* The Business of Software

A former community discussing the business of software, from the smallest shareware operation to Microsoft. A part of Joel on Software.

We're closed, folks!


» Business of Software FAQ
» The Business of Software Conference (held every fall, usually in Boston)
» Forum guidelines (Please read before posting!)


Andy Brice
Successful Software

Doug Nebeker ("Doug")

Jonathan Matthews
Creator of DeepTrawl, CloudTrawl, and LeapDoc

Nicholas Hebb
BreezeTree Software

Bob Walsh
host, Startup Success Podcast author of The Web Startup Success Guide and Micro-ISV: From Vision To Reality

Patrick McKenzie
Bingo Card Creator

big companies expect listed price but ask for discounts

I run a small software company and when I deal with Microsoft and Google for software subscriptions and advertising, they are inflexible on price.

Several years ago I got a reminder email from Microsoft that my software subscription was going to expire in 2 - 3 months. I think the exact same subscription wasn't available, but for what I needed I chose something similar. Anyway instead of waiting 2 - 3 months, I paid immediately. I then saw my new subscription was expiring in 12 months, instead of 14 - 15 months which I had hoped. I had lost 2 - 3 months of my existing and valid subscription! I contacted Microsoft and the man that replied didn't budge. Having said that Microsoft have lots of different schemes and it is possible to get good deals.

Back in the days of click fraud (around 2005 - 2006) on the Google display network, I did get hit for a couple of months before I worked out what was going on (I was busy with writing software at the time). I emailed Google a couple of times,and they just wouldn't refund me. More recently I have emailed Google about high click rates in my niche in the absence of competition, but again they don't budge in their click costs. I did get some advice about low click-through rates in the display network affecting the price of clicks for Google search. I turned off the display network and over the course of a few months, the costs became a little more palatable as the system adjusted to better click through rates. However I emailed Google again about high costs and they either don't reply or don't budge.

This week a software reseller, contacted me about one of his clients getting updates to the latest version of my software for 4 licenses. I checked my sales records and the company only originally purchased 2 licenses. I told them the price would be higher as you can't get 4 cheaper upgrade licenses, if you only purchased 2 to begin with!

I was told the company had only approved x dollars for this transaction and it is time-consuming to change it, so can I accept the lower amount of money? I gave in.

My point is that large companies have fixed prices and if you don't like it, you have no choice. But when large companies deal with me, they want discounts and preferential treatment. I am expected to be flexible, but big companies are not.
AnonForNow Send private email
Wednesday, June 04, 2014
It relative to how 'big' or 'small' the companies doing business are relative to each other, the unit price of the services or software, and the quantity being purchased.

A company the size Google and Microsoft relative to yourself can stand to not sell to you. And they know you are more dependent on there services than they are you buying from them.

However if you're a corporation of similar size or a government entity representing thousands of potential software licenses, then you get dedicated sales person or persons then pricing becomes an issue and the price is not fixed.

You don't have to be flexible in price with any organization. It's there buyers job to try and make purchases for the best (lowest) price they can. It's your job to determine how much selling to them is worth.
TrippinOnIT Send private email
Wednesday, June 04, 2014
"I then saw my new subscription was expiring in 12 months, instead of 14 - 15 months which I had hoped. I had lost 2 - 3 months of my existing and valid subscription!"

As a senile old man, I'll now relate a couple similar stories from my own experience, and then go back to my nap without remembering to summarize and state any point.

Years ago I used to have several magazine subscriptions. How these worked is you paid for 12 months/issues and then after 8 months you started getting notices to resubscribe each month, then after 12 months you got ones where the price was a lot lower. If you refused to renew long enough, sometimes the price would go to $5, or even free.

But... one year something different happened. I paid for a subscription in year X with a personal check, and in year X+1 a certain big corporation publication DIRECT WITHDRAWED from my CHECKING account WITHOUT MY CONSENT.

I consider this theft.

After a year of letters and complaints, the company refused to refund the money and refused to explain how to stop them from continuing to steal from me. I tried to bring a legal action, which led to nothing but wasted money, that's another story.

Their claim was that they had fine print that said that their policy had been changed to one where paying by check was giving implied consent for them to "auto-renew" subscriptions "for my convenience", by doing direct withdraw by what to me sure looked like check forgery. Furthermore, to stop this theft, I had to comply with the cancellation procedure which was in some fine print I no longer possessed, and which they wouldn't tell me what it was.

I had to CLOSE MY CHECKING ACCOUNT to stop this.

Guess how many magazines I ever subscribed to with a check or credit card every again in my life?

Did you answer ZERO? That is correct. Their actions PERMANENTLY disengaged me from magazine subscriptions.

OK, with one exception. I subscribe to an underground arts magazine published by a small group of people.

