Ecommerce, the buying and selling of goods or services online has long been increasing in prevalence. But COVID, the global pandemic that severely limited in-person interaction, supercharged the need for companies to improve their online presence and adopt digital strategies. Those who were already making digital sales, or were able to quickly shift to online, reaped the benefits. Digital commerce set new records in 2020 with the biggest Cyber Week ever, hitting $270B in global sales.
Salesforce was prepared. Back in 2016, Salesforce spent $2.8B to acquire eCommerce platform Demandware. Overnight, relationships with Salesforce commenced or even grew, simply through the acquisition. As Salesforce integrated Demandware into their own portfolio, Commerce Cloud, as we know it today, was born.
Once the pandemic was underway in early 2020, Salesforce pivoted to introduce four quick start commerce solutions to help organizations very quickly move to eCommerce. Functionality for online ordering and in-store pick up became mandatory, as an example. But even before COVID, Salesforce was strongly pushing their Commerce Cloud which has become a leading eCommerce platform, boasting customers like Puma, Adidas, YETI, and Samsonite, among a long list of others.
Whether you are considering purchasing Salesforce Commerce Cloud or are already a customer with an upcoming renewal, you will want to ensure you obtain the right price as well as the right commercial terms that provide transparency, flexibility, and predictability. There are specific steps you should take for every Salesforce negotiation, but there are some things you will want to pay closer attention to when negotiating Commerce Cloud because of its unique pricing.
Commerce Cloud Pricing
With the current licensing mechanism in place, Salesforce uses sales forecasts to determine the total fees that your organization will pay. Aside from an annual fee, it charges Gross Merchandise Value (GMV), which reflects your forecasted sales. GMV is defined as the total dollar value of all transactions for goods and services in a time period that is (or will be) generated through Salesforce Commerce. The forecast is based on performance and fees are typically paid annually.
3 Tiers of Commerce Cloud Pricing
The main reason this pricing model works for Salesforce is that they get paid more as your sales increase. It is important to keep in mind however, that if you don’t meet your sales targets, Salesforce still gets paid.
Negotiating Commerce Cloud with Salesforce
Three scenarios would put you in a position to negotiate with Salesforce for Commerce Cloud:
- You are facing a Demandware renewal that now has you executing a Salesforce agreement for the first time
- You already made the transition to a Salesforce agreement and you are approaching a renewal
- Your organization is looking at adopting Commerce Cloud for the first time
Of course, there are several contractual mechanisms that may be available to further enhance your protections, while limiting the commitments you need to make. Whether it be protections against various growth thresholds or other caps, there are ways to potentially protect your deal, even in future terms. It is also important to have a good understanding of the products and storefronts that you will have on the platform as there are several subscription tiers.
In all Commerce Cloud negotiation scenarios, there are three key strategies to keep in-mind:
- Accurate Forecasts. It is critical that your organization has a good understanding of the number of sales that can be expected to go through the platform. Being able to come to the table with a confident forecast generated by your team (instead of Salesforce’s team), will help to keep you from getting caught up in lofty projections. If you were to use aggressive sales forecasts, larger fees paid to Salesforce do not look so intimidating. But what if you never make those sales?
- Overage Coverage. Another crucial component of solidifying the right agreement includes negotiating an appropriate contractual mechanism to cover overages, important in the event that your organization sells more than your forecasted commitment. This becomes even more critical if your company is being risk averse and uses conservative forecasts.
- Longer-term Agreements. As your organization’s online presence grows, your eCommerce platform becomes stickier and more ingrained within your organization. Don’t be surprised if your sales rep approaches you about a longer-term agreement, since Salesforce wants you locked-in for the long haul.
What happens when your forecasts are off in future years for a signed deal? The short answer is that Salesforce will likely hold your feet to the fire and charge you per your signed agreement.
When assessing your current needs and forecasting demand, it is important that you also determine the timing of your needs. Understand whether there are certain thresholds you’ll require at the outset as well as the potential increases you expect 2 years, 3 years, and even up to 5 years out.
Much of your negotiating flexibility also depends on other Salesforce products you are using and your overall relationship. There may be additional chips to play, but one of the most important is having a solid understanding and foundation.