The “You’re Getting Our Best Price” Ploy

In this ploy, the vendor’s marketing representative attempts to convince the customer’s negotiators that the customer is getting the vendor’s very best price.  The implication of being able to “sell” the best price ploy to the customer is twofold.  First, since the customer is being offered the vendor’s best price, further negotiations to achieve additional price concessions would be a waste of time.  Second, because the vendor already has cut its profit to the bone, the customer shouldn’t expect soft dollar and contractual concessions from the vendor. 

By convincing the customer there will be further contractual concessions, the vendor is likely to gain another edge.  The vendor’s representative will note that the quoted best price has been based upon the vendor’s standard contract, not on a lengthy document that alters “traditional” liability relationships and includes other vendor concessions.

A Winning Ploy

The “Best Price” ploy is effective against big companies and small firms alike.  Large customers are susceptible to the ploy because they already are impressed with their own size and clout with vendors.  In dealing with many large companies, vendors have to do little further convincing that the quoted price is the best price.  Vendors feed a large company’s corporate ego by comparing that firm’s negotiating advantages to the disadvantages faced by smaller customers. 

The vendor’s script reads:  “Mr. Adams, we recognize that we’re dealing with one of our largest customers so we’d never consider having you pay the same price as  our smaller customers.  They don’t have the same purchasing power, and you’re a terrific negotiator. So, rather than beat around the bush, we’ve quoted you our best price from the start.” The amount of money and contractual protection large customers leave on the table as a direct result of this “ego inflation” tactic can be staggering.

Smaller customers also can be victimized by this same approach.  The vendor’s marketer tries to convince the customer’s staff that, because of their personal relationship, their strong negotiating ability or the importance of the transaction to the vendor, the vendor is giving the customer its very best price, which is seldom available to much larger customers and is virtually never offered to smaller firms.

In this approach, the vendor’s representative says, “Because this transaction is especially important to our senior management and because your negotiating team has a reputation for driving a hard bargain, we’ve quoted you our best price from the outset.  I hope you appreciate the fact that this is a significant discount.  I know for a fact that [insert the names of a few Fortune 500 companies] haven’t been offered this price. But, we want your business, and we want to expedite this transaction to meet your installation deadlines.” 

The vendor’s representative also may assure the customer’s staff that the vendor’s standard form contract, which the customer has the audacity to ask to modify, has been accepted virtually unchanged by a number of named national firms.  In some situations, the salesperson is simply misrepresenting the situation, but this is easy to check out with a series of telephone calls to the supposed signers.  In many other instances, the sales representative will be all too correct. 

ICN often has observed that, until enlightened by training publications, consultants, or other customers, some of the nation’s largest companies have left the most contractual protection and the most money on the negotiating table.

Securing Favorable Treatment

Regardless of the customer’s size, the vendor should be required to back up its “best price” puffery in writing by agreeing to a “most favored nation/customer” provision in the contract.  If the vendor agrees to include such a provision in the contract, the customer will gain meaningful contractual protection and considerable peace of mind.  If the vendor balks at such a provision, the customer may learn a great deal about the candor of the vendor and the relative importance the vendor really attaches to the customer’s business.

Consider the following situation, where the vendor began by saying:  “John, this is obviously our very best price.  As you know, you get our best price.  We can’t sell it for less than this amount, even to a company of your size.” 

Unlike most customers, however, John replied:  “Great!  If that’s the case, I’m sure you won’t mind a contract provision stating you are selling us your system for the maximum allowable discount which gives us the minimum total price.  Furthermore, since you represented the fact verbally, let’s put it in writing that this system has not been sold for less money to anybody else.  Of course, if at a later date we find out you have sold it to somebody for less money prior to our date of signing, we’ll be entitled to a retroactive discount.”

As might be expected, a request for this kind of provision normally separates puffery from reality.  The customer’s negotiator will find out if the vendor is telling the truth.  If a vendor will put a “most favored” provision in the contract, the customer can be pretty well assured that the vendor has undertaken a high-level review of the negotiations to make sure that the customer, in fact, is being given the maximum allowable discount. 

If, after making grandiose verbal representations, the vendor is not willing to put this provision into an agreement, then the customer has a simple and dramatic remedy—throw the vendor’s negotiators out of the office.  Once the vendor overcomes the shock of being ejected and the protestations have ended, two possible scenarios might occur.

If the vendor’s negotiators were serious about offering the customer the vendor’s “best price,” they’ll regroup, figure out a way to save face and come in with the discount price and the “most favored customer” clause.  However, the vendor may try to restructure the transaction to scramble the actual discount and protect itself with other favored customers. 

On the other hand, the vendor may come back with a new story coupled with an absolute refusal to provide the “most favored customer” clause.  If this is the reaction, the customer should ignore the vendor’s stated rationale and zero in on the relevant question:  Why won’t the vendor supply the clause in writing?. 

The Real Reason

While it’s possible that the vendor has a firm policy against “most favored” provisions, this is the exception.  The more likely reason is the vendor has offered a better discount to another customer.  In essence, the larger (or smaller) customer was not so “favored” after all.
 

Most Favored Nation Provision

Notwithstanding any other provision of this Agreement, all of the prices, warranties, benefits, and terms granted by the Vendor to the Customer hereunder are hereby warranted to the Vendor to be comparable to, or more favorable to the Customer than the equivalent prices, warranties, benefits, and terms that: (a) have been offered by Vendor to any of its other      (1)      customers      (2)      during the period from      (3)      to the effective date of this Agreement; and (b) are being and will be offered by Vendor to any of its other      (1)      customers       (2)      during the period from the effective date of this Agreement through and including      (4)     If at any time during the periods stated in subparagraphs (a) or (b) above, the Vendor shall contract, or have contracted, with any other      (1)      customer      (2)      for the      (5)   of substantially similar equipment as that listed in Schedule A hereto, on a basis that provides prices, warranties, benefits or terms to the customer more favorable than those provided to Customer hereunder, then: (i) Vendor shall within (30) calendar days after the effective date of such other contract notify Customer in writing of such fact, explaining the more favorable basis in detail; and (ii) regardless of whether such notice is sent by Vendor or received by