You submitted your proposal to your customer two weeks ago and reluctantly presented it with line-item detail like the bid required; you also submitted a package price. Finally, you sit down with the grim-faced buyer, who pronounces the pricing too high by citing lower line-item prices from the competition. “If you want the business, you need to lower your prices,” declares the buyer. This is called cherry picking.
Cherry picking is an aggressive negotiation tactic used to create a “best or optimum” proposal. Buyers will spend hours pouring over vendor spreadsheets to find the lowest prices by product and then systematically work-over each vendor. Sometimes buyers will come back and propose to buy just individual line items after they have ground you down (so much for the package price). Buyers consider this tactic as a check and balance to insure that they avoid over-paying; the buying motive for the buyer is fear. This type of buyer does not trust the sales rep; the buyer fears that he or she will pay too much.
On one level this approach is reasonable if you look at it from the buyer’s point of view; it is a buyer’s job to secure the best possible price for the good and services. Buyers are often under a lot of pressure to reduce supply chain cost and they may have financial incentives to beat last year’s prices (i.e. price standards).
What makes this approach “unethical” is the buyer’s request for both line-item pricing and a package price and then sharing it with your competition. Your prices are used against you. The package price is a ruse and the sales rep is being used. This lie fosters contempt between the buyer and seller: neither party can trust the other.
One way for the rep to fight back is to request the names of the competitors; typically, aggressive buyers don’t like to reveal exactly who quoted what. Since you probably know the competition and the pricing better than the buyer, this candid question often “smokes out” the truth about the prices. I have seen many buyers back down after they are asked some simple questions. Some buyers may reveal their sources, which then makes it easy for you to verify the data. If there is a major change in market pricing, then this competitive information is good to know. More often it is a price quoted out of context or it can even be a fib.
Alternatively, you can give in and match the competitor’s price, but only if you get something in return. Concessions are made only when you get something in return of greater or equal value. Sometimes buyers are under pressure to get a certain line-item at a certain price; trade that price for a longer contract, greater quantity, or better terms. Help them out, but ask for something to make the deal better for you. You deserve it.
John Bradley Jackson
© Copyright 2006 All rights reserved.
Please visit my website at www.firstbestordifferent.com
If you match the competitor’s price and the buyer does buy your line item, aren’t you already getting something in return and that is the buyer is buying your product? Or is there something more that you’re suppose to get?
Evie,
Yes, if you match a competitor’s price and you get the order, that is a good thing. What I have a problem with is the practice of shopping the line-item prices when they presented as a package deal.
JBJ
Hi I am interested in the cherry picking buyer problem and it’s a topic I include in an undergraduate marketing class I teach. It’s something I encountered in a previous life in industry, where our overall package was better than competition but the buyer would pick out the isolated bits that were more expensive than competitor and want those all to be cheaper too. I think this is a negotiating tactic but is also consistent with the psychological factor of “loss aversion” – we anchor onto higher prices (losses) unduly even when there is a mix of prices some a bit cheaper, some a bit dearer than competition. I think the answer must involve somethines just saying “no” the package is the package, the overall price is better. Or explicitly indicating that the package price is conditional on buying everything, so
adding in a line item saying “discount for package” ?
Dawes,
I understand the dilemma. I think the seller sometimes packages things together that are not in the best interests of the buyer. It goes like this. The seller offers a a great deal on a lot of goods that is more than the buyer wants. The package discount is very attractive, so the buyer cherry picks and wants the discount percentage from the package. Fair? Not really, but the seller may have set this behavior up in the first place.
Or, the buyer manipulates the seller to discover a best discount percentage. In this case, the seller must simply remain firm since the package price is just that: a package price.