Where The Prices Are Insane! July 10, 2009
Posted by Chuck Musciano in Leadership, Technology.Tags: Customer Service, Software, Users
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It happens four times a year, like clockwork. Just before the end of March, June, September, and December, the phone calls and emails flood in, all promising the same thing: unheard-of pricing on products you absolutely cannot live without. These once-in-a-lifetime prices are only available for a short time, if you act now!
What’s being sold at immense discounts? ShamWow or Snuggis? A Pocket Fisherman or a 12-CD set of the greatest hits from the 70s?
Nope. The big sale is on software. Big software: databases, ERPs, business intelligence platforms, and the like. Even with the fabulous discounts, the prices still run well into six figures, plus implementation costs.
Who buys software like this? Is there a CIO anywhere in the world who will write a check and buy software at the drop of a hat?
Done correctly, big system purchases take a long time. Requirements analysis and market evaluation are tedious but vital to ensure a good fit for your organization. Understanding the deployment costs and timeframe is crucial for success and can takes weeks to figure out. Just reading and negotiating the support and licensing contracts is a major exercise all by itself.
Moreover, as CIOs work to gain the respect of their executive peers, the last thing any of us should be doing is running to the CFO’s office on June 30th, looking for a signature to close a deal before 5 PM. Rushing a deal to save a buck is unprofessional, and any other C-level executive should question our abilities if we behave like that.
That isn’t to say that I don’t appreciate a good deal. But the right way to approach a quarter-end discount is to start working towards it at the beginning of the quarter. Everyone on both sides of the table knows that pricing gets tighter as the quarter and year ends. By doing all the heavy lifting well before that time, we can focus on solid price negotiation without being pressured to short-circuit our diligence when things go down to the wire.
I really appreciate those vendors that come to me well in advance to put together a great deal with plenty of time to spare. Not only does that let me do my job on my side, it also lets me manage the process with my management team, giving them plenty of time to learn about the proposal. When I do go forward with the final pricing at the end of the quarter, there are no surprises to delay the process. By helping my company reach a good decision in a timely fashion, a vendor makes themselves (and my team) look good.
Selling is about relationships and providing solid value over time. Vendors, please leave the high-pressure tactics to late-night TV ads and used car lots, and give your customers time to evaluate and respond to good offers in a timely fashion. We’ll all close on more deals with a lot less stress.
The Effective CIO 
So true Chuck.
Lately I have been finding the vendors are skipping me and my team and going directly to the business leaders. Then I get approached by our senior business leadership with a rushed funding request for a product (no problem statement, requirements, or business case) that is “a great deal” and is going to “have a huge impact on our business”.
This will certainly put ones leadership skills to the test as you try to explain why we should take a step back and understand what problem we are trying to solve.
I know everyone has a job to do but I agree with you that this approach does not support creating that trusted relationship.
What makes all this even more unbelievable is that these (pricing) practices have been around for at least 2 decades in this industry.
You would think Marketing and Sales would have figured out by now that no customer likes to be rushed into buying – not for cars, not for the 12-CD greatest hits and certainly not enterprise software.
@Ernie: Training vendors to work directly with you takes time and the support of your peers. Once vendors see that the tactic is fruitless and your peers realize how of their time is being wasted, it gets easier.
@Krishna: While successful oong-term salespeople figure this out, lots of newcomers still need to learn that sales is about relationships and not price.
Chuck,
I just had this same issue come up in the end of June. We had been negotiating for some time with a vendor for a product. However, the deal depended on our sales staff signing a contract with a customer. It was a nice deal, but our customer didn’t want to to sign after 4 months of negotiation. I was straight and up front with my vendor – great deal but no purchase with a signed contract from my customer. I try to start these negotiations with my vendors at least 6 months out in order to verify all requirements and to get the best win for both sides. This includes straight maintenance contract renewals. It is worth the time and effort to plan well in advance, but a discipline that is not liked by many employees.
Good post.
Wayne
Chuck,
I have always found that the time pressure tactics are fake. Depending on whether I want a broader, deeper relationship with the vendor or not, you can use their high pressure tactics against them.
You often can get good price concessions from software vendors at the end of a quarter or year. If you don’t want to play their game, or simply can’t get the deal done by the end of the quarter, get the quote in writing. 100% of the time I have been able to get the same price after the end of the quarter. See how low they will go when their quarter end is looming, and then do the deal on your own timeframe.
Given that end of quarter discounts are offered by most vendor, including hardware, we work with clients in the annual budgeting process to turn the tables and time purchases.
We recommend clients quote systems 6 weeks before EOQ, then request new quotes with end of quarter discounts 2 weeks or so before EOQ. We are open and honest with vendors that we expect significant discounts, given the vendors’ history of calling with offers in the past.
We’ve seen savings of 15% to 60% off original quotes on purchases planned well in advance.
Regards,
Allen
afalcon@horizoninformation.com
@Wayne: As with all things, honest negotiation and up-front dealing is the best path to success. Letting a vendor know how deals may or may not play out is always a good diea, and a good vendor will always respect and appreciate that approach.
@Todd: I agree: EOQ prices are almost always available at other times as well.
@Allen: Again, planning and honest approaches always pay off.
Thanks to everyone for their comments!
I find it extremely fascinating to read CIO-level perspectives on this tired vendor tactic. Each and every time I talk with C-level folks, they all agree – this tactic is wrong, shouldn’t be used, shouldn’t be reacted to, etc.
But at the end of the day, the tactic is used time and time again because these same CIO’s fall for it. Or they don’t have the power/support/energy/attention/respect from the business to stop it.
The day that IT management stops buying the end-of-quarter/year firesale deals is the day that these deals will magically disappear. Or rather, it’s the day everyone will discover that these deals exist every minute of every day of every year… and if you’re planning properly in advance, you’ll be ready to pounce or create them on YOUR time-table rather than the vendors.
Heck, I even wrote an entire article on it:
http://www.licensinghandbook.com/2008/04/01/firesale/