I know that Ulrik has called this a “red flag” if companies ask for it. But I wonder if it can also be used as a way to increase ACV by a decent amount. Especially since in our case, enterprise companies in the same product category won’t be the most likely next customers anyways.
What are the most important aspects of having this inside a contract/pricing package? What’s a fair amount for a startup to charge for this?
I haven’t dealt with this directly but definitely see where you’re coming from, especially if your company is high ACV enterprise SaaS.
Would be curious to get Ulrik’s take. My worry would be that it creates a power imbalance from the get-go, and could signal an unrealistically needy customer.
Curious if you’re working on this right now and if you’ve seen it create leverage in negotiations?
Hey thanks for the response!
Yes, the brand actively approached us about it. They want to leverage the software as a competitive advantage in their customer journey for some time.
However, it was unclear how exactly this exclusivity would be structured and compensated. The main concern is that they want to avoid direct category competitors (think Dyson/Bosch) launching the same thing anytime soon.
But since it would take at least 6 -12 months to close a deal with those players (if they care), I’m feeling pretty ok with exclusivity for some time, as long as it’s compensated. I was thinking 10-20% as a premium added to the reoccurring monthly PO.
This is also a test for me to see how much they really care about this.
Very cool. I like the idea of having a defined window of exclusivity so it doesn’t lock you out of selling to competitors forever. Think 10% to 20% seems totally fair. Keep me posted on where you land and how it goes!
This is very industry x solution dependent. There are some industries and solutions where the major companies in the industry always choose different vendors. If this is the case, take advantage of it if you can to get a higher price. There is also a reasonable expectation that one pays for exclusivity, so if a buyer demands this they should be willing to pay for it.
But there are many other industry x solutions where the industry converges on one solution. If this is the case for you, and you agree to exclusivity, you will cripple the business and the company you have exclusivity with will eventually churn.
Under stand market structure before making such a profound commitment.
You’ve given me a point to ponder on. Thank you!
Here are my rules for when you should consider accepting exclusivity:
In about 90% of cases where customers ask for exclusivity they don’t really want to pay enough to make “1” worth it.
Also: consider what exclusivity does to your strength in negotiation position when you have to renew/renegotiate.
If you have 1 customer at $200K it is hard to renegotiate that one customer to $300K.
If you have 4 customers at $50K it is easier to renegotiate them to $75K… because even if you only get 3 of them you still get $225K. So you push harder.
Best!