I was chatting with my brother the other day and was reminded of a situation a while back where the client always insisted on 'negotiating' a price with me. They had a well earned reputation of being hard negotiators. I was aware of this when I attended a meeting to work out our first large contract.
Before hand I did my homework and knew exactly what I needed for the job. On entering the meeting I took two sealed envelopes out of my pocket and put them on the table. I explained to my customer that one contained a fixed price... what I was willing to do the job for, no negotiation. The other envelope contained a price which was negotiable. If they chose to negotiate I would place the first envelope back in my pocket and we would 'work out a price' starting with the figures in the second envelope. They would never know my bottom line.
The customer chose to negotiate. So the game for me immediately became to see how much money I could keep on the table. What the customer didn't know was how much I had marked up the item to allow for negotiation. It was real world poker with considerable sums of money at stake.
In many years of large contracts with this customer they always left money on the table just for the privilege of negotiating. But I suppose they felt better having 'negotiated' the deal which suited them. And I was always extremely well paid as a negotiator.
-dan
[ February 17, 2003, 11:03 PM: Message edited by: Dan Sawatzky ]
Posted by Bob Stephens (Member # 858) on :
I had an Indian (not native american) come in wanting a new sign for a motel he just purchased. We discussed this and that and I quoted him a price of $1,500.00
Immediately he offered me $1,300.00 and I could have the job. I said no thank you have a nice day. He said no he would not leave that he was told I was the best around and he wanted me to do his work. I said no leave. He continued with please my friend, (we just met for the first time ever?) I said ok but now you must pay me $1,700.00 for the same job. He gasped and said but that is more money and I said yes, you're math is quite good.
He kept on and I told him I would start charging him for the time he was wasting arguing with me. Eventually he gave up and I won out. I know he was really ****ssed off that I wouldnt play with him.
I just dont get it though. Call me stupid.
Posted by Mark Fair Signs (Member # 289) on :
you are one smart businessman dan.
mark
Posted by Brian Diver (Member # 1552) on :
Great idea and great job Dan I'll have to remember that the next time I do business with some of those types. I've been in a few sessions way to deep before I knew what was going on I was giving the farm away. Of course I was young and dumb (ok - old and dumb) and new to business. It only has to happen once. Thanks for the tip! Posted by Kent Smith (Member # 251) on :
I don't negotiate, period. I sets the customer up to assume your price is never correct or that you are always overcharging, even if he wins. If the customer wants to haggle, I will tell him to change the specifications and I will re-figure the price to the new specs. Change the job, not the price.
It helped when we started using QuikPrice since the customer could not haggle with the computer over the price. Then he would change the specs.
Posted by Joey Madden (Member # 1192) on :
I agree with Kent as I don't negotiate the price either but do negotiate the work which is involved. Although my business may differ from yours, my competition is basically the same and the prices I charge may be more then most persons want me to charge them. I am the captain of my destiny and I take my work very seriously. Most of my work comes from referrals from persons who aren't afraid to dig into their pockets.
Posted by Myra Grozinger (Member # 327) on :
I have unfortunately not yet worked out a good, non offensive, consistent way to tell people that the price and design conversations, the time hemming and hawing, the back and forth of useless micromanaging of details that some of my customers do when they place an order has to be figured into the price.
That can become a problem as they chat away and try to soften me up for a stab at a low price, since it is obvious I am a little old lady working alone out of her house and have a "low overhead". That I sell signs, not family memberships is still hard to explain to some who want to hang around because they think it's a cool atmosphere or who want to reminisce about signs they themselves have painted in the past, and if only they had the time they would do these current ones as well......
I try hard to not tell them that the talking costs them as it should, just as hard as I try to collect for it as I deserve. I rarely get into serious price negotiations any more. I do it just like Kent, I let the computer program do it, and let them tell me where to cut if they don't like the price. I let them watch me compute the price, if they are the follow me around kind. And print it out, because it's a great psychological tool of non - negotiation. If they seem to not like the price I tell them, with a smile, that I no longer do this for practice. And that this is good for them, because I know what to do and they can just leave it in my hands.
