Thanks Tom, but we’re not in the 90s anymore

A tale of Customer Success: Part III — The negotiation is over when you start talking about money

Almost 3 years ago, when I started to apply to CSM jobs, one of the main questions I faced during job interview was “What do you know about customer management, you’ve mostly worked in procurement?”

I never really knew if the question was genuine or if it was just a way to try to trick me but it was actually really easy to answer : “The most challenging part of a buyer’s job isn’t negotiating with suppliers, it’s negotiating with internal customers”

And what about CSM? Well: “The most challenging part of a CSM’s job isn’t negotiating with customers, it’s negotiating with internal suppliers”

Yes, CSMs and Buyers do exactly the same job !

Back in the days, when I met new people and told them I was a buyer, reactions were always the same:

• “What do you mean, people are paid to buy stuff?”
• “Basically your job is to tell suppliers they are too expensive and that without a better offer, you’ll buy from someone else?”

Now that I work in CSM, reactions are:

• “What do you mean, people are paid to ask customers to pay more?”
• “So basically your job is to tell customers they need to pay more because it’s in the contract and that it’s too late to cancel?”

Hold on, I can hear you “Olivier, either you’re really bad at explaining your job or you really need to change your social circle”.

You might not be 100% wrong but that’s not the point.

All buyers face those comments and are pictured as cold-blooded hitmen, that will pull the trigger without any hesitation if it allows them to kill any extra cost. Unfortunately, that’s exactly what happens when your company confuses cost reduction with price reduction.

The same applies when, as a CSM, your targets are reduced to those 3 words, “Increase portfolio value” and your job consists to ask customers to pay more for the same service.

Price negotiation is the tip of the iceberg: The procurement side

The difference between an amazing price negotiation and the worst possible one will have a roughly 5–10% impact on the savings. Not negligible but quite insignificant compared to the potential gains of a better set of requirements.

I’d even go further, if your Request For Proposal (RFP) has properly been set-up, you’ll barely need to negotiate the prices.

The main added value of procurement lies in the preparation. You have to understand the needs of your internal customers and help them to identify the best solution.

If they tell you “we need 10 iPhones 12 Pro with 512go”, your job is to understand if they

1. really need 10 of them,
2. really need an iPhone,
3. really need a smartphone,
4. even really need a phone at all! Maybe an old fashion megaphone is better suited to their needs!

It’s exactly the same when you’re in a CSM role and you try to increase a contract value with a customer, your job is to identify if

1. they see the benefits of your solution
2. there is a business need and
3. you can fit in their stack/roadmap.

Once you’ve ticked those 3 boxes, 90% of your job is done!

Let’s take an easy example. You’re CSM at Netflix and want to convince a customer to move from a basic to a premium membership, including UHD features:

1. You checked the usage data and see that on average, your customer watches Netflix 2h a day, 30 minutes on mobile, probably while commuting and 90 minutes on a Samsung Smart TV (Yes, data can be so precise)
2. During your conversation, your customer praises the quality & diversity of the content. (S)He also says that (s)he watches sci-fi movies and is a bit disappointed by the “blurry images”
3. Finally, you learn that (s)he just bought a brand new (Samsung) 4K TV to cope with lock-down routine

So, to sum-up: Your customer loves your product, uses it and has extra needs you can answer to.

Agreeing on a “fair” price should be easy don’t you think? You will, sometimes, face such “dream” situation in your daily activity, but unfortunately, they won’t represent the majority.

Some customers will have low usage, won’t see the added value or will not be able to implement new features (why should I book a UHD option, I don’t have a TV and only watch 90’s sitcoms on my old laptop?). Don’t worry, that’s perfectly fine! These are customers you want to nurture for future growth, time is on your side!

Whatever outcome you face after 1, 2 & 3 analysis, price is not the blocking point!

Internal negotiations are 10 times more challenging (and annoying)

Ok, so CSM and Procurement jobs are easy? Not at all!

Getting the yes for a megaphone or a UHD option (if development is needed) is the result of intense internal negotiation, with almost all departments:

• Marketing / HR:
• Legal/IT Security: Communications need to be encrypted and stored
• Finance: The megaphone supplier has no VAT number, how should we pay?
• Sales: I told our prospects we could use Facetime with him!
• And of course, the product team: Creating an API to connect a megaphone to our data warehouse requires heavy manpower and is not a top priority

Really folks, pricing is the least of your problems so don’t focus your energy on it

• You are talking to a stakeholder that already works with you (CSM) or want to (Procurement)
• They already agreed to your price-list (CSM) or they know the market prices (Procurement)
• They see the benefits of a partnership with you
• Last but not least, and this is the magic trick for CSM, most people hate change. So that means that even if your competitor comes with a ultra agressive offer for new customers, you still have the higher ground.
  You’re not convinced? So I guess you change your phone contract every year to benefit from special offers for newcomers?

Once you’ve identified the real needs and paired them with the relevant offer, the rest is (almost) a piece of cake.

And don’t forget, when facing tough internal negotiations: You, as a CSM or a buyer are the only persons in your company that bring immediate profits and not future turnover, so be confident!