Software sales vendors may mouth platitudes about how “customer-centric” they are, but the reality is that aggressive sales tactics are still rampant.
Customer organizations need to become more aware of vendors’ tricks and learn counter-tactics to avoid being forced into sales they don’t need or want.
Those are the main conclusions of a study by Ovum a research consultancy based in London, U.K., which examined the most frequently used sales tactics adopted by vendors over the past year. The study is based on a survey of 125 organizations across Europe and North America.
“Every single customer I spoke with had a problem with at least one major vendor, and every major vendor was named by at least one customer,” says David Mitchell, software practice leader at Ovum.
The vivid metaphors used to describe aggressive sales tactics – such as “gunmetal in mouth” and “serial rapist” – were provided by respondents, says Mitchell. “The sheer vehemence of the language was surprising – if I were a shrinking violet, I would have been shocked.”
When he first started doing the research, Mitchell assumed one or two vendors would be highlighted as “blacker” than the rest. “But the research showed everyone was partially black.”
Frequently mentioned names included major software vendors whose products form the backbone of most corporate systems, he says. “It wasn’t just young fresh software companies looking to make a quick buck that were aggressive – there were established, well-known names as well as new guys.”
Vendors may claim their primary focus is on building positive customer relationships and that questionable sales tactics are a thing of the past, but no real structural changes have been made, says Mitchell.
Economics is at the core of problem. “The Pavlovian instinct is what drives this behaviour,” he says. “This comes down to sales compensation: Representatives are paid based on the deal size.”
Mitchell has spoken informally to some senior executive teams at vendors to get their reactions to the report. “The key question I ask them is this: ‘if you’re trying to drive customer satisfaction, who in your company gets paid based on customer satisfaction?’ If they want to drive good quality service, they need to map that out to someone’s pocket.”
Off the record, some vendors admit they know there are bad apples in their sales teams. “They say, ‘Yeah, I know some of my guys get up to bad things, and if we find out we try to squash it – but there’s lot of things happening that we don’t know about.'” At the other end of the spectrum, he says, are vendors who argue that the environment is harsh and competitive, and they need to do whatever they can to make their numbers. In general, Canadian buyers are very conservative. They are turned off by aggression and will look for every opportunity to block or get out of the sale. When Americans come up here to sell, they are perceived as overpowering bullies.Michael Kuhbock>Text
Shareholder pressure to meet quarterly targets plays a role. “When sales reps are struggling to meet their numbers, be it to keep their jobs or keep shareholders happy, they are more willing to play hardball, particularly in Q4.”
Mitchell is unimpressed with arguments that sales positions by their nature attract aggressive personalities. “If I say, this account is yours for this year only and I’ll pay based on year-end revenue, then see what behaviour it produces.”
Conversely, he says, if sales persons are told the account is theirs for 5-7 years, and their job is to maximize growth over this period, then they know if they do bad things in year one, they won’t get revenue in years 2-7. “That’s what’s really needed to drive change in behaviour,” Mitchell says.
He points out that none of these sales tactics are new, but many people in IT procurement at customer organizations have not been working in the industry for long. “Vendors have an institutional memory of these tactics, but users don’t.”
Customers can arm themselves with some sensible counter-tactics, says Mitchell. “If a single vendor constitutes more than 15 per cent of your discretionary IT spend, then you should have a replacement plan so you know exactly how much it will cost and the time and pain it will take to dump him,” he says, adding that customers should let the vendor know they have an exit plan if a dispute arises. “If the vendor says it’ll be really tough for you to move on, you can say, I know exactly what it’ll take, and if we can’t agree, I will do this.”
He also advises customer organizations to be willing to challenge contracts. Much of the contract wording is ambiguous and generally not legally airtight, he says. “If it comes down to the vendor’s senior legal counsel and yours, most likely, the two sets will suggest settling out of court. This will likely be a lower settlement than if you buckle and don’t push it to the wire.”
Mitchell cites some figures from an actual dispute. A vendor claimed a customer organization owed