Best Negotiation Technique

r0GuE · May 23, 2003

( If the prospective customer seemed to want to squeeze every penny out of the deal, I would generally walk from it. )

Well you may have done this, but if you did I believe it was more for your pride (perhaps not the right word) than business reasons. From a $ perspective, it is always better to make the profit. You never hear of corporations telling stock holders that if the customers don't want to pay 12 cents a minute, let them go to the competitor because they are trouble.

( When the dealership has bills to pay, payroll to meet, and iron in the yard.......the price always seems a little more flexible. )

This is my point entirely!, there are ALWAYS bills to pay and iron on the lot. In fact, this is a complaint I have from car dealerships that want to deal more at the end of the month to meet a 50 car quota. If they dealt like that all month, they'd already have the quota made. The first car in the 50 is as important as the last.

Egon · May 23, 2003

I'd have a tendency to think there is no " Best Negotiation Technique " . Each case has its own variables factored in.

I gota live and the dealer's gotta live. Otherwise we both be in trouble.

Egon

RanchMan · May 23, 2003

Rogue -

You're right on with this one. 3 points to add...

1) Rocketman and DavesTractor are following the "high margin/low volume" sales model. Now, while I will agree that incremental costs are higher for a small business than a large one, there is no reason for sellers to "stick to their guns" and follow this model. Like you point out, they are only shooting themselves in the foot. (It also goes against some basic principles of cost accounting as well. /forums/images/graemlins/crazy.gif)

When I bought my tractor I went 250 miles down the road in order to save $2000. Yep, the "local guys" "walked away" just as was advocated in the earlier posts on this thread. That's fine - stupid maneuver - but it's their choice. If they had even been within a few hundred dollars of the other guy (i.e. saved me a trip) I would have gone with them.

The result? They have inventory on their lot getting old making them no money while the fellow I bought from made some money to pay the bills. (By the way, the small dealership I bought from sold 3 tractors in 3 hours while I was there picking mine up, so there is no reason these other guys couldn't follow the "low margin/high volume" model - it works for the dealership I purchased from just like it works for Wal-Mart.)

2) All this “relationship” stuff isn’t about the seller being your friend, being helpful, or anything else other than money. Now, that doesn’t mean that they don’t want to be your friend, they don’t want to be helpful, etc. – it just means (as admitted to) forming a long term relationship with a buyer (client) is about getting more money out of them at a future date. I’ve been in the business world a long time and trust me, it works for the Fortune 50 companies just like the local “Mom & Pop” shops.

Oh, and by the way, the "relationship" I established with that dealer 250 miles away has resulted in repeat business for him - i.e. more money in his pocket. All done over the phone and shipped to me. The local guys? Had some warranty work done at one - done INCORRECTLY and I had to fix their "fix." Needless to say, I won't ever go back to them. (They weren't being "mean" to me to "get even" for not buying from them - they were just incompetent.)

As far as “not wanting” folks who want a good price or them being “rarely satisfied” - while yes, there are some like that, I’ve seen folks who pay a premium be just as picky, if not more so. Does the phrase “Look, I paid a lot of @#%$& money for this (insert item here) and I expect it to work!” strike a cord? And what the heck is the matter with someone EXPECTING their device/vehicle/item to work the way it was advertised regardless of the price they paid???

3) Haggling is a way of life. Period. It’s been around since the beginning of civilization and it isn’t going anywhere. There may be a few companies that employ a “no haggle” model, but they are the exception and will never become the rule. Same thing with “Sales.” – Remember a few years back when Sears had a big advertising campaign where they said they’d never have another sale but would follow a “new” no-sale model - just low prices every day? Yea, THAT lasted a long time. /forums/images/graemlins/tongue.gif

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.) I'm simply trying to point out some of the business principles in play along with the fallacies of their points.

bmac · May 23, 2003

To the best of my knowledge, these tractors all have an MSRP so why not just pay that for the tractor if you're interested in getting 'one price' on it and avoiding the haggling? 