If I am dealing with an insecure and time wasting person, I won't go figure until the talking is done. Then I figure the time just spent talking into my estimate, and don't have hard feelings if it just wasted a half hour of my time - if I get the job. By that time too much energy on both sides is spent, usually, for me not to.
Only yesterday was I thinking with gratitude about that I have many customers who long ago stopped mentioning price when they place an order. Consistency and fairness and reliability. I try hard to succeed at giving them what they need -how they need it - and when they need it - every time. That kind of service helps after a while to make talking about price a non issue.
Posted by Dan Sawatzky (Member # 88) on :
I'm with most folks here in that I don't generally negotiate. In the case above I knew it was negotiate or walk and the job was waaaaaay too good (both creatively and financially) to walk away from.
I WANTED this job. My point is that sometimes you HAVE to play by the other guys rules. It doesn't mean that you have to lose. And it doesn't mean you have to play on an uneven table.
In the case above I made much more than if I had done it without negotiation.
In this particular case it was a WIN WIN situation. They got to negotiate (something they insisted on) and I got my price and a healthy premium for negotiating as icing on the cake. We both came away from the bargaining table happy.
The sealed envelope that remained in my pocket for my eyes only was a benchmark for me to measure against.
-dan
Posted by Joey Madden (Member # 1192) on :
On that note Dan, I can truly say that being a pinstriper really has its perks. For instance I don't have to give a customer a design on paper in order to jet the job. When pricing a job I am able to make any design big to small whenever I don't hear the gingling of the coin, but I will get the job!
Posted by Doug Allan (Member # 2247) on :
quote: ...That I sell signs, not family memberships is still hard to explain to some who want to hang around because they think it's a cool atmosphere...
I know that feeling Myra. I've got my office/studio just where I want it to make the time I spend there confortable & enjoyable. It's not only clean, organised, & professional, but it is air conditioned with a great sound system, comfy stools & generally an asthetically pleasing environment to hang. I have plans in the works to put up a wall with frosted glass, a sliding service window, & a narrow, sparse & un-cooled customer order area. The "follow me around" types will no longer be backseat drivers in the design of economy level signage. If I do offer full color computer layouts in the first meeting, they will have a faw magazines & a water cooler to keep them company while I shut my window to keep inmy cool air. I like to talk to people, so I will be doing this as much to reduce my own time wasting habits as to discourage others from getting too comfortable & staying too long.
Posted by Myra Grozinger (Member # 327) on :
Dan: I had an appreciative comment about your negotionation, which I thought was brilliant, and about which I fully understood that it in essence happened by request. But somehow I must have deleted it in shifting my typing around.
Ha! We do what we must to avoid starvation and to stay out of prison and hopefully have fun while we're at it.
Posted by Arvil Shep' Shepherd (Member # 2030) on :
A few years ago I quoted a Sign for a Jewelry Store in Statesville NC....(About 75 mi from my shop at the time) I was bidding against a local Sign Maker.... This was only a $3000. job.......The other guy came in at $2000......When I asked the Owner about his materials...he said it was the same..when I asked about his Ability...he said that he did great work.....when asked about his promptness.he said two weeks ...
Then the Owner asked me why such a price spread in practically apples for apples bid ????
I told him "I guess I just operate on a higher profit margine than my competition.......Being in the Jewelry Business I am sure you know what I mean".........He just looked at me for a long time...started grinning while he was writing out my deposit check........from then on he never asked for even a preliminary price..... Shep'
Posted by Ted Nesbitt (Member # 3292) on :
I always picked an odd number for my quote.
Whether you're using a pricing software or have a strategy or not, thry this on for size;
You work out what you need and what you deserve from the job, and you come in at $1500. That's too 'round' a number in my mind---whether you worked it out or not, it sounds like you grabbed it out of the air, and your customer may think that. This could be what opens you up to price negotiation.
I'd always adjust that number to say $1488.50, or $1527.88. Sounds strange, but try it! Instead of negotiating round numbers that are hundreds, you might find your customer coming in at 1500 right off the ;) bat, which is what you wanted.
An odd number makes your pricing look structured and well thought out, whether it is or not. It's all in how you present it!
