Best Negotiation Technique

BillyP · May 27, 2003

( Not meaning to flame or anything, but all products are not created equal. I could give hundreds of examples, but to truly compare apples to apples, you must carefully examine the stock#/model# of the item. )

You are right midlifecrisis but I'd like to add to that.

Say for instance Lowe's orders 2,000 Husky 141s and the local Husky dealer orders 2,000 (not likely) of the same. Husky does not build a special/cheaper 141 for Lowe's. They are going to be the same unit. The only time things might change, as you mentioned earlier, is when when Husky may change vendors for some certain part. Say they changed vendors for carburetors. This will be recorded in the serial numbers, beginning with the first unit of change. This way, if they have a problem with that carburetor, they will know who to come back on. Or if it's a safety issue, they know which units to start the recall. When there's any major design changes, the model number is changed. For instance the 141 replaced the 41.

BillyP · May 27, 2003

By the way, this same procedure is used for tractors too.

WVBill · May 28, 2003

Rocketman and Dave's Tractor:

You guys have been very informative and straightforward so let me ask two questions:

1) Several people have mentioned "Let the dealer know that you'll be buying several implements in the future." as a part of their negotiating technique - with the thought that if the dealer thinks there will be future implement business, he will come down in the price of the tractor. Is this effective with you? Why/why not? Rocketman: you said "convince the dealership you are a repeat parts/service customer" do you mean implements or repair parts?

2) In other threads, people have theorized that when it comes time for service/repairs a dealer gives preference to those people who purchased their tractor from him. Is this the case? Rocketman, you've just said you make negative profit on tractor sales and that "The $$$ is in parts/service - not sales. " so why or why not give preference to your tractor sales customers?

Thanks

kokopelli2 · May 28, 2003

the best negotiation technique i have used is to be willing to walk out at any time and to other dealers on your cell phone and ask them their price while you are standing in another dealers shop.

sendero · May 28, 2003

I agree with ya - if you let the salesman know up front that you have done your homework, you can cut the cr*p and get serious.

I did a similar thing - and the first quote I got was not a bad price at all. I got them down a few hundred, and was satisfied.

I'm probably in the middle here - I don't believe a "haggle free" enviroment is attainable given human nature (and I hate haggling too, but will do it on a big purchase) and I also don't believe in trying to squeeze out the last dollar. I want a fair trade, where perhaps the dealer isn't making what he'd like to make, but where he doesn't feel like he's being lumbered either.

And lastly - the "best" strategy is ephemeral at best IMHO, because it all depends on the individual you are dealing with. They all have their own styles, their own biases and their own methods. When you find one whose style meshes with yours, you can make a mutually beneficial purchase /forums/images/graemlins/smile.gif

RanchMan · May 28, 2003

DavesTractor -

Sorry so long to respond - busy past few days. I'll try to reply, simply to explain (not to reanimate a discussion that seems to have come to a natural conclusion.)

Rocketman and DavesTractor are following the "high margin/low volume" sales model. 
 Ranchman, big assumption on your part, and wrong. I'm not sure why you would make this remark...

Technically, I should have kept you and rocketman separate when responding as there were different "twists" in your replies. In my attempt at not being verbose your two positions seem to have become cross-connected to a degree.

Well, let I’ll refine my statement.

 Rocketman and DavesTractor seem to be advocating the "high margin/low volume" sales model. 

Rocketman’s talk of letting buyers “walk” if they try to “squeeze” the dealer I think is self explanatory with regards of “high margin/low volume.” So why did I “key” on your post?

Your statement regarding reducing margin in order to turn a “big package” implicitly states you have “extra” margin already built in somewhere - if you didn’t, you couldn’t reduce the price you charged. Is this “extra margin” on tractors? Is it on implements? Is it on service? In other words, you have somewhere else you can cut and still make a significant profit on the deal as a whole - even if you are taking a loss on the “cut margin” item.

The other thing I “key’d in on” with regards to believing you followed the “HM/LV” model was your statement of ”..We have a standard price for every item on the lot and it is significantly off MSRP...” I won’t go into rehashing the whole thread (also here on TBN), but MSRP is a bottle of “Salesman’s Snake Oil” - even if a large portion of the public swallows it. (This “knee jerk” reaction I have is only made worse by you citing percentages - again, look to the other thread.)