Well, it seems to me that in most cases MSRP is an artificially inflated price. Otherwise, 15%-20% discounts one commonly sees would preclude the dealer from making a decent profit. I expect the dealers to earn a good living. What irks me is the tiresome practice of having the dealer (this is not limited to tractor dealers) "work up a price" for a given item. Should be able to walk in, look around and know from looking at a tag what the item costs. If the dealer charges MSRP and you know from comparison shopping that the price is higher than you can get elsewhere, then you can walk away and save the dealer the time and aggravation of dealing with "shoppers". I've read on more than one occassion here on TBN the phrase "when your serious" or something to that effect referring to the point at which the dealer will really sharpen his pencil and give his best price. Well, I might become serioous sooner when I know the real price of something. Can you imagine if every area of commerce worked like this. Holy Cow! Standing in line at Wal-Mart while the slaes clerk goes to see the manager to see what kind of price they will give you on your basket of goods. Then you see the lady in the next line get a bigger discount than you. Geez!

 the customer who comes in and tries to wring every last nickel out of a transaction is seldom a customer you want. 

Agreed

 As a customer, you should want your dealer to sell his wares for enough money that he can cover his overhead, maintain and improve his facilities and staff and make a profit. 

Absolutely

I don't have a problem with a dealer charging whatever he feels is appropriate to satisfy his buisness model. I just don't care for the process many utlilize. Getting a price should be fast and friendly and non-confrontational. There should be no requirement to demonstrate "seriousness" to get the price (not MSRP or ballpark price, but THE price) of an item for sale. That was the point I was trying to make before.

Time for my blood pressure medicine.

Anonymous Poster · May 23, 2003

Rogue,
I don't believe it can be said any better. The dealership is in business for one reason - to make money. The only way it is going to make money is to make it's customer's happy.

I just bought (in April) my first new tractor. I felt I received a good deal on the package, especially with the availability of the model at this time. I could have driven 50 miles and gotten it a little cheaper, but when I told my dealer I couldn't wait 3 weeks for delivery, he called around and found me a tractor at another dealership, dropped it at my house, lent me a rear weight box to use with the FEL- all within 3 days, and for the same price as he originally quoted. I have been back for a few toys to add to it...didn't have to ask for a discount, got 15% to 20% off each item compared to the price tag.
I plan on buying a larger unit next year for field use, and you can bet I plan on using the same dealer. His Service and Parts people are great to work with too. Maybe I was just lucky in my choice of dealers, but from my experience with other dealers, I think there are some who could greatly improve. They have missed the opportunity to have me as a customer.
I hope each of you have had the same experience with your local dealer...if not, keep looking. There ARE dealers out there who WANT your business.

bmac · May 23, 2003

bmac, you misunderstood my post. 

Sorry, I'm prone to do this on occassion

We have a standard price for every item on the lot, and it is significantly off MSRP, and it is intended as the actual selling price and normally is. 
Is price clearly marked or does the customer have to sit and wait while a salesman pulls out the books, looks up the prices, takes a couple of phone calls and bangs around on a calculator before you have this price? You can probably tell that I've sat through a couple of these experiences and I found it hard to understand why this calculation wasn't done on the dealer's time card and not mine. I want to walk in, look, ask questions about the product (if necessary), get a price and get out. Very simple.

 That is a reasonable way for a buyer to think and as a seller we can reduce our percentage of margin a little on a big package and still have a good bottom line. 

That is understandable. However, when the next guy comes in and makes a similarly sized purchase does he get the same incentive? Probably only if he asks. Why not treat all customers the same? Buy a tractor - here is your price. Add 3 implements - congratulations - free delivery. Oh, your getting a backhoe? You get the 50 hr service as a bonus. I'm just playing devil's advocate here. But it often seems as though the biggest PITAs get better prices than those spineless people like me who tend to believe that a stated price is THE price, not a starting price. Although I'm not naive enough to believe this will ever happen, for me, it would make the shopping experience much more enjoyable.

 For most people there needs to be a little flexibility on price. We all say we want one price, no haggle deals, but when it comes right down to it, most of us want to make the best deal we can and there is absolutely nothing wrong with a little negotiation. 

Personally, I want the best deal without haggling. I don't necessarily mean lowest price when I refer to best deal. For me, its the entire buying experience. If I have to spend hours or days (refer back to rancars suggestion to give a dealer a week to get back to you with a price quote) making counter offers to save a few hundred dollars, count me out. The dealer who can readily provide me with a fair price without requiring me to haggle will get my buisness every time.

