The dialog below shows a negotiation stalled on price,neither side will compromise.This is the perfect time to play a bargaining chip.Mel represents an electronic control panel manufacturer. Bill works for a stereo maker that manufactures most of its own parts. They want to buy a large quality of Mel's control panels.Because new design is superior to what Bill's company is currently making,retooling will take a lot of time.
Mel:I'm sorry,Bill,butI can't help you.
US$6.37 per unit delieverd to your factory in Taiwan is the best I can do.
I'm only willing to let them go this cheap because you're buying so many of them.
My normal price is US$6.45 plus shipping. I'm offering you a heck of discount.
Bill:I understand that,Mel. It's a good price,but we have to remain competitive.
We're already one of the most expensive units on the market.
The only reason we get that much is because of our reputaition for quality.
And, the only reason we're thinking about buying your control panels,instead of making them,is your reputation for qulity.
Mel:Bill, qulality costs money.
Bill:We understand that. But,at that unit cost, we would have to significantly increase our consumer price.
And that would definitely cost us a piece of our market share.This is something we want to avoid.
Mel:I understand completely,but if I drop the price ever 2 cents, I'll be swimming in red ink.
Bill:This could be a deal breaker.My instructions from the boss are very clear,I can't go over US$6.30.
I hate to see this deal fall apart for a lousy seven cents.
Mel:Me too, but my hands are tired. A seven-cent loss times two hundred and fifty thousand units is more than I can afford.
That works out to around twenty grand if you factor in the operating losses.
Bill:Stop the presses,Mel.There's more than one way to skin a cat, and I might just have an idea.
Mel:Well,let's hear it.I'm all ears.
Bill:My production people mentioned a few modifications you could make that would be a negligible cost to you but would save us a production step.
Mel:I don't know,Bill. We usually charge at least set up fees to deviate from the standard production model.
Bill:I know.That's why I didn't mention them before.
I realized pretty quick that money was a problem and we can't afford your usual set up fees.
But,if you're willing to work with me,we may be able to pull the fat out of the fire.
Mel:I'm still listening.
Bill:What if we ship the panel housing to you and instead of you placing each unit in the shipping box,you perpanently crimp the units into place on the housing and ship if back to us ready to install.
Mel:I don't know.
Bill:Look,the crimping process isn't even an extra step.
You could do it at the same time you crimp the back and front plates together.
Then,you save the expense of loading each unit into an individual packing box.
Just lay a couple of slotted styrofoam bars in the bottom of the crate to keep the units seperated in shipping and you save the cost of the packing box.
Mel:We could do that, but the cost of a packing box is only 2.5 cents.We would still be losing money.
Bill:What about the savings on packing,both labor and materials? That's got to be worth seven cents a unit.
Mel:Actually, it's more like three or four.
Bill:Ha,ha,ha!Okay,Mel,I'll tell you what I'm going to do.
If you agree to do everything I covered so far, plus mount the knobs on the units instead of sending them in seperate box for us to mount,I'll up our offer four cents to US$6.34.
But this is only because I want to put this deal and myself to bed as soon as possible.
Mel:Okay,I'm tired too. Let's shake on $6.34 and I'll buy the drinks. We'll work out the details tomorrow.
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