I also find it interesting you claim “high volume” with a tractor a day. As “High” and “Low” and “Reasonable” are all very subjective terms, 30 tractors a month is not what I classify as a “high” volume dealer (remember the point I made about 3 tractors sold in 3 hours when I picked mine up?) I won’t go in to a bunch more, other than to say that it appears that what you consider “reasonable margin” I would probably consider “high margin.”

As I said earlier...
Look, my point is not to be rude to DavesTractor, Rocketman, or any other individual who owns a business. They may indeed be good hearted individuals, but that doesn’t matter anyway – it’s their business and they can run it any way they see fit (within the confines of ethical & legal boundaries, that is.) And I have nothing against them making a profit - heck, I WANT businesses to make profit! (I'm not "against the 'Man'" as my post seems to imply.)

Hopefully this helps you understand where I was coming from in my earlier post. Again, not wanting to rehash or threadjack - just wanting to respond as to the “why” of my earlier post.

DavesTractor · May 29, 2003

Ranchman, It's interesting to see everyones point of view on this subject. I appreciate your explanation.

WVBill, promises of future implement sales do not have much of an effect on the price of the tractor from our perspective. Generally, if all else is equal, a happy customer will return to his dealer for implements anyway.

On the service issues when a customer buys a tractor from me or a competitor....this has been discussed at length more than once, so I think I'll leave it alone.

rancar · May 29, 2003

Very nice reply Ranchman. /forums/images/graemlins/wink.gif You're one of only a few TBNers who appear to fully grasp subject issues that you post replies to and you do so in a lucid, succinct, and diplomatic way I really appreciate. Thanks!!!

...Bob

spencer200 · May 29, 2003

Ranchman I think if you surveyed all the dealers in the US you would find that a tractor a day is very high volume. Just because the dealer you were at sold 3 while you were there does not mean that he sustains that sales rate every day. I have seen days when well sell 9 or 10 tractors in a day and days when we sell none and I can tell you this, we are one of the largest volume NH dealers in compacts that they have. We are in the top 20% and the top 20% sells 80% of NH compacts.

RanchMan · May 29, 2003

Just because the dealer you were at sold 3 while you were there does not mean that he sustains that sales rate every day. 

Very true, and it would be unfair of me to not acknowledge that. I will go one step further and say that perhaps 6 tractors a week is a “high” sales volume. “High,” “Low” and even margin percentages (over cost) can all be misleading depending on the industry. I will even go one step further and admit they are less than precise terms and open to subjective interpretation. Since I’m not an industry analyst for compact tractor sales, I can't really definitively tell you that your definition of “High” volume is right or wrong.

What I can tell you is that I found a Mahindra dealership here in the U.S. (i.e. compacts) that claims sales of 700 tractors last year. (Wasn’t hard to find.) I find it interesting that a company with far less name recognition and a much smaller distribution network is selling approximately double what you classify as a “high” volume in the tractor selling business. Perhaps it’s an aberration, an outright lie by the dealer, or maybe it’s something else - regardless, I think it helps to illustrate where I’m coming from.

All this doesn’t really prove nor does it negate the point I was really trying to make. Moving beyond the scrap of what numbers define “High” and “Low,” “High” Margin dealers (whether it be tractors, cars, or widgets) usually have “Low” Volume (dependant on market factors) while “Low” Margin dealers have “High” Volume (e.g. the Wal-Marts of the world). These of course are two different ends of the spectrum, and yes, exceptions exist, along with a lot of sellers that fall somewhere along the continuum.

As someone who appreciates precision and presentation of facts, it’s almost an oxymoron that I seem to “snub” specific figures in this particular thread. The reason why is that we have (blame it on me if you wish) actually exited the topic of “price negotiation” and entered discussion of economic theory and sales models. To me, this is pretty straight forward concept. It's a pretty fundamental economic principle after all - even if I apparently have been somewhat clumsy in my attempt to portray it. What I find interesting (and somewhat disheartening) is the feeling I get that some folks are determined to argue this.

I honestly don’t see the controversy - other than to say that my perspective on what is “high” volume doesn’t mesh with yours or some of the other posts on this thread. Perhaps my definition is wrong. Perhaps yours is. Regardless, it doesn’t affect the economic principles involved nor does it change your ability to keep the lights on at your business.

I will say this though – I strongly suspect that if you dropped your margin significantly (assuming NH lets you), you would no longer be in the top 20% of NH dealers but would continue to move up - maybe to top 5% or even top 1% with regards to number of tractors that move through your doors. Doesn’t necessarily mean you would make enough money to cover your costs (have no idea how efficient your operation is), but your sales volume would go up.