I am looking for some feedback regarding this situation.
We provide software in the form of SaaS.
Now, we have been working with this 1 company for over 3 years. They have 1200 employees, of which all could be using our software but for the past 3 years they have only been using 50 licenses/users.
I recently talked to our contact, a mid-level IT guy and discussed the potential of having our software implemented across all 1,200 users. He mentioned that in order for that to be possible we would also need to offer some sort of professional service dude to the fact that they do not have the bandwidth to analyze the data that would come out of ever user.
I provided him with a proposal with an attractive discount due to the fact that we have been working 3 years and that we will be providing 1,200 licenses and professional services. He reviewed the proposal and his response was not only asking us for a further reduction in the licence cost but that the professional service element be completely free. He then finishes the email by saying, let's make this a win win situation (I felt sick)
Now emotions aside, I understand that is definitely a Super win-lose situation for us.
I believe I am going to take the route of explaining to him that I doubt he sees the value in our system and offer to provide him with a thorough presentation as to how he will get his ROI. If he still doesn't budge then I reckon I'd have to walk away because it just seems like he is asking for way too much.
What do you guys think? Let me know if you need any additional details.
If it's a low-ball counter offer just politely say "sorry those are our best prices" and walk away. Any other response undermines your current pricing.
If they need it, they will come back with a better offer.
If you don't think you can walk away, cut something (professional services, number of licenses) to meet the proposed price.
"We can't do 2000 licenses for that price, but we could perhaps do 500 licenses with up to 50 hours of professional services during the first four weeks after your purchase. Additional professional services could be purchased at our standard commercial rates after that if they are required." The guy may just not have enough budget for what you proposed.
The golden rule in negotiation is to never reduce your price without also reducing what is being offered.
I don't know your negotiation history with them and what their attitude has been over your fees for the past 3 years. Usually it is better to make a high proposal (not too high) and allow them to counter-offer around price and services. The mistake the IT guy made, was going too low on the counter-offer and he's put you off. Sounds like the professional services are very important to him (Maybe he is running on a low staff.) and then price (Low IT budget).
Since you asked him to jump from 50 to 1500 licenses, he really has no need for it but will go along if the price is right. I would reduce your quote slightly, and let him know that you understand if he doesn't have the money in his budget and that there are no hard feelings. Or offer the services for a short period of time to let them get things tested out and settled.
I'd figure out a way to allow for INCREASING the cost based on the professional services requirements. They can bear all the costs directly. That is a risk - unless you are already supporting on the order of 1000 users this is a big jump for you and lots of risk for labor costs.
You need to budget for providing the services you have to provide.
Hold your ground, and just explain that you can't offer a better deal.
OK a few questions and then some thoughts.
First two have to do with understanding the demand for your product.
Who initiated the discussion for the jump of use from 50 to 1500?
The next two have to do is there future sales implications with other firms.
Does the change of capacity that they are asking for increase fixed costs and reduce variable or they both go up for you?
Is there another sale of this magnitude in the wings if you could be priced like they are asking where a change of capacity on your end?