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End of Year Software Discounts: Savvy Cost Saving or Short-Sighted Business Move?
It’s the end of the year, which means buyers are rushing to use up all their year-end budget, (hey there, favorite The Office clip). Of course, this means salespeople are also hyper-motivated to negotiate to hit that all-important number. As such, steep discounts are often on the table in a way that can feel as thrilling as a 50% off Apple Watch on Cyber Monday.
But as we dug in and talked to our community, we found there were two sides of the coin, literally. On the one hand, sometimes vendors will offer a price break to push their number over the line for the year. This is reasonable and it could still be a great product. For example, in the reference above, Apple doesn’t technically discount their technology on Cyber Monday. Instead, they offer you a $200 gift card when you buy one full-price item. This is an example of a nice incentive to shop that is attractive to a buyer and provides a little extra perk.
On the other hand, we have all had that Amazon Prime experience where we’ve been thrilled to find a graduation diamond necklace for our niece at 50% off, only to have the chain break the second we take it out of the brown package. And on closer investigation, the “diamond” reference in the product description was in air quotes, and it’s actually Swarovski crystal. And with that, you are now making an emergency trip to the jewelry store at the mall at the last minute, like you now wish you had done in the first place, lest you give your niece a present that makes her look like a rip-off version of a Kardashian.
When it comes to B2B, the 50% off necklace phenomenon shows up in the form of desperate companies who are offering rock bottom discounts, not just price breaks, because their product isn’t up to snuff, or because they want to distract you with such a low price so that you won’t ask too many questions about the product details and will just sign on the line, delighted to go report to your CFO the wonderful bargain you’ve negotiated.
And sometimes, a discount is just a discount, and you should grab it while it’s hot and save that money.
So, how do you know which is which? What’s a year-end buyer to do? How are the industry’s most savvy buyers handling their end of the year spending? This seemed like a very delicate problem, so we wanted to poll our community and help you figure out how to handle your end-of-the-year budget in a way that will be most cost-effective and truly set you up for success in the new year. Here’s what they had to say. Hope it is helpful!
When it comes to end of the year budgeting best practices, we got some mixed responses. For example, Peter Kazanjy, Cofounder of Atrium HQ, suggests saving on commodities but splurging when there’s a superior differentiated solution. “Generally speaking, as a sophisticated purchaser,” said Kazanjy, “I’m going to be seeking out differentiated solutions, so it would be unlikely that an inferior solution could win my business by discounting. Now, this isn’t the case when the offering in question is a commodity, and I am confident that there isn’t a delta between the superior and inferior offering.”
On the other hand, Chad Dyar, Director of Sales Enablement of OnDeck, recommends saving on new technology so you can splurge on upgrading your current tech stack. “Our team is lucky enough to manage both the sales and marketing stack,” said Dyar. “When those high dollar tools come in under budget for the year, there are a lot of fun, less expensive tools or upgrade options for existing tools that we can invest in with whatever remains in the budget. My personal goal is to always negotiate my way to some savings and then use the good will that creates (and the leftover dollars) to invest in other projects over the course of the year.”
These are both thoughtful approaches. And overall, saving money is always a good thing, right? Or is it? We decided to dig deeper and ask our community where buyers should draw the line. When is a price reduction a positive thing, and when is a deep discount more of a red flag and less of a revenue-saver?
“I’ve never felt so helpless in my life”
We first heard from Deb Day, CEO of 3 Leaps, who shared a harsh budget lesson that has stayed with her all these years. “It happened in 2009. I was just trying to launch my very first e-commerce startup and I was waiting for a Black Friday discount on a web hosting package,” she said. “So, I was vigorously searching the web for the cheapest web hosting deals available. I found a great one. The company was offering a whopping 90% discount on its web hosting package and the domain was offered for free. The offer was so tempting that I succumbed and purchased it immediately.”
At first, everything was great, Day said. “Everything went on fine for the next few days,” the CEO shared. “I got a nice domain for my startup and the hosting appeared to be okay-ish. But things started unravelling the very next week. I naively installed WordPress, add a few apps on it to start selling some products, and began making design changes to customize the website.” Here, Day shares, is when the other shoe dropped. When she refreshed, none of her changes were reflected. “When I checked the domain on the web, it shows nothing. I mean nothing. I contacted the support team. I felt that I was talking to a robot. No matter what questions were being asked, they were giving me some template answers. ‘Give me two hours’ or ‘Give us two days to fix this issue.’ Man, I never felt so helpless in my life. Nothing was going right. After a fortnight, I decided, enough is enough and moved on to a new server.”
Sales Hacker commentary: We conscientious budget shoppers have all fallen for a Black Friday deal gone wrong (we at Sales Hacker may or may not be harboring a defunct Roomba or an inflatable unicorn that never actually inflated) but while falling for a bummer Amazon Prime deal can cost you a small chunk of change, a bait-and-switch purchase at the business level can be much more painful, expensive, and even catastrophic. Learn from Deb’s disaster and if something seems too good to be true, it probably is!
