VOLUME LICENSING: "MAKE IT EASY FOR BUYERS".

Over the past seven years, Geoff Surkamer has helped draft dozens of volume licensing plans for software publishers, and he's still amazed at how a few little details in a licensing contract can affect a company's success rate. "There are publishers who try and try again to revise their plans, and they still don't see a payback," he says. "Then there are others who just keep closing deals."

Many of the least-effective plans are the work of "committees of people who never speak to customers," Surkamer adds. These plans are typically full of unwieldy business rules and often reflect misconceptions about how software is sold. "If the program isn't working, start by listening to what the sales force has to say."

We recently asked Surkamer for advice on developing volume licensing programs. Here's what he suggests:

* Count points, not dollars: Typically, volume licensing plans offer progressively deeper discounts as customers buy more units of a company's product. But the discount levels should never be based on either dollar amounts or units, Surkamer argues; instead, the "only universal unit of measure" should be a point system that is independent of the specific price a customer paid or the sales channels. "There's a valuable cross-pollination effect to point systems," he adds. "To earn points for a higher discount level, users will often buy copies of other products that a publisher sells."

* Keep the system simple: A common pitfall with point systems is that publishers are tempted to assign different point values to each product. "Make it easy for buyers to do the math," says Surkamer. "If you have more than five different values in a point system, users will get hopelessly confused." Worse, complex pricing systems tend to insure that lawyers and contract negotiators will get involved in the deal. "Complex plans always take more time to sell," he points out.

* Use volume discounts to speed up cash flow: Volume discounts may not inspire customers to buy more software than they need, says Surkamer, but they do create an incentive to buy sooner. Giving customers points for buying maintenance and upgrades is an especially good tactic, he adds. "Rather than spread the expense over the contract term, usually one or two years, the user is more willing to pay up front to earn discount points faster."

* Get the sales force behind the plan: "Some companies don't sell a lot of licenses, and they wonder why," says Surkamer. "It usually turns out that they've failed to train their sales force adequately or they've reduced the financial incentives too much." One effective technique, he adds, is to appoint a "licensing champion" to back up the sales force. "Eventually, the sales reps learn how to answer tough questions on their own, but in the beginning they like having extra support on call."

* Control the terms and conditions: In some highly competitive markets, volume license deals are so important that sales reps are told to "win at all costs," Surkamer notes. Negotiated discounts are a fact of life, he concedes. "But you need some rules that you don't change--for instance, no special prices on deals under $100,000, or giving away bonus points instead of dollar discounts. Otherwise, you'll end up with tremendous errors in processing orders, billing, and revenue recognition."

Geoff Surkamer, vice president/managing director, License Technologies Group, 850 Asbury Dr., Buffalo Grove, Ill. 60089; 800/883-8573. E-mail: [e-mail].