Ok, I’m going to start this newsletter with a disclaimer: I’m going to get dangerously specific in my recommendation for handling an essential conversation that can arise in negotiations.
Here’s my disclaimer:
- This example is built for a SaaS company that offers its product in different “bundled” tiers
- This example is made for usage-driven pricing models
Like all my frameworks, it’s meant to be flexible. Please don’t use this “script” word for word – adapt the principle to best fit your product, company, and negotiation circumstance.
You can adapt this framework to non-SAAS negotiations – you’ll just tweak the language.
Here we go:
A common negotiation tactic for buyers is to ask, “Thanks for sharing this proposal. Can you please break it into line items so we can see the price per feature?”
Two reasons to “break the bundle:”
- Negotiate by attacking the price of individual components
- Lower cost by Isolating and removing unwanted features
Most of the time, it’s number one. Still, you should clarify. Here’s how:
Ask the buyer:
“Usually, this request is made for one of two reasons: a desire to understand better how we price or to consider removing some “nice to have” functionality. Can you help me understand your objective so I can best support you?”
If they say it’s to understand better how you price, their intent is likely the first point from above: they want to lower the price by reducing the cost of individual parts.
To respond, explain how you price (hint: it’s probably a combination of usage metrics + product bundle). Then, defend the bundle. It may sound something like this for a SAAS seller:
“Makes sense that you want to understand where these numbers come from. We price based on license type and usage.
We’ve worked closely with your team to establish that (license type) is the right fit. The cost for that bundle is driven by usage. Are we out of line with the usage projections?”
Shift the conversation away from individual features and back to usage where scope is easier to define.
Be Comfortable Saying No
You can politely say no if they still press for “line item” pricing:
“Like most software companies, our license options are bundles of individual features that are not offered separately. Since we don’t sell individual features, there’s no per-feature price to share.”
If they say it’s to remove some “nice to have” functionality, try:
“We bundle these items based on data showing how our customers get the most value. We can further explain where we see the benefit – if you still don’t want them, we could look at a different package that may better fit your needs. Which items are the team most skeptical about?”
I like this approach because 9/10 times, the customer is just trying to negotiate. They don’t want to remove any functionality – especially once they understand you aren’t going to remove one-off features from a package.