[ February 18, 2003, 10:25 AM: Message edited by: Ted Nesbitt ]
Posted by Wayne Webb (Member # 1124) on :
I do what Ted does and rarely ever give round figures.
I also agree that submitting to price haggling makes it look like you had your price 'jacked up" to begin with. But that was mighty slick Dan...and I don't mean that in a bad way. Given the circumstances, I believe that was good business.
Posted by Steve Aycock (Member # 3612) on :
I try to avoid verbal price negotiations when I can. I'm fully aware that some people are audible jousters and I try to avoid them as best I can. I get the info I need to do my figuring and then let the prospective customer know that I'll get back to them as soon as possible, and then I don't doddle. I fax or e-mail quotes as soon as I am able. It's hard to haggle with a sheet of paper.
I also use off-round numbers. Even if it's cut and dry pricing, I add a few cents to make it look like it was figured, and hey a few extra pennies in my pocket always helps.
Posted by Rick Chavez (Member # 2146) on :
At the small sign shops I worked at we left a little room for negotiation, if you spent too much time haggling, you bid the client good day and go to the next customer. I have seen all the tricks a client does, baiting being the favorite, by saying give me a good deal now, and I'll give you a lot more work later.
At the level where I'm at now, it's not uncommon (from what I observe) is you submit a proposal with qualifications, company history, key staff bio's and estimated budget, goes through a review, narrowed to a few companies, then your interviewed, and if you are awarded the job, goes through negotiation. Many of the jobs I work on are still being designed by the architect, years from being built, in a rush because they dropped the ball, or any other reason. With the amounts of money involved I can imagine it's pretty scary trying to bid on a 250k job, because if you blow it, you can really hurt yourself. I'm only a distant observer of this process, but get to see it at different times. Rick
Posted by Nevman (Member # 332) on :
Here's one of my techniques for negotiating...sorta like Bob Stephens...
Conversation...
Me: The price is $ 350.00 Them: Can you do any better than that? Me: SURE... $ 380.00 Them: THAT"S NOT A BETTER PRICE! Me: IT IS FOR ME!
It usually makes them laugh and I will usually get the job at my price. If they balk, they walk. So long...
Posted by Kent Smith (Member # 251) on :
Reminds me, when a customer asks how much for a sign I respond "usually under $100,000". After they stop laughing, we can talk.
Posted by ScooterX (Member # 2023) on :
I carry the large format Sign Contractors Pricing Guide. When the customer wants a price, I flip open the book, find the page, find the size, find the design level and show it to them. My finger is pointing at the price.
If they ask for a lower price I show them by moving my finger -- either we make the sign smaller, or we lower the design level (from 2 color to 1 color, NOT the quality of the materials).
If the STILL want to bargain, then I can offer these as negotiation points 1.Pay me 100% up front 2. Longer time (three weeks instead of two) 3. Increase the project size (more work)
Some people LIKE to bargain. I try to work with that, but on my terms.
Myra, I work at home too, and do all of my negotiation at the customers place of business. Most of my customers don't have a clue about what my shop looks like, or even where it is. They figure I cost more because I come to them (extra service!). Anybody who has TIME to leave their business and watch me work is probably somebody who can't afford me.
Posted by Murray MacDonald (Member # 3558) on :
My favourite recent case was a customer who owned a service station. Called to say he loved the design, the time frame was good, but a 10% discount would cinch the deal. "No problem, just give me 10% off on all the fuel I buy in the next year" was my reply. At 76.9 cents a litre, I would do really well. The customer went with my original price.
Posted by George Perkins (Member # 156) on :
I had some dealings with the "Motel Indians" a number of years back, Scottish Inns, I think. A bunch of work as I remember. I give the guy my quote and he commences to start haggling. I told him my prices weren't negotiable. He proceeded to tell me it was customary in his country to negotiate the price on everything....bad move on his part
![[Smile]](smile.gif)
I'll have to remember that the next time I do business with some of those types. I've been in a few sessions way to deep before I knew what was going on I was giving the farm away. Of course I was young and dumb (ok - old and dumb) and new to business. It only has to happen once. Thanks for the tip! ![[Cool]](cool.gif)