“Delivery rate drop-off disaster”
Erica Stritch, VP of Marketing at RAIN Group, also shared a tale of a deep discount gone wrong. “A few years back, we were reevaluating our list/business information provider,” said Stritch. “While we were happy with our current provider, they were increasing prices and we’d been getting many offers and solicitations from competitors. We took a few demos and ultimately decided to switch to a competitor who seemed to have similar features and validation processes, but was giving us a highly discounted rate that would be half of what our current provider was offering.
We integrated the new technology into Salesforce.com only to realize one of the features we used the most with our old provider did not work with the new provider. It created a ton of manual copy and pasting to get the data from the provider into the Salesforce.com record, while it used to just take the click of a button. The disappointment really set in when we launched our first marketing and sales campaign. While we typically got a 70% delivery rate with our old provider, our first campaigns were getting about 40% delivery using the data from the new provider. The data was old and not validated the way they described in their sales pitch.
Within 3 months we switched back to our previous provider, paying twice the amount but also getting the features we wanted and accurate data.”
Sales Hacker commentary: Twice the amount! Ouch! Our number one tip is, if you see Erica, buy her a drink. Secondly, her comment on false feature parity rings especially true. Not all features are created equal. A vendor may say “Oh yes, we have at-a-glance metrics also.” But Vendor A could have at-a-glance metrics that include pageviews, leads, and demos whereas Vendor B could still justifiably say they have at-a-glance metrics, but only offer pageviews. So, double-click on those feature claims! Go beyond the “feature! Check!” mindset and really dig deep into what the feature entails. Also, seriously, don’t forget the drink for Erica. She’s been through enough
“Beware the bait and switch software”
Collin Cadmus, Vice President of Sales at Aircall, also shared his discount philosophy. He advised it’s not the discount itself, but the chance of the bait and switch product that is the real risk. “Considering the dozens of tools I’ve implemented I will say it’s not usually a heavy discount that can be predictive of most issues— it’s buying things that sounded too good to be true from the start. If they sound too good to be true, they usually are. Too many solutions out there making claims they can’t live up to— selling way too far ahead of their realistic abilities. Selling stories and dreams may sound good to investors, but software vendors need real results for a sales leader to keep paying the hefty price tag.”
Sales Hacker commentary: Collin is correct! If something sounds too good to be true, it is often the case. We all understand the desire to future-sell—you definitely want to let your prospects and customers know if a feature they really want is in the works—but it’s a fine line. Don’t get too ahead of yourselves as salespeople and overpromise too much. Even if you have the best intentions and just really want to get them excited, over-selling will ultimately create a negative customer experience and perpetuate a negative stereotype of salespeople.
“Choose expensive and effective”
Brad Rosen, VP of Revenue Operations at G2 Crowd, told us when it comes to purchasing b2b sales software, it’s about quality and ROI, not just face cost. “Price does come into play when purchasing software,” Rosen said. “However, we are fortunate enough to have significant backing and can purchase the best tools for us (within reason).”
So does this mean you should pay more for better results? According to Rosen, the answer is yes. “I’d rather purchase a tool that is more expensive but also more effective,” the Rev Ops VP shared, “Lost productivity will generally hinder us more than trying to prove the incremental ROI from a more expensive tool.”
In conclusion, Rosen said he has to think about the bottom line. “My general thought process when buying is ‘Will this tool help our productivity and bottom line? If yes, how much effort will it take to implement? Do I believe the team will adopt the tool and benefit from it? Does the price align with our budget and perceived value?’ “ If the answer is yes to all of the above, Rosen says it’s a winner.
Sales Hacker commentary: It is safe to say G2 Crowd knows a thing or two about the best sales software, so we trust their advice is good advice. Brad makes some great points. While it is tempting when your CFO is breathing down your neck to go for the cheapest option just to increase your chances of getting the budget line item approved, that same CFO is going to come back to you in a few months, asking you to prove the ROI. So remember to focus on overall value—Price absent the context of value is meaningless. $1 per user per month is too expensive if you make $0.50. $1,000,000 per user per month is cheap if you make $100,000,000. So, don’t be penny wise and pound foolish. If the increased expense in the beginning will be easily justified by the end results, that’s one thing. On the other hand, if the other product is more expensive and you can’t find a good reason why, of course, go with the less expensive option.Save money where it makes sense to save money. Just make sure you check under the hood, as we discussed in the feature parity section.
There you have it, straight from the source! We hope you enjoyed this Sales Hacker Community round-up and that you have a little more clarity about your end-of-your-spending! Get value, save money, and don’t end up with a Kardashian necklace, and you’re good.
Also published on Medium.