Beware the Exploding Offer Bluff

As we head into the Labor Day long weekend, we note that this year Friday is the 31st, a.k.a. the end of the month.

Yesterday I wrote about the car buying experience and its applicability to information resource renewals.

I have bought three cars from dealers over the years - one new and two used. In each case, I negotiated the sale on the 28th or 29th of the month - and one, on December 28th - the end of the month, quarter, and calendar year. I bet I was the only customer they had between Christmas and New Year's! And I got great deals each time.

As in buying a car, you will also find that the end of the month is a big deal for sales pros at market data and information services vendors.

You've likely heard one or more of the following from a vendor:

• The offer expires 7/31
• We really need to get this signed before the 1st 
• I won't be able to offer this discount next month. 

What's driving this? Simple: companies can book, and often recognize, the revenue (or a portion of it) in the current month. That's why sales people always want to close a sale in the current month.

The problem is, these "deals" don't "expire". In effect, the vendor is showing their cards on their ability and willingness to negotiate. Don't far for one of the oldest sales tactics on the books.

The "discount" will still be available on the 1st, just as it was on the 31st.

It's not like information services vendors have expensive inventory they're carrying. These are highly scalable, low variable cost businesses. They don't have lots of working capital tied up in inventory. In fact, they don't have inventory per se - their product is non-rivalrous: selling you a subscription to X service doesn't mean they can't also sell it to Y. So you're not taking any inventory off their hands. They don't have to ship un-sold inventory back to the OEM.

What to do?

First, consider the merits of the deal, independent of whether the offer is exploding. A deadline to sign shouldn't necessarily factor into your decision around the value of the product for your organization. However, if the deal is a good one, why not take advantage of it?

Second, see the "discount" for what it is: pricing flexibility. Look at what other concessions you can extract from a vendor that's not playing firm on price. Can you get a CPI cap? A flat renewal? Additional licenses, if the ROI is there? The opportunities that open up in this scenario are many. Take advantage of them.

Third, use the end of the month tactic yourself to negotiate better deals, particularly on renewals. The earlier you start the renewals process, the more likely you are to realize savings. Say you have a service that expires 4/30 that you know you want to renew. Why not reach out in February and discuss early renewal? Your sales people at the vendor may have more flexibility on pricing if you can close a renewal with them by 2/28. Take a stab at it -- but don't appear too eager to renew, thereby undercutting your negotiating leverage.

As with most aspects of negotiation, there are two sides to every gambit. Use end of the month urgency to your advantage when negotiating renewals - you may be surprised at the savings you can extract from the seller. But don't allow vendors to use this tactic on you to get you to sign for something you don't necessarily need.

- Kevan Huston