Now don't misunderstand me. I would offer a local dealer the opportunity to match a price offered by a distant one if I was comfortable with other aspects of the local dealer. As has been said about a million times on this forum, the dealer is more important than the color of the tractor or the price.

Finally, many of my comments are based upon my limited tractor-buying experience and many auto-buying experiences. My statements are intended to reflect my personal disdain for the haggling process in general. I know many enjoy the opportunity to knock a few bucks off the dealers offer and that is fine. I, too, enjoy saving money where I can.

SLOBuds · May 23, 2003

Thanks for the great tips, which are:

1. Do my homework by knowing exactly what I want, and what the list price is for each of those things.
2. A discount of between 15%-20% off list is a target. Not always achieveable.
3. Make sure I like the dealer. Meaning that I like him, and that I believe he will give me personal service when I need it, and that he is capable of providing good service when I need it.
4. End up with a price that both of us can live with.
5. Get prices from as many different dealers as I can. (Part of the 'homework,' in my mind.) Internet too.
6. Send in Dourobob's wife. If she can't make the trip to Central California, maybe have a 3rd party do the actual negotiation.
7. Make sure the dealer is appraised of my future plans which MIGHT involve additional purchases.

Sorry ... I don't think that I will walk in to offer list price. /forums/images/graemlins/smile.gif And internet purchase really does not set well with me for some reason. I'm thinking that the relationship is important with this type of acquisition.

Very good thread on this one. Again, thanks everyone and please continue with the ideas. They're great!

Gary_in_Indiana · May 23, 2003

competition between dealers was stiff (none of those dealers are in business today) 

Bob,

I think you make my point very well. None of those dealers survived. I guess that makes the potential for service and implement sales kind of a moot point.

Gary_in_Indiana · May 23, 2003

Can you imagine if every area of commerce worked like this. Holy Cow! Standing in line at Wal-Mart while the sales clerk goes to see the manager to see what kind of price they will give you on your basket of goods. 

No, I can't imagine that. Retail stores commonly mark up items 100% or more yet you just walk in and pay the price on the item. The markup on cars, trucks, tractors and implements is far less yet no one seems to want to buy them the way they'd buy something at Wal-Mart or Home Depot there.

dourobob · May 23, 2003

Hi Gary
It may make your point to some extent - in this particular case the dealer turned out to be a victim of his own poor business practices (my assessment) and it was 18 years ago. This fellow had recently purchased a long standing dealership and most of his parts and service department staff had been at that site for 20+years. Within a few months of my purchase (and I take no direct responsibility here /forums/images/graemlins/grin.gif) he moved to a bigger location, increased overhead dramatically, lost all of his service and parts staff (mostly quit - one was fired) and stopped paying bills. I know about the bill paying because I had ordered an after market FEL for my tractor and delivery kept being delayed according to him. I met the FEL manufacturing rep at the International Plowing Match a few weeks later and as soon as I asked about the loader I was waiting for they told me 1) they didn't have an order yet and 2) the only way this dealer would receive it was if he paid "Cash Up Front".

Once I confronted him on this the loader arrived in a week.

Our objective was to pay a fair price and the dealer (I was dealing with the owner) agreed to that fair price.

In hindsight he may have been sliding down a slippery financial slope long before we even began our negotiation becuase he was out of business within 18 months.

I guess there is a side of me that feels I would have paid more if he had asked for more but he was the only one who could decide the bottom line on the unit.

As has been said, it seems every deal is different. I recently purchased a 1962 MF FE 35 privately and when I started talking price (my wife wasn't with me this time /forums/images/graemlins/grin.gif) he immediately took $400 off his original advertised price so I believe he set the stage for haggling. Still, I think we arrived at a fair price and we both had the option of walking away.

Some folks love the challenge of negotiating a deal and others don't but I suspect there will always be an expectation of some give and take.

Bob

r0GuE · May 23, 2003

( No, I can't imagine that. Retail stores commonly mark up items 100% or more yet you just walk in and pay the price on the item. The markup on cars, trucks, tractors and implements is far less yet no one seems to want to buy them the way they'd buy something at Wal-Mart or Home Depot there. )
Wal Mart has 30 - 40 people on staff at any one time keeping every concievable item in every conceivable color in a large air conditioned building with ample parking convieniently located. They have thousands of people buying in bulk to bring you the best and cheapest of everything.

