Modern Middle Manager
Primarily my musings on the practical application of technology and management principles at a financial services company.
More Vendor Management

Monday, July 19, 2004  

The creation of the competitive bid has to be the best negotiating tool ever. For the last two months I have been working two vendors regarding the replacement of a single color copier. Small potatoes, you say? Nay, I say! For this damnable device was costing us about $1900 per month thanks to the foolishness of an ex-executive assistant. After pitting two major copier company reps against each other, I was able to bargain the price down to half of that. Naturally, it didn't start out that way. The existing vendor offered me "lower monthly payments," reducing my costs by $200 per month. How sweet. The competing vendor (who had won my black & white copier contracts about two years ago) showed me where the residual was hidden in that payment and offered me a lower base & service fees per copy. Then it got exciting. Offers got very aggressive. By the time I was ready to call it quits, I was prepared to go with the existing copier vendor. I tried to sweeten their deal by having them take back a black & white copier I didn't need, but no sale. I was a little miffed at that, but they still had the best price close to the deadline.

Time to make a final decision. I made the call to the competing sales rep and started explaining the bad news. His boss was in the room and the conversation went very quickly. He shouted out, "How much are we off by?" I threw out the figure with a little padding. He said, "If I give it to you as a service credit, will you go with us?" "Absolutely," I said. The sales rep was in my office in an hour.

Why did the deal get done so quickly? Because I knew the numbers and knew the other vendor couldn't give me this deal, which was effectively a year of service for free. Since we've been using the competing vendor in other situations, I knew their quality was good and they would give us great service, even if it meant damn near slitting their own throats. The best news, of course, was that we got a pretty reasonable price for what we needed. I had good fun with this one.

The moral of the story? All negotiating books tell you that information is power. So is the competitive bid and knowing what you need. One more thing -- don't be afraid to challenge a vendor you have a good relationship with every once in a while to make sure you aren't getting overcharged. My old boss used to tell me that a vendor relationship gets too cozy after a couple years and shaking it up a bit is a good thing. I agree completely. The bottom line is still the bottom line.

posted by Henry Jenkins | 7/19/2004 08:47:00 PM

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