Deals, especially the larger ones seem to always close at the end of the quarter and I’m pretty sure that’s because most Buyers know that is when they have the best leverage to get good pricing and terms. This is no secret of course, and I also think it’s an artifact of the intense focus modern business has on quarterly results. I am not sure it’s a bad thing really, if you know it’s going to happen and you are gearing your process to it, then it’s potentially as good a forcing function as anything else. OTOH, there are cases where it’s just annoying and frustrating. For instance, if a deal slips for a relatively minor reason, then often it’s going to get delayed to the end of the next quarters so procurement teams can try and wring out even more concessions.
Buyers know that sales teams could be in any of a number of situations at quarter end — here are the more common ones:
- Quota Short — need the deal to hit the number
- Quota Long — need the deal to hit accelerated goal
- Plan short — need deal to fund other territories short of quota
- Strategic — Fund company strategic, growth or guidance objectives
Interestingly, in good and bad sales quarters alike there is almost no situation where sales doesn’t need the new business more today than it does tomorrow, and buyers definitely take advantage of that fact! Bear in mind though, that once the order is placed and the terms are agreed, there are a lot less options for the buyers to influence their vendor-partner’s behavior.
Is there anything that can counterbalance the buyer-leverage? Probably not really. In economic terms you are trying to create scarcity, which will drive demand and influence motivation. Scarcity cannot be artificially achieved — especially in the case of software that has no inherent material limitations on production such as out of stock and back-order, etc…
Here are some “tricks” that are often used to try to create scarcity; and I always cringe when I hear them suggested because they are NOT usually effective:
- Expiring discounts
- Threats of price increase
- Artificial limitations on availability
As a sales manager I’ve always discouraged these types of ploys. What goes around comes around. If you offer a reduced price and the deadline expires — either somebody has to loose face, or the deal is going to stall. Legitimate price increases aside, these are never situations that leave both partiers feeling great.
But there are things that are very good to include in a sales process and often DO work to help drive demand in lieu of scarcity. My favorites are:
- A rock solid business case and ROI — well documented and socialized
- Buyer goal or deadline
- Trusted relationship based on business performance
Say for instance that your customer is a manufacturing company that has a new strategic initiative to get 100% of their material received by the close of business every day; and you are providing a new ERP module that automates the majority of that very process. One good technique is to gain agreement on the GO LIVE DATE required for the initiative to best succeed. First, you can credit the penalties for NOT hitting the date as value on the ROI calculations . Then count backward through any lead time and implementation required, and you will arrive at agreement on when the deal has to be signed to make sure that the deadline is met. This type of exercise winds up being far more compelling than discounting because it’s in the BUYERS best interest. The value of hitting the objective is almost always far, far greater than any discount you are willing to provide, AND it protects the value of the solution against future discounting.
One of my Favorite manager-type questions during quarterly territory reviews has always been:
- Why do anything?
- Why do it now?
- Why do it with us?
These questions will really flush out the quality of business case, the ROI, and the buyer’s intent and motivation. If you’re gut says the answers are not good, or that you don’t really know the answers, then you may not get the deal – even at the end of the quarter! My experience has shown that if the response to this challenge is good — deals can, and often do close early in the quarter.