Tractor guy keeps 1 or 2 of perhaps 5 or 7 different models. The dollar value of the markup is in the thousands per unit. He keeps an average of 1 - 3 people in the shop.

Totally different model.
I can get a husky chainsaw at Lowes now. The cost is 75% of what i paid for mine from a dealer. I'd bet it works just as good as mine.

I'm not against the dealers making aliving. I'm sure some are great and earn every penny. But I don't think the accusatory "bad person" attitude toward hard bargain shoppers is justified. If I want the absolute lowest price I have to pay for my Kubota, then that is what I'll get. And I might add, it is what I did get. Since then, I (being a ... what was the term... Sissy Hands Engineer /forums/images/graemlins/wink.gif , yeah that's it) have thrown 3 more BX unit sales that I have intitialtred through some coworkers. There's always a down side to turning away bussiness, there is seldom a good side. Yopu may notmake as much on this particular unit, but I promise the nice people at Kubota will give you another one to try yoiur luck with! /forums/images/graemlins/grin.gif

DavesTractor · May 23, 2003

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, but sometimes I've written things and later wondered why, so I'll cut you some slack. Our prices are generally 16-18% off MSRP on tractors and often greater than that on implements, and we sell a lot of tractors based on a low to reasonable margin and high volume. We are a small business, but sell just about one tractor per business day. We try to keep about 40 units and 100-200 implements in stock and rarely will anything set on our lot for more than 60 days. I sell tractors, not collect them. I see other dealers with last years models, or even two year old machines, and they are hanging on to full list. That just isn't good business.

bmac, I think I understand your position, and I like it. We do try to post our prices, and have the prices marked on the bucket of our tractors. Just due to the volume we do for a small business, we sometimes will not get a tractor marked or have a price on an implement, and it does cause a delay as someone will have to go to the price list to figure the sales price. As the same model tractor can have different options, this can take a few minutes. As a dealer, I appreciate the comments made in this thread. Some of you are fellow dealers, but most are owner/buyers and informed ones at that. I appreciate the points you have made!

BillyP · May 23, 2003

Go in Wal-Mart or Home Depot and pluck down 20 grand. I'll bet you could get a pretty good deal. Speaking of markups, you can't even begin to imagine the overhead these retail stores have. I worked in the grocery business for over 35 years. If you can cut a 3% net profit, you were doing good.

If a tractor dealership can come off his price 25% and still shake your hand, you can bet your sweet petunia he made money.

Rocketman · May 24, 2003

Well.............hasn't this been an interesting exchange. Sorry I missed it.
Earlier in the thread someone ask what I considered the "Off" season". The "Off Season" in the tractor business is generally considered late fall - early winter. That is when most manufacturers offer the greatest discounts.

There seems to be a slight misunderstanding regarding the profit margins in tractor whole goods; so, I thought I'd share.

Although the manufacturers all have slightly different programs and there are many influencing factors (time of year, special program, dealer volume, etc); in round numbers, a dealer will pay 20-25% (off of MSRP) for unit purchases. This could be as low as 15% and as high as 30% -depending upon the influencing factors.
Now take your typical $16000.00 Kubota BX22 and apply a typical 20+5+5 (volume dealer) discount and you get a cost of $11552.00. Or a typical straight 20 discount for lower volume dealers and you get a cost of $12800.00. You read it right ...... with only "dealer volume factors" there could easily be a $1250.00 "profit difference". Add in time of the year, special programs, and incentives, and you could sway the price another 5% or so. The lesson here is a dealer is not a dealer, all dealers are not paying the same price, and size DOES matter.

For the purposes of this discussion, lets say you are dealing with the "high volume" dealer and he buys his BX22 for $11552.00 + freight of $150.00. The tractor will arrive crated and require setup which will probably take 3 hours to get from the crate to the showroom. Out of pocket expenses is now around $11850.00.

Mr. informed customer walks in and sees the $16900.00 MSRP and negotiates a 15% reduction and pays $14365.00. Not a bad deal - the high volume dealership pocketed $2500.00 on the transaction the lower volume dealer pocketd $1250.00 - right? Not so fast tonto. Commisions (2% of gross at $231.00), caps (premium wool style with logo $20.00) , a free service (1.5 hours or $75.00), and baseball tickets ($25.00). The real number delta now sits at $2209.00 (or $959.00 for the low volume dealer). Taxes, insurance, light bill, wages for the salesman and sweet-thang behind the desk, a 51% IRS burden on the remainder, and finally the owner gets what is left over - believe me it is a negative number for even the largest dealerships.