When I resubscribed to this one, by paying with a money order (which is not tied to bank accounts), the same thing you mention happened, they restarted from the date of resubscription rather than expiration.

I emailed them about this, and they:

1. Gave me a free extra year.
2. Sent me a mug.

So that is the difference between dealing with a small company and dealing with a big american corporation.
Scott Send private email
Wednesday, June 04, 2014
The flip side of this is why do consumers expect lifetime technical support for one $50 purchase made 8 years ago just because they are dealing with a mISV?  They wouldn't dream of contacting MS or Adobe to ask for such support.
Mark Nemtsas Send private email
Wednesday, June 04, 2014
My experience is that yes, many clients will always ask for a discount because that is their policy.  But the ones that push like you described INVARIABLY are the biggest pains in the neck out there.  Sometimes you are better off with out them.

I once heard a speaker say "A customer who purchases based on price alone cannot spell the word loyalty."  And it's true.  Not only will they always work you for discounts once you give in, they will also SUCK THE LIFE out of you with their endless, helpless neediness and ridiculous, unrealistic expectations.

I do custom work for many of my clients though so if you're just selling straight downloads it may not be as bad.  But the clients who don't question price?  They are also the low maintenance ones who don't ask for much and happily pay for what you give them.

Ironically, I have NOT noticed a correlation between company size and these qualities.  I have huge corporation clients who are a dream, and ones who are a nightmare.  Same with small 5 - 10 people companies.

Now, when someone pushes me for a discount like you described, a big red flag goes up in my mind and it's NOTE TO SELF: Charge full price on everything,  They will never appreciate anything extra you do for them and they will become entitled to discounts and free support in a heartbeat.

Of course if I'm desperate for business at the time, I adjust my attitude.
Emily Jones Send private email
Wednesday, June 04, 2014
Large companies ask for discounts because they have full time buyers. One of the goals of purchasing departments is to minimize cost, so they try to negotiate a discount.

In order to handle these situations, it's important to understand the purchasing process in most companies. I've worked for large multinationals and small companies, and they all basically had the same process:

1. The person wanting the item(s) fills out a purchase requisition.

2. They send the purchase requisition to a manager with signature authority.

3. Once signed, the purchase requisition is sent to the purchasing department.

4. The buyer places the order via credit card or purchase order, depending upon the dollar amount and company policy.

At step 4, the buyer has two internal customers - the person who placed the purchase requisition and their own boss. Ultimately, the objective of the purchasing department is to fulfill the needs of the company, so their primary goal is to satisfy the needs of the person who placed the order (in step 1).

However, I have worked for companies where the buyers were under strict orders to negotiate everything. They often have a long queue of purchase req's in their pipeline, and software orders typically are not rush jobs. The buyer is happy to sit on the order until you cave or the originator from step 1 puts pressure on them.

If you want to speed up the process, have a 5% discount code that you can offer them. That way, you haven't lost too much on the sale and they will have met their needs of getting a marginal discount. If that doesn't work, have a 10% discount ready. If, based on previous emails, you know the person who placed the req, make sure to CC them on the replies, even if the buyer didn't include them. This helps place internal pressure on the buyer to fulfill the order.
Nicholas Hebb Send private email
Thursday, June 05, 2014
Perhaps the 'reseller' was just too lazy to create another purchase order?

The bigger the company, the less discount I offer them. And I never offer additional discounts if they buy through a 'value subtracted reseller' such as SHI, because it is invariably more work for me.

See also:

Of course, if you really need the order then it may be worth negotiating.
Andy Brice Send private email
Thursday, June 05, 2014
"I was told the company had only approved x dollars for this transaction and it is time-consuming to change it."

Even if this statement is not a lie, the change would consume none of *your* time, right? Somebody miscalculated the cost, why should that be your problem? Unless I really needed the money now, I probably would have replied "Okay, we'll wait".

Or perhaps "How about we get a testimonial or at least a permission to include <big company> in the publicly available list of our clients?"

The rule of thumb is to either give less (e.g. just six months of support and upgrades instead of twelve) or get something other than money when extending such a "forced" discount to a large customer.
Dmitry Leskov Send private email
Thursday, June 05, 2014
@Nicholas Hebb - that is great info thanks for posting. 

It reminds me, I have also heard that some companies sit on invoices for a long time (say, 90 days) as policy.  I have experienced this with some east coast companies, New York in particular.  It's so obnoxious IMO.

BUT also as policy they are told if you can get a discount you must take it.  So the way to get them to pay up quickly is to bill with terms like 1%/10 Net 30.  Even though 1% is a very small discount, if their policy is to get all discounts they should act.

Of course this is if you are billing them after the product/service is delivered.  For most software you're probably requiring payment before they get it.
Emily Jones Send private email
Thursday, June 05, 2014

This topic is archived. No further replies will be accepted.

Other recent topics Other recent topics
Powered by FogBugz