If you work in operations it is part of the job description to evaluate and select the tools for your teams. So you will negotiate with vendors. Try to become good at it because
it helps you stay within budget if you're responsible for one
it helps your boss to stay within budget (+ brownie points for you)
you might get a better tier for the same price
you leave room for buying additional tooling that might make your life even easier
it's fun!
There are two well-known approaches to negotiating. Both work, but think of them as giant enterprise platforms that try to handle everything. You, however, are looking for a simple tool that does one thing only. I'll propose a much leaner playbook that works very well when negotiating with the average SaaS sales rep. Let's look at both established schools of thought first and see why they are not a good fit for SaaS negotiations.
Getting to yes (GTY)
This is the more academic way, first defined by two Harvard professors in the book "Getting to yes". It rests on five principles:
1. Separate the people from the problem
Your goal is to build a positive and trusting relationship, despite the fact that the other side has opposing interests.
2. Focus on interests, not positions
Positions are what people say they are, interests are the underlying forces that lead people to hold a certain position. Your counterparty might not have realised that their position does not further their interests.
3. Invent options for mutual gain
It is your job to find options that benefit both you and the people you negotiate with. No party should feel they were taken advantage of.
4. Insist on using objective criteria
People say dumb stuff when negotiating, especially when they become emotional. Insist on using objective criteria to evaluate proposals and positions; do not give in to threats.
5. Know your BATNA
To assess whatever is currently on the table, know your best alternative to negotiated agreement. You have to have one, otherwise all leverage is on the other side and you might as well not bother negotiating.
👉 GTY is what you learn in Negotiation 101, and it's useful for every negotiation where the other party has at least an inkling to come to an agreement. But what happens when they do not?
Never split the difference (NSDT)
The antidote to GTY: Chris Voss is a former FBI hostage negotiator and now book author and speaker. He turns the academic approach on its head by insisting that there is no mutually agreeable outcome. There is no BATNA in hostage negotiation, there are no objective criteria, and no option for mutual gains - the hostage taker must give up.
How does he negotiate to that point? His approach is a lot more psychological than analytical. In his view, negotiation is not a battle of arguments but an act of discovery. Discovering something together requires rapport. Voss describes different approaches to quickly establish rapport, such as
repeating particular phrases or words to make the other party feel like they are being heard;
labeling emotions by saying „It seems like…“ or „it sounds like…“
This will sound familiar if you've heard about nonviolent communication. From there, he uses various tactics to continue the discovery process. Voss is looking for leverage, that is
something he can provide or withhold (positive leverage)
something he can do to make the other party suffer (negative leverage)
something that uses the other party's existing beliefs (normative leverage)
For him, every negotiation was different because no hostage taker is alike. So he relies on excellent conversation and listening skills. His strategy is highly adaptable, but it takes time to master.
Focus on features
GTY and NSTD are toolkits for very complex negotiations, from party coalition agreements to billion-dollar infrastructure contracts to hostage situations.
Negotiating SaaS contracts is simpler and follows a predictable pattern. So let's use a simpler system. Our protagonists are:
You
Use a number of different SaaS tools already
Need new tooling to automate or streamline processes
Have some options on how to solve your process issue
The last one is crucial. There is hardly any tool that doesn't have at least two to three competitors. It's in the nature of the software business that unique services don't stay unique for long.
Sales rep
Works for a mix of fixed salary and commission
Can pull three levers: Price per month or license, contract length, tier
Has very limited influence on product features, i.e. cannot change the product on the spot for you
Your leverage
If you compare two descriptions your leverage becomes obvious. You can usually choose between a number of options with only slightly different feature sets. The sales rep you're talking to has only one feature set that s/he can work with.
The sales rep wants to close, even if that means giving you a significant discount. Most customers don't enjoy negotiating very so they do it halfheartedly at the very end. You should use that to your advantage.
Step 1: Research and demos - but don't talk about pricing
Here's what you do:
Research the available tools that would solve your issue - that's your longlist.
Book a demo with your top three (or more, if you really enjoy demos)
Let the rep walk you through all features relevant to your use case
Get demo access to the tool
Here's the important bit: Do not talk about pricing or budget.
"I'm just evaluating different vendors in the market that could help us solve this problem. I'll get back to you if it's a possible fit."
Talking about pricing is like blood in the water for a sales rep. Once you do they know you're seriously interested, so make them wait. Time is your friend here.
Step 2: Find the flaws
After those initial meetings you will likely find that no tool offers exactly what you need. Some might lack a feature, others have so many that they are bloated and hard to use (looking at you, Atlassian...). But you'll have a rough idea which tools are the right ones. That's your shortlist.
For every tool that made it on the shortlist, figure out the flaws. This can be anything:
Too bloated so it's difficult to set up?
Too simple so a nice-to-have feature is missing?
No extensive training videos?
No native integration with a specific tool?
No API?
Switching cost too high?
The idea is to find objections that the sales rep cannot solve. Remember, sales reps cannot change functionality on the spot - their only levers are price per user/month, contract length and tier.
Step 3: Hello again
With that, go back to the sales rep and schedule a second meeting. Go over your use case again and highlight the flaws that you found. There'll be handwringing, lame jokes and lines like "it's on our roadmap, but I obviously can't promise you when it'll be released, you know how it is".
They'll ask about your budget. You respond with something like
"It gets 80% of the job done but given the flaws we talked about I need to go back and review some other options we're looking at".
That's it - again, do not talk about pricing.
For a sales rep, that's the worst part. They have an interested customer whom they can't seem to get to sign. There's nothing they can do because you refuse to talk about their levers.
Step 4: Get a first offer
Once you've had all second meetings, email each rep:
"I like your tool but given the flaws x, y and z that we talked about, I need to invest in additional tooling/development resources/manual work. How much would n seats cost?"
💡Obviously use your own wording here that fits your style and the industry you work in. 💡
Here’s the POV of the sales rep and what they might tell their boss if asked: There's a potential customer who is interested (multiple meetings) and well-informed (researched the flaws), but needs an additional push to get over the line. They won't accept any offer that's not discounted, in fact I might even lose them altogether if I don't offer any discount upfront.
That offer will already be quite significantly discounted. In part 2, we'll talk more about how to proceed from here. For now, just remember: If you hadn't done what what we talked your first offer would have been whatever is on the pricing page. Now you start the actual negotiation with a guaranteed discount. And don't suffer from discount shock. High discounts are the norm in SaaS. You can always pay less.