Now - how many BX22s do you have to sell per year to maintain a profitable sales program? I'll tell you that it takes over 125 units per year and there ain't too many dealerships out there that push that much iron.

The $$$ is in parts/service - not sales. So what is the best negotiating technique? Buy when the discounts are greatest and convince the dealership you are a repeat parts/service customer.

OK guys - I'm on vacation. I'll look at this again in a couple weeks. Be sure and give a moment of silence on Monday - our warriors (past and present) deserve at least that much.

MikePA · May 24, 2003

believe me it is a negative number for even the largest dealerships. Now - how many BX22s do you have to sell per year to maintain a profitable sales program? 
Hmm, if it's a negative number, then if you sell enough BX22s, the dealer will go broke! /forums/images/graemlins/grin.gif

5030 · May 24, 2003

I've found that the best negotiator of price is CASH . When I buy a new tractor, implement or even a car, a large down payment will adjust the dealer's bottom line. I usually deal with the same 2 dealers here and they know that Forage Services, L.P., will either pay cash or put a sizeable amount down. Dealers use the cash for their operating expenses. Credit payments have to come from the parent company and there is a time delay. Dealers, like you and me like cash. It's liquid and immediate. Besides, I don't like to pay interest charges.

r0GuE · May 24, 2003

W O W...
Rocketman sure seems to have a handle on the bussiness. Here's a wrench in the theory though. I worked with my 2 closest dealers. I am certain that the closest one would be considered large volume. As well i have no doubt that the one slightly farther away is lower volume. He beat the large volume dealer by over $600.
I agree that every dealer has their own circumstances and may not be able to match prices. If we are talking a few hundred and I reallyt liked the dealer and they were closer to me etc, I'd consider going with them. But really for 5 or 6 hundred or the thousands others are talking about... geesh, forget about it.
If they are that far off the mark based on their costs, perhaps they need to find another line of work. Cold to be sure, but reality is ugly. Ask me I know, I'm in telecom. I've seen so much reality in the last 2 years I could make a small farmer cry!! /forums/images/graemlins/wink.gif

Gary_in_Indiana · May 24, 2003

the best negotiator of price is CASH 

Unless the dealer is carrying the paper himself (like a buy here, pay here operation) the "delay" in converting the note you sign to cash is only a day or two in most instances (maybe as many as four or five over a holiday weekend).

I know that a large down payment won't change my bottom line on any conventionally financed transaction. There are actually advantages to the dealer if you DO finance your transaction through them. The dealer can make money on the finance reserve and on the CLA&H insurance.

Personally, I always get a kick out of someone who emphasizes over and over that theirs will be a "cash deal." I can't help but think, "It's all cash to me." /forums/images/graemlins/smile.gif

To be fair, there is one difference. With the large, large number of people today who have credit problems, a cash deal is one that the dealer knows will be a deal once he sells it. Lots of dealers today are seeing 40-50% of the deals they write turned down for financing.

spencer200 · May 24, 2003

Well I have read this thread and kept quiet until now. There are a lot of assumptions out there about how much margin a dealer has,so let me clear it up for you on New Holland equipment. The TC tractors have a 20% margin plus whatever programs New Holland is offering that month anywheres from 1% to generally 9% in addition to the twenty it just depends on how hungry the manufacturer is that month.
The attachment for the TC tractors have a standard 20-23% discount plus whater ever programs the manufacturer is running that month generally an additonal 75.00-250.00 dollars
The implements also have a volume discount to the dealer at the end of the year of 1-3% depending on the dealers volume. The TC tractors however have no paid volume on them regardless if you sell 1 or 20001 New Holland did away with volume on the compact tractor over 10 years ago because of the competitive nature of the compact tractor business. I hope this clears up a few misconceptions about voulume and profit margins I have read in this thread, at least for NH compact tractors. I can not say what other manufacturers do. /forums/images/graemlins/smile.gif

spencer200 · May 24, 2003

Hate to disappoint you put as a new holland dealer the minute your credit is approved the money becomes available over the internet for imediate use so it is just like having cash in hand. /forums/images/graemlins/smile.gif