In tough times pricing negotiations can get very tough and some customers are essentially setting their own price. They decide how much they will spend on support and present the vendors with an ultimatum: they won’t spend more than a certain sum, take it or leave. What can a vendor do?
1. Establish a relationship with the head of the line of business group that uses your product prior to the ultimatum. Price ultimatums are typically set by the purchasing team, which usually knows little about the way the support contract benefits the company. If you can instead negotiate with the head of the business group that uses your product you will find much more understanding of what’s needed. Naturally this assumes you planned ahead: relationships take time to evolve.
2. Demonstrate that the current price is a great deal. Often support pricing carries hefty discounts that originate in the history of the business relationship — but the “list price” is rarely shown in the quote. Try showing it. Psychologically the bill seems lower if it is a result of a discount (and many purchasing agents are compensated on the discounts they negotiate, so could become more accommodating if you serve one up to them.)
3. Show options. Here again the same bill can seem lower if paired with a higher option. Try sending all bills with two options, the current setup and the offering level right above it.
4. Use the next-lower option during negotiations. Say you have three support offerings, Bronze, Silver, and Gold, and the customer bought Silver. If they balk on price offer to sell them Bronze. At least you salvage some money and with any luck the users of the support will push to restore the level they enjoyed to begin with. (I would not show the lower option on the original quote; keep it as a back-pocket option.)
5. If needed request “custom” concessions. For instance let’s say the customer refuses Bronze support (they need 24×7) but won’t pay the price for Silver. Perhaps you can cut down on the number of technical contacts as a partial compensation for your concession. Generally speaking do not make price concessions without asking for something in return. Remember that concessions you make today will likely carry over “forever.”
6. Remember that mission-critical tools are just that. If your customer’s usage of your products is mission-critical they may negotiate very hard, but in the end they do need the service. Offer a few low-cost perks to soften the edges (e.g. an additional support contact, a few free training seats) but hold firm on the overall price.