B2B sales. The right way.
Working in Technology business (SaaS or services), you encounter clients that want to modify your offer. They need a feature you don’t have, lower pricing, a longer trial, additional training, etc.. Sometimes that’s okay, but too much of it leads straight to a Death by a Thousand Cuts. Been there, done that – I’m going to tell you how to decide whether you should make an exception or not, and what to do when you have to stand your ground.
When you make a deal, you usually promise that over time your technology will result in big ROI, cost savings or process improvements. To deliver on that and make the deal successful for both parties, you need to spend resources – mainly money and time.
There are 3 outcomes of a deal:
Modifying offers usually leads to an increase in costs or decrease in revenue on your side – both can result in lower, or even a lack of, profits. My firm belief is that margin/profit sacrifice is a great way to fail your clients, team and investors by going bankrupt. Can you avoid it? How should you modify your offer for the right customers?
Some people buy only when they get a better deal than everyone else. That’s their right. Your right is to avoid them at all costs. From my experience, the cost of handling such clients is much higher than usual, because they always expect more&better. They like to ask for features you don’t have.
Too many clients like this will kill your margins and profitability – especially if you have a low-touch sales model. It seems that some people aren’t satisfied with the fact that you can pay 1000$/month for a SaaS that does the same as the 300.000$ tailored software you’d have had to implement 5 years ago.
Rule of thumb: If they are not high profile clients (big brands with millions sitting around) – discard them and feel good about it. Trust me, if you don’t – their friends will soon start asking around for the same offer.
Your clients have to understand that if you charge them less, they will be underserved. Be confident and tell them that you’ll make the payroll with or without their business, but you believe in karma and won’t risk underserving a client or making your team work for free – and that’s why you won’t lower the price.
“I will buy if you add X into the build” – We’ve all been there, right? There are two things you can do:
1. “Sign the deal and we’ll include it in our product roadmap, you’ll have it in 2 months“ – generally worth it for high-profile/high Life Time Value clients. Changing your product team’s roadmap won’t do much good long-term.
Rule of thumb: Do it more than 3 times a month, and it’s morally okay for your product team to mock you (and you can’t talk back). Oh, you’ll probably go to hell too.
2. “Sign the deal and we’ll include it in our product roadmap as soon as more users tell us they need it“ – it’s less likely that you’ll close them, but it’s honest and shows that you really care about client opinions.
A fair amount of clients will still tell you they won’t sign anything until you add a feature. Have a special tab in your CRM for those cases, mine is called “follow up when new feature”. I follow-up when that deal-breaking feature is ready. They usually don’t buy anyway, or keep asking for other features.
Why, you ask? Because it’s usually just a polite excuse not to buy from you.
Some clients will ask you for more customer-care than you usually provide (which should be a lot!). I always say yes to them.
They either really need it, and I’m really into helping people and delivering value to my customers, or they don’t and I benefit from just agreeing to it (without having to do the extra work after all).
Just make sure that you don’t develop a habit of scheduling a call every Tuesday. Call when they need you. And that’s because there is a rare group of clients out there, ones who just like to talk because they have nothing better to do. It’s a marginal and manageable case – when it gets really bad, you can always stop doing business with them.
Rule of thumb: if Goldman Sachs or Uber want to buy from you, don’t argue for pennies. Cash aside, you have to make sure that they give you a logo and testimonial to show on your website (ie.: generate as much referrals and positive word-of-mouth as possible).
Rule of thumb: Reward people who help you.
Rule of thumb: When in doubt – it’s always better to have money in the bank.
Rule of thumb: Have a low-touch sales gateway drug (Audit, Consultancy, Workshop, Training, Book, Report, etc), that you charge a bit of money for and add value with.
There is no perfect answer. Ideally you should provide what your clients care most about, and at the same time you don’t care much about. If you are a bootstrapping startup, cashflow is a bigger priority than profits, until you have real money in the bank.
Regarding your first clients, lifetime discounts are the best way to thank someone for using your MVP when it was yet unpolished. When it comes to one-time discounts, you can always charge a full price if you renew the contract.
Businesses which give discounts on a daily basis will give them more frequently and on a bigger scale over time. It never ends. Remember when you bought your first -70% sushi on Groupon because that was the sickest deal ever? Thing is that since 2008 margins in sushi bars dropped and will never go back to pre-Groupon levels. Because the perceived value of sushi has dropped.
Rule of thumb: After you eat sushi worth 60$ for 15$, you’ll never see it as being worth 60$ again. Remember that when you consider giving a discount.
Of course, those rules are only decision makers who have choices. Don’t be picky if you’re bleeding cash and have no new clients in your pipeline. If the situation stays critical for months, then it’s a good indicator that you need more leads (then you could afford to be more assertive with potential clients).
But having a lot of leads is a different story. At RightHello, over the course of 15 months we’ve made 3 exceptions (out of 114 new deals). And we’ve increased pricing by more than 100%, and initial commitment by 640%. Sounds hard? Well, it’s doable, that’s what matters.
PS. If you’re asking yourself “why is he so negative about discounts?”, go to your boss and give him a 10.000 USD discount on your work this year. Not feeling like it? Good, welcome on board.