Focus Research Insight: When it comes to pricing, what are you expecting in your initial contact with the vendor?

We have just gone through the exercise for two different products from two different sides and it was interesting to us to see how we handled the situation. We have also been witness to a number of our friends and partners (this is what happens in China) transactions and can see how both systems work.

We have two primary businesses that we are focussing on at the moment
1. As a "manufacturer" of solar street and park lights.
2. A vertically integrated mobile voip company.

When we were selling the solar lights to our first customer they asked for "ballpark, budgetry" numbers. We responded with a specific quotation right down to volume and numbers of products per container, per km of road. (they could then extrapolate that number out)

We found that by providing such a specific quotation it took a lot of the "negotiation" out of the deal which we have found happens ALL of the time with a ballpark number, further the deal happened a lot faster and there was less "chit chat" content.

We have experienced over the years that those who are "shopping around" will keep a specific quotation and come back to it or more importantly use IT as the reference point for other quotations.

It also makes sense to handle the work once. Think about it, the amount of work that needs to be done to go from ballpark to actual is generally not that much more effort and as mentioned you dont have to do it again (which you will if they then ask you for a quote)

When we were negotiating with the phone manufacturer for our phone, we only wanted very generic ballpark pricing when we were discussing the different models, functions/features (within $5). This gave us a general idea of what price points we had to make and what features we would / could include.

When we got down to the negotiation there was some "haggling" from our side with extra features "thrown in". We believe we got a very good deal by taking this approach.

Had the supplier simply given us a "flick and tick" checklist we would have got to a decision quicker, and the supplier would have made more margin.

In comparison a partner of ours who supplies "low end" mobile phones haggles every point from the beginning, wanting specific costing for individual components verifying the minutia of the information. We find that he gets very good pricing however the relationship with the manufacturer is very "stressed" with each always trying to win a point.

I understand that some businesses have very tight margins, but in this economic upheaval with currencies fluctuating etc, it is better to increase your margin, up your service levels and ensure you are in business when the "crisis" is over. It is good for you and your supplier, but it is also better for the customer, as you will be around to honour the warranty (can the same be said about Circuit City?)

To sum up if you want a good deal (or want to end up GIVING a good deal) ball park numbers is the way to go and you can expect the sale cycle to be long.

If you want to win the business and have control over your destiny, get specific early, but don't try to squeeze every drop of blood out of the deal, after all both sides need to make money and the first thing that will drop is quality.

Just my $0.02 worth.

Regards

Shaun Kelly