Support discounts for larger license sales?
Hi Folks,
I'm looking for some benchmarking on if / when you should consider a maintenance discount for your top tier license sales.
These are made up numbers, but let's assume you've historically offered support @ 20% of the license. This works fine for deals in the $1 million range. Maintenance is 200K and everyone is happy. However, you find that with license deals in the $10 million range, these are harder to close because of the sticker shock of 2 million in annual maintenance.
Are there any studies out there indicating that certain classes of enterprise license sales will warrant a discount on maintenance fee?
Thanks in advance for any guidance you can provide!
I'm looking for some benchmarking on if / when you should consider a maintenance discount for your top tier license sales.
These are made up numbers, but let's assume you've historically offered support @ 20% of the license. This works fine for deals in the $1 million range. Maintenance is 200K and everyone is happy. However, you find that with license deals in the $10 million range, these are harder to close because of the sticker shock of 2 million in annual maintenance.
Are there any studies out there indicating that certain classes of enterprise license sales will warrant a discount on maintenance fee?
Thanks in advance for any guidance you can provide!
Replies to This Discussion
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Permalink Reply by Michael Lochead on -
Only one reference point for you - in previous company (very large enterprise software), when license price exceeded $5M, they would drop from 22% of net license to 17% of net license. Up until that point, because support was tied to net license, not list, there was never any willingness to discount support more than the license discount.
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Permalink Reply by James Jobst on -
I believe every enterprise software industry could apply different rules in these cases. I would encourage your company to do some internal analysis and find out if the amount of support that you provide to the top tier clients is cost effective to discount in the first place. If not, then you have numbers to justify the existing price. If it is then you have numbers to tell them a good news story and tell them how valued they are and wish to pass on some savings to them ( all in how you market it to them). As far as the analysis goes, you should have a ticket tracking system in place that can break out some numbers and tell you not only how often a specific customer calls for support, but also how long each ticket takes to resolve at each support level and match that against your resource costs. Another thought...in today's economy also look at the likeliness of a customer going to another solution. After spending $10 million on a product, depending on their level of satisfaction, perception on needing to go to a new level of product and how long they have had the solution in place may determine their threshold to spend another $10 million for something else or pay the $2 million for the status quo. Good Luck!
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Permalink Reply by Mike McLoughlin on
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Thanks for your responses. This was very helpful. I've analyzed tickets from our most-similar accounts and found that historically, the cost per case was not much greater for larger licenses. However, since the newest large licenses will include a much broader suite of modules and technologies, I'm pushing to keep our pricing as is, at least until we have more representative data points to compare against.
Thanks again for your help!
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Permalink Reply by Pauline Mulvey on -
Some of our very large enterprise customers have agreed to do their own Level 1 support. This can save you significant dollars so you can offer them some sort of discount as well (we have seen between 5-10%). You can even provide them with use of your knowledgebase, etc. if they are willing.
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