Best Negotiation Technique

bogeygolfer · Jun 2, 2003

I know there are several dealers who read this website. Other dealers would do well to read it also. It would inform them of what we the consumers like and dislike about dealers. As has been said many, many times, as buyers, our relationship with the dealer is extremely important. Even more important than the price of the tractor or the negotiation techniques used to arrive at that price.

By the way that's 100. /forums/images/graemlins/grin.gif /forums/images/graemlins/grin.gif

good night all /forums/images/graemlins/wink.gif

Woodbeef · Jun 3, 2003

hey JM3,

Somewhere out in Cyber-space is a breakdown of all the tractor manufacturers in India. M&M manufactures in the 85,000 units per year area,and has capacity to build in the 125,000 range. Now this is utility tractors only. I'm not sure how many of the badge-engineered TYMs they are moving. M&M has a 85 hp tractor slated for release in the near future,and is working on ones up to 125 hp,with 200 hp being their target by 2005-2006. They want to be the worlds largest tractor manufacturer over 50 hp,not just under it!!

19th_VA · Jun 3, 2003

According to Ranchman's article, and the article I found, I think Mahindra sold 50,000 units in India last year and 5,000 in the U.S. This does not include sales elsewhere in the world, but I think it's safe to say that most of Mahindra's foreign marketing efforts (at least for its compact and smaller utility line) are directed to the huge U.S. market, one of the few that are currently growing. I'll keep looking into this--maybe we'll even get an anser.

sendero · Jun 3, 2003

There are lots of good points being made here.

There is one point I'd like to make that I haven't seen.

Running a high-volume lower-margin business is a lot riskier IMHO than the other way. You have higher inventories, and are more exposed to fluctuations in demand - i.e. you HAVE to move product or you will be hurting. (Of course, you have to move product in any retail biz, but I'm talking a matter of degree).

Now, in the interest of full disclosure, I have to admit that I've long believed in "working small" - I've been running my own 1-2 man software biz for 13 years - and I never had the desire to start hiring people in an attempt to make more money. There is a whole 'nother level of headache that accrues the more folks you have to depend on to provide your service. It was just not for me. It would have put me in the same situation as a "high-volume" dealer, and two years ago when the telecom bust killed the software development industry in the Dallas area, I would have had to lay everyone off. As it is, it has not been fun but then I don't have responsibility for anyone but my own family and I can handle that /forums/images/graemlins/smile.gif

Simply put, people have a different tolerance for risk and that is what this discussion is about. There is no right or wrong way, just right or wrong for a given individual. I admire people who can be totally ambitious, but I've watched plenty of them rise and fall like a shooting star. I prefer the turtle approach myself, and it has worked well for me.

Ok, are we over 100 yet??? /forums/images/graemlins/grin.gif

19th_VA · Jun 3, 2003

O.k., here's an update. Mahindra's Indian sales have amounted to about 60,000 units each year over the past few years. 90% of their exports are to the U.S. (5,000 units), which means their exports total less than 6,000 units. Let's say that's 70,000 units worldwide. If each sold for 30,000, that would be $2.1 billion in annual sales. John Deere's annual equipment sales are $11 billion. Now this includes all of Deere's sales, not just tractors. So stay tuned. Yes, I have a job, but this is more fun.

19th_VA · Jun 3, 2003

Well, this is a tough question to get answered exactly. Can't seem to locate the exact number of tractors John Deere sells. I will say this: unless India's domestic tractor market is much bigger than the U.S. domestic market, I seriously doubt Mahindra sells more tractors than John Deere on a worldwide basis. Total annual sales (including their financial divisions) are thus: $14 billion for J.D. and $8.5 billion for Mahindra. Number of dealers in U.S. and Canada for John Deere is 3200, for Mahindra in U.S. it is 160. Moreover, John Deere sells nearly 25% of its equipment in the international market, compared to about 10% for Mahindra. Finally, John Deere sells tractors in far more countries than Mahindra--160 compared to around a dozen for Mahindra. Mahindra is looking to expand worldwide because its domestic sales have plummeted (nearly 30% in one year alone). John Deere's domestic sales are flat and their international sales are growing. Unfortunately, I still have not been able to determine the number of units John Deere sells worldwide.

I need to get some work done for now, but I'll look again when I get a chance. By the way, most of these numbers came from the Company's annual reports, though some of the numbers came from trade journals. If they are exaggerated, they are probably equally exaggerated, though I would point out that annual reports are given to stockholders, to whom the executives are ultimately accountable. This may have been less true before Enron and Worldcom, but I imagine companies are being pretty careful these days.

