Part 3 - How to encourage customers to sign up easily with less friction
This is Part 3 in our series to help early stage and scaling companies review some key areas around contracting, liability and risk. This one considers how to make yourself look and feel more established and professional, to give your customers (and investors!) more confidence in your contract terms and contracting process.
Part 3 - How to encourage customers to sign up easily with less friction
- What tactics can you use to dissuade customers from negotiating your standard terms?
- How do you build in a web based order form process, linking to online terms only?
- Could you set up a Trial or Pilot version with minimal “as is” terms?
- What is the best way to get auto renewal effectively into your contracts?
- Is it ok to sign the Customer’s standard procurement contract – will they be fit for purpose, and will they create a risk in terms of your IP and your liability levels?
- What about the PO terms associated with the customer invoice? Whose terms will apply in that situation?
Nobody wants to waste time (and legal fees!) negotiating contracts. The ideal situation would be that you present your customers with your standard form, with an easy to ready set of commercial terms, order form or statement of work, and they just sign it. This note discusses how you can make this happen as quickly and with as little friction as possible.
1. What tactics can you use to dissuade customers from negotiating your standard terms?
Importantly, make sure your terms and your process look and feel as professional and industry standard as possible. Presenting a scrappy set of loose and badly drafted terms will not inspire confidence and will mean that the terms are probably read in detail or passed to the customer’s lawyers for review.
However if you supply a well written set of terms that are fair and reasonable, well balanced for both parties, covering all the main points that the customer would expect to see, looking professional in a clear and simple format, this will inspire confidence that they are industry standard and offer the customer all the usual protections. This takes away doubt, and encourages the customer to sign up without having to refer them to the lawyers. Even if they do need sign off by their lawyers, this should be quick and simple as they will recognise and understand the structure and be able to tick off their usual concerns quickly.
2. How do you build in a web based order form process, linking to online terms only?
Having a web based sign up process can work even better. It makes it really easy to sign up, and makes the supplier look well established and the terms look even more standard form.
Do make sure though that the online terms are properly incorporated in the order process to ensure that a valid contract is formed including the standard terms. This is normally done with the correct legal wording around a link, tick box and a “Submit” or “Agree” button. But do take care to also create a proper record as evidence of what terms were agreed to when, and how. This is for your own records and contract management, but also if there is a dispute you need to prove that the terms were properly incorporated and what version was relevant at the relevant date.
Off course it does not prevent the customer and their lawyers reading the standard terms and asking for amendments. In which case you may need to draft a side letter or special terms to make the necessary amendments, or you may need to move to a paper process in any event to achieve these negotiated amendments.
3. Could you set up a Trial or Pilot version with minimal “as is” terms.
Trials and Pilots are obviously a great way to get new customers on-boarded and then flip them to a full longer term arrangement. You should still have some T&C that apply to the trial to make sure your obligations and level of service offered are limited, the customer’s rights and permissions are limited and short term, and crucially that your liability and risk exposure levels are limited for what may be a free, short term period.
There are two ways to achieve this – sign the main contract terms, but have a provision that disapplies or limits certain parts of the contract during the trial. This has the advantage of easing the transition to the full relationship as the terms have already been signed. But can create friction by having to sign up to the full terms in anticipation of the switch.
Alternatively you could have some separate short form terms to apply to the trial, which are very simple and easy to sign up to. The disadvantage is though that you then move any possible friction to the point in time when you switch to the full relationship. And you also need to take care not to simply extend the relationship on the trial terms without ever implementing the full terms - putting you at risk as you will be lacking the full protection of the full contract.
4. What is the best way to get auto renewal effectively into your contracts?
Having contracts continue for ongoing rolling periods is a good way to try and keep customers on board. However it is normally one of the first commercial terms the customer will pick up and review. Having a period that rolls over and renews unless either party gives notice that it should end is better for the supplier, than a structure that ends unless both parties agree to extend.
In reality though it comes out as the same thing, and in both cases you should be able to use the situation to discuss increasing the offering or changing the price as applicable.
5. Is it ok to sign the Customer’s standard procurement contract – will they be fit for purpose, and will they create a risk in terms of your IP and your liability levels?
The Customer will often try and insist that the contract is concluded on their standard terms not yours. This is especially the case with larger corporate customers, and may be because they want to maintain a more standardised contracting and risk position, or may be because they feel it is quicker and less resource intensive for them as they don’t have to review your terms.
However, you should take care when being asked to use customer terms. They are very often not fit for purpose either because they are general procurement contracts that cover goods or standard software, and often don’t cover SaaS or services properly. And even if they do, they are unlikely to cover the nuances of your services and the bespoke considerations that you will have dealt with in your own contract. And they are likely to be very one sided.
Unfortunately this normally means getting your lawyers to review their terms and make changes to fit the actual model and redress any imbalances. This can often take longer and be more expensive for both sides. You should have a standard response you can use to try and rebut the request to use their terms - making the above points, but also pointing out that your pricing is set on doing business on your terms, and not spending time and costs on negotiating their terms.
6. What about the PO terms associated with the customer invoice? Whose terms will apply in that situation?
Of course customers often require Purchase Order numbers, but do be careful about actually signing any POs which may accidently incorporate the terms that are hidden on the back of or linked to POs. This could then default you back to the customer procurement terms or create a clash of contracts. Make sure you have wording in your standard terms about your terms taking precedence and overriding their terms.