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.

spencer200 · May 29, 2003

oh I am not here to argue economics with you! I can say that if I sold anymore tractors than I do now I would need a larger building and staff. NOW thats a whole topic in its own finding good people to staff the operation. I would like to talk to your mahindra dealer because I would be willing to bet he is working on a larger margin than I currently do. I would also bet he is a dealer distributor selling to other dealers. Anyways it does not matter this has been a good thread and plenty of food for thought! /forums/images/graemlins/ooo.gif

Chipperman · May 29, 2003

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. 

Ranchman
I too have herd there is a dealer in Texas that sells 700 Mahindras. But I have also herd Mahindra sold some where around 6000 tractors last year. Now you may have a better idea than I as to how many dealers they have but lets just say maybe 300? If the 6000 tractors is even close then there are not many other dealers selling any where near that number. They build a nice tractor and they they do and incredable amount of advertising. Thats my two cents.
Happy Tractoring
Chipperman

RanchMan · May 29, 2003

Spencer200 -

I can say that if I sold anymore tractors than I do now I would need a larger building and staff. 

And that would be bad.....how ?? Potentially more money for your company, more jobs for the local population, higher demand for NH products, etc. etc. etc. Sure more work for you, but other than that, I really don't see much of down side.

While some businesses hit specific limits due to circumstance (industry, management, sales model, product, etc.), the vast majority of business folks I know have a desire to grow their business and their market share (especially those that are publicly traded). Again, I’m the first one to defend a business owner’s right to run their business as they see fit (a theme I've hit on in this thread), but I find it interesting that the reason you cite you don't wish to grow your business is because it's too big a pain to find "good" employees.

I would like to talk to your mahindra dealer because I would be willing to bet he is working on a larger margin than I currently do. I would also bet he is a dealer distributor selling to other dealers. 

Interesting conclusion - since I have presented no information on that particular dealer other than their volume claim (which I even acknowledged could be fictitious!) Heck, I didn't even say which State the dealer was in, much less their name. Again, maybe you’re right - maybe you’re wrong - but I find it interesting you are willing to make such a conclusion without any evidence to substantiate it. As for if they are a “dealer to dealer” - can’t comment on that other than I didn't see anything they stated that seemed to indicate that. (I could have missed something though.) ‘Course, if you want to talk with the dealer, (not sure how much information they would be willing to provide), here's their link.

Anyways it does not matter this has been a good thread and plenty of food for thought! 

I believe we agree on something. /forums/images/graemlins/wink.gif

RanchMan · May 29, 2003

Chipperman -

But I have also herd Mahindra sold some where around 6000 tractors last year. 

That's pretty close to the number I was able to find doing a little research in some trade rags.

...maybe 300? (Mahindra dealers) 

Hmmm. That feels too big to me - by a pretty substantial margin. I don't have hard facts to back it up other than using the "dealer finder" on the Mahindra web site along with various folks complaining here on TBN about their State having one or two dealerships (if any at all.) My “gut” would put it somewhere in the 100-150 dealer range - but again, that’s simply a “feeling.”

Regardless, your point is well taken – 6000-700 = 5300, /300 = ~ 17-18 tractors per dealer per year for the remaining ones. But, that still doesn’t negate my point - “High” volume is still “High” volume even if everyone else is “Low” volume. Maybe Mahindra has 1 “HV” dealership - maybe 2, maybe 3 -- and everyone else is just a “mom & pop” shop. Can’t really say - other than I still don’t see the controversy with my point regarding HV. (BTW, I found in one of the trade rags that the U.S. market for 40-70hp tractors is somewhere between 60-80K units/year - couldn’t find it, but I’d bet the volume is substantially more for smaller HP tractors - especially the “lawn” versions).

 They build a nice tractor...

Thanks (since I own one /forums/images/graemlins/wink.gif) I’m happy with mine, but they certainly have their warts too (pointed out my disappointments with mine here on TBN.) If I had it to do over again, I’d still get another Mahindra without hesitation- just that I’d be more aware of some of their shortcomings.

...they do and incredable amount of advertising. 

Hmm. I’ve only seen a couple of bill boards during my treks across the Texas, and I think I’ve heard 2 radio commercials. I don’t subscribe to a lot of tractor/garden magazines, so maybe that’s what you’re referring to. ‘Course, I can’t seem to not flip the channel without finding a JD commercial during T.V. time. Since T.V. time is pretty pricy compared to other forms, I suspect that their budget is far greater than Mahindra's. Advertising budgets are another one of those relative items I suppose.

Gary_in_Indiana · May 30, 2003

I can’t seem to not flip the channel without finding a JD commercial during T.V. time. 

Of course, Mahindra makes compact tractors and, to my knowledge at least, not a whole lot more. Deere, on the other hand has not only a full line of tractor in every size but also implements, garden trators, lawn mowers, combines, etc., etc., and even when they're advertising a combine, the consumer is still seeing that same famous color and logo and hearing "Nothing runs like a Deere." I'm sure that factors into the brand recognition value as well.

I happen to have a Deere but don't think they are the 'be all, end all' of tractors by any means. I don't want to sound like a Deere ad here, but I do think most people associate the Deere name with quality. That perception alone probably sells a million dollars worth of Deere equipment a year. Keeping that name in front of the public is part of that.

Woodbeef · May 30, 2003

Gary,actually Mahindra manufactures Utility tractors in India. The CUTs they sell are badge-engineered TYMs from Korea. On a world wide basis they sell almost twice as many tractors as JD does.

cnoel · May 30, 2003

Hey Gary, yor response is popular with me /forums/images/graemlins/laugh.gif. As a dealer, I couldn't have said it better. The better you treat a customer, the better they treat you....and vice-versa. The customers that treat you like you're trying to take them for all they own or try to get an extra 3% by pulling out a credit card after they have haggled you down till you're sorry they ever walked thru your door, are not going to get the same little "extras" that the honest and up front guy will get. Now don't get me wrong, if a customer doesn't ask for your best deal, then they aren't doing their job as a consumer-Its the ones who keep going and going and going......you get the picture.

19th_VA · Jun 2, 2003

( And that would be bad.....how ?? Potentially more money for your company, more jobs for the local population, higher demand for NH products, etc. etc. etc. Sure more work for you, but other than that, I really don't see much of down side. )

It's called having a life outside of business, Ranchman. I understand economics (haven't seen any mistakes on your part, by the way), and I also understand that there are more important things in life than making money. I think Spencer200 has discovered some. I would speculate this: he has weighed the opportunity cost of higher volume/bigger business with his desire for leisure/free time and has chosen (not wrongly) that his time is worth more than the trouble of more growth in business. Economics is not complicated but it is sometimes confounded by one of God's most beautiful creations--the human brain.

dourobob · Jun 2, 2003

Well said 19th VA.

Some choices are just NOT about more $$$

Bob

WVBill · Jun 2, 2003

Ditto - and there's also the "service level" issue. The general perception that "big" businesses give less/impersonal service is not unfounded. Perhaps Spencer2000 has decided that he would rather provide quality, personal service than make megabucks.