Update: also discovered John Deere employs 40,000 people, compared to Mahindra's 13,000.

rockyridgefarm · Jun 3, 2003

Since purchasing a tractor is more than purchacing a basic widget: It IS pertinant to understand business models. A small volume service centered seller will have differant motivations to to a higher volume less service oriented approach. If the buyer wishes to negotiate an effective deal, there is a concern that both parties are satisfied enough to continue in an effective relationship. There are high volume, high service operations as well. But most are some form of compromise.

Effective negotions involve getting a fair price with acceptable service. To some that means dirt cheap and zero support. Others are satisfied knowing the dealer is making an honest profit, and will want to take care of them.

so, other than discussing how long this thread is (which is OK, too) the discussion about economics probably isn't far off mark. JMHO.

RanchMan · Jun 3, 2003

Sendero -

Running a high-volume lower-margin business is a lot riskier IMHO than the other way. You have higher inventories, and are more exposed to fluctuations in demand - i.e. you HAVE to move product or you will be hurting. 

Interesting perspective. My gut reaction is an opposite one (mainly thinking about how many “mom & pop” shops one hears complaining and/or going out of business when a new of Wal-Mart - a very solid HV/LM company - moves in to a small town.) But in reality, (when I ignore what my knee "thinks," /forums/images/graemlins/wink.gif) I believe that either method can be riskier than the other depending on a large number of variables.

For example - let's say you are a HV/LM dealer of widgets. The loss of 1 sale this month will probably have 0 to minuscule impact on your bottom line. If you are a LV/HM dealer that only sells 3 widgets a month, then you could be in big trouble in a sales drop of 33%.

Now looking at it the other way, the LV widget salesman has only to push 3 widgets for the whole month to make his goal - the HV guy? Maybe 100 or 1,000 or 10,000 - whatever. Point there is that it may be easier to push 3 widgets "out the door" in an over saturated market than 10,000 - regardless of the discount available on the volume purchase.

Of course, I used material "widgets" as the standard placeholder, but as you point out, service industry sales are the same way.

There is no right or wrong way, just right or wrong for a given individual. 

Well, I see where you are coming from basically advocating a business sales model that the owner feels comfortable with. That point I agree with - it's his business after all.

But can't quite agree with the statement though simply because some industries (e.g commodities) dictate the sales model involved. Take something like gasoline, for example. I seriously doubt that someone would stay in business if they sold "SuperDuper" brand gasoline for $10/gal. - even if it was truly "super duper" compared to other brands. (The whole consumer price sensitivity thing.)

Now, yes, some would argue (correctly) that are gas stations out there that do go for a "LV/HM" model, but it's within ranges that the market will accept (say $.10-.15 more per gallon, maybe?) - but again, as I said earlier "Low," "High," and margin ratios are all relative and subjective depending on the business. (A “Low” volume gas station still sells thousands of gallons per month.)

(Here's an interesting analysis of gas station marketplace I came across. It talks about volumes, marketplace evolution/saturation & such.)

I guess the point I'm trying to make is actually twofold. (1) Because of certain inherent characteristics associated with a specific industry, there will be limits as to what consumers are willing to buy; and (2) Some industries may accommodate (meaning allow a person/company to stay in business) multiple sales models while other industries will not.

Sounds like you have carved out a section of the marketplace that you have been successful in pursuing - and are happy with how things are going. I wish you continued success in your endeavors. /forums/images/graemlins/smile.gif

Rick Jay · Jun 3, 2003

( I seriously doubt that someone would stay in business if they sold "SuperDuper" brand gasoline for $10/gal. )

True...but take a gallon of tap water, put it in a clear plastic bottle with a fancy french name on it and you can sell it in Manhattan for $10/gal easily. /forums/images/graemlins/grin.gif

O.K....we now return to our regularly scheduled thread.

dourobob · Jun 3, 2003

Hi Ranchman
I believe that "a large number of variables" was what I had in mind when I made my earlier comment "just NOT about more money".
I don't have any argument with any of the business models you discuss and, I agree very much with your relpy to Sendero "Well, I see where you are coming from basically advocating a business sales model that the owner feels comfortable with. That point I agree with - it's his business after all."

I personally like Sendero's model and have used it but, it doesn't fit everyone.

Bob