Contract Consolidation in Covid-19 World

We have a couple companies that have purchased or consolidated under one name, and they are not trying to consolidate both companies under one contract, but looking for "combined deals". I have included more details below, but I am just not sure how to deal with this. Of course contractually, we have no obligation to help, but I am curious what others are doing in these situations:

Company A - Unlimited licenses for 3 divisions @$20K
Company B - Unlimited licenses for 2 divisions @ $30k

Company A & B recently "merged" and company A removed 1 division. Company B would like to add an additional division, usually a cost of $10k, but would like it for free because Company A had to close an office (covid related).

Note: the price models are different because length of contract, grandfathering and negotiating before my time.

What would you do? How would you communicate it? I have some ideas, but I don't want to sway the jury pool

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Comments

Tiffany Morin

This is something I consulted one of my former CSMs on recently. To figure out the best path forward, I had her find the main exec stakeholder for the newly combined entity. We assessed current and projected future usage. Since we charged based on MAU, our stakeholder was able to get us what we needed to price out the newly combined contract. In this case, one of the previous contracts was custom grandfathered in pricing and they wanted the option for both old and new pricing models.

As with any negotiation, I find it best to provide a set of options. I still applied some grandfathered in pricing but only with the expectation that there would be more volume. Since this was not standard pricing, I had to get involved. In the end, we turned this into an upsell opportunity and found additional room for consolidated with 2 other companies the main parent company acquired.

Russell Bourne

@Willow Moellering, I've handled a lot of requests like this with happy resolutions. One way to handle it is to formally execute a sales order where you transfer the licenses from A to B. Since A has a lower price per division, B should be happy to take it. You could pro-rate the price to match the remaining term of B's other licenses if that makes most sense for everyone.

The other option is to consolidate their account objects in your CRM, and pool the licenses so that B is entitled to use them without the sales order transfer. For this to work, the A+B merger would probably need to be well-integrated such that their internal systems are consolidated.

I agree with the sentiment that during COVID, vendors should be human-first and offer temporary concessions to their customers. If they have extenuating circumstances and you can be flexible, you'll get loyalty in return. That said, from what you shared I think the first solution I laid out would be a win-win without conceding more.

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Russell Bourne
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Original Message:
Sent: 08-18-2020 21:30
From: Willow Moellering
Subject: Contract Consolidation in Covid-19 World

We have a couple companies that have purchased or consolidated under one name, and they are not trying to consolidate both companies under one contract, but looking for "combined deals". I have included more details below, but I am just not sure how to deal with this. Of course contractually, we have no obligation to help, but I am curious what others are doing in these situations:

Company A - Unlimited licenses for 3 divisions @$20K
Company B - Unlimited licenses for 2 divisions @ $30k

Company A & B recently "merged" and company A removed 1 division. Company B would like to add an additional division, usually a cost of $10k, but would like it for free because Company A had to close an office (covid related).

Note: the price models are different because length of contract, grandfathering and negotiating before my time.

What would you do? How would you communicate it? I have some ideas, but I don't want to sway the jury pool

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Willow Moellering
Head of Customer Success
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WillowMoellering

That is a great point Kevin. Thier contract is already through end of 2021, so I don't think we can use contract extension as a driver for us.

As far as the swapping on out, based on their contract...it doesn't really work to break the ARR out by division to make a fair swap. Interested to hear if anyone has the experience recently because of COVID.

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Willow Moellering
Director of Customer Success
CHARLESTON
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Original Message:
Sent: 08-19-2020 02:02
From: Kevin Mitchell Leonor
Subject: Contract Consolidation in Covid-19 World

I think it depends on what they mean by free. If they tore down a division worth 10k while adding a division worth $10k, sounds like a wash. In speaking with other renewals teams and account executives, we would be willing to do this but on the condition that they extend their contract length.

It becomes win-win at that point.

If we are comping $10k worth of services, I do not see how that would be fair. In my book, we lost the ARR of the lost plus $10k in revenue that we comped free.

I would position the cost difference of the loss of revenue to backdrop the gain in revenue to highlight that it led to a lower overall price increase. We have to remember that our customers are business professionals too and I don't know if any of them would provide $10k free services often when they should be collecting revenue especially during Covid.

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Kevin Mitchell Leonor
Customer Success Manager
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Original Message:
Sent: 08-18-2020 21:30
From: Willow Moellering
Subject: Contract Consolidation in Covid-19 World

We have a couple companies that have purchased or consolidated under one name, and they are not trying to consolidate both companies under one contract, but looking for "combined deals". I have included more details below, but I am just not sure how to deal with this. Of course contractually, we have no obligation to help, but I am curious what others are doing in these situations:

Company A - Unlimited licenses for 3 divisions @$20K
Company B - Unlimited licenses for 2 divisions @ $30k

Company A & B recently "merged" and company A removed 1 division. Company B would like to add an additional division, usually a cost of $10k, but would like it for free because Company A had to close an office (covid related).

Note: the price models are different because length of contract, grandfathering and negotiating before my time.

What would you do? How would you communicate it? I have some ideas, but I don't want to sway the jury pool

------------------------------
Willow Moellering
Head of Customer Success
------------------------------

Kevin Mitchell Leonor

I think it depends on what they mean by free. If they tore down a division worth 10k while adding a division worth $10k, sounds like a wash. In speaking with other renewals teams and account executives, we would be willing to do this but on the condition that they extend their contract length.

It becomes win-win at that point.

If we are comping $10k worth of services, I do not see how that would be fair. In my book, we lost the ARR of the lost plus $10k in revenue that we comped free.

I would position the cost difference of the loss of revenue to backdrop the gain in revenue to highlight that it led to a lower overall price increase. We have to remember that our customers are business professionals too and I don't know if any of them would provide $10k free services often when they should be collecting revenue especially during Covid.