementing a new CRM system is largely a mechanical exercise. However, switching CRM software may not be easy for users emotionally attached to the brand leader. To avoid user challenges, a clear value-based business justification and change management program are likely required.

And here's the whammy. Successfully planning a viable CRM replacement may be for not as the Salesforce seller is likely to shift the conversation from price escalation to customer retention. All of a sudden, an inflexible CRM renewal contract just became flexible.

It's Not Salesforce

I'm not suggesting Salesforce is the culprit in the CRM renewal dilemma. They are simply growing their revenues and their business. The same goal as every other CRM publisher. And to be clear, I'm a Salesforce fan, at least when the software's capabilities are aligned with the customer's objectives.

However, without this alignment, customers may benefit from reassessing their options.