This is a true story. Only names have been changed.
Just last week Sally, who sells shoe manufacturing plant to footwear manufacturers, told me that Bill Evans, the Production Manager of Giancarlo’s Italian Shoes had tried to pull one of the oldest negotiating tricks on her.
She had quoted $72,500 for five newly designed rotary slipper insole shoe upper embossing moulding machines to be supplied to three of his plants. To me, that’s quite a mouthful, but it just rolled off her tongue. She told me her company was the first to market but that the Chinese were catching up fast.
Bill Evans had phoned her after seeing their online media release announcing the launch of their new machine and invited her to meet him.
After discussing lead times to delivery and price they had visited the factory floor to discuss how the machine could best be integrated into their existing production line.
When they returned to his office he offered her a cup of coffee then gently tapped a file which appeared to contain brochures and correspondence and told her that she had better sharpen her pencil as he had already obtained several competitive offers which were cheaper and that they needed to make a decision who to order from within 24 hours.
Initially she wondered why he tried to pull such an old trick when she was fairly certain that the competition did not, as far as she knew, have a similar product with the new features.
She therefore assumed that Bill was on a fishing expedition to see whether she would immediately offer a lower price. She told me that her company had a policy of honesty and openness towards employees and customers alike. They therefore never padded prices to allow for the “I’ve got a better offer” trick.
When she called Bill’s bluff and asked to see these ‘better quotes’ and he refused saying it was against his company’s policy to do so she surmised that he was not comparing apples with apples.
Not wishing to call Bill call his bluff and risk losing the business she used two tactics.
Firstly, she said that if price was an issue, they could certainly lower the price if their service plan was not included in the price. Bill said that would not work for him.
Then she got Bill discussing the savings Giancarlo’s Italian Shoes should make after the machines had been installed. She also asked whether he needed any modifications to the machines she had offered him. She emphasised her company’s superior after sales service programme and the lower cost of spares her company offered. She referred to the excellent relationship between their two companies going back several years and how Bill had complemented her on the quality of her company’s after service team on several occasions.
She then summed up the savings which would begin accruing from the day the machines were installed, her company’s superior after sales service programme and the lower costs her company charged for spares. Then she asked whether Bill would prefer delivery this month or the next month. When Bill said he wanted the machines delivered within 2 weeks she know they would agree terms.
The Lesson
- Many companies pad prices to allow for this often-used negotiating tactic.
- No two offers are strictly comparable so, providing you know what your opposition have offered, you can use the Apples and Pears defence.
- Never suggest the buyer is bluffing as he/she may purchase from a competitor at a higher price just to save face.