Many times IT vendors will offer special discounts at the end of the month, quarter or year. They offer these discounts with a deadline. But is that deadline real? Why would they sell it for $x,xxx in December and not sell it for the same price in January? If you put enough pressure on them in January for the same year-end price, they’ll give in, right? Actually, many times that is wrong, the special discount really does expire.
There are a few reasons that vendors will not honor special discounts after the deadline has passed.
- The primary reason is a sale today can be worth much more than a sale tomorrow. Organizations trying to hit revenue goals to match Wall Street or investor expectations will give away the house to meet those expectations. If they don’t, stock prices can take a hit, greatly overshadowing the money lost giving deep discounts before the end of the fiscal period. In short, a sale in January simply isn’t as important and valuable as a sale in December.
- Sales people will go to the mat when their paycheck will be majorly impacted. Perhaps they are in “accelerators”. Meaning, they’ve met their goal for the quarter or year, and so get a MUCH higher commission rate on sales over goal. On the flip side, perhaps they are “on plan” and if they don’t sell enough they will lose their job. In short, sales people can be very motivated by deadlines… and when the deadlines pass, the motivation is gone.
- A final consideration is the loss of credibility. If they put a time requirement on a special price offer, and then still give that special price after the deadline, they lose all credibility for future time-based discounts. They forever lose a valuable tool for closing business when they really need it.
So, is it worth considering buying on the vendor’s timeline to get special discounts? That depends on a few factors. Obviously, the most important consideration is, do you need the solution being presented? Are you going to eventually buy it anyway? If the answer is no, then no discount is worth it. If yes, then consider the amount of the discount. If you’ll save 15% by purchasing today, versus two months from now, you’ll effectively be getting a 90% interest rate on your money. Now those are loan shark interest rates!
Before you get too excited, remember that your support contact is being consumed for those two months, which reduces your ROI (assuming you can’t implement for two months). Here is an example. The solution costs $1,000 with standard discounts, you save an extra 15% if you buy now vs. when you planned on purchasing two months from now, and support is 20% of the purchase price per year. The “interest” you’ll receive by purchasing now is $150 for two months. But you’ll lose out on two months of support. That reduces your “interest” by $33.33 for a final ROI of $116.67, a 11.67% interest rate for two months. That is still an annual interest rate of 70%! And, your organization may save on taxes in the current period. Most CFO’s will jump on an investment like this, if there is cash on hand to fund the project early.
It is wise to consider time-based special discounts, if you know you’re eventually going to buy the solution anyway. Run the numbers and calculate your ROI. And if anyone in your organization says “they’ll offer the same discounts, after the deadline if we squeeze them hard enough”, have them read this post. That being said, don’t let special discounts entice you to buy something that you don’t need.
Author: Dave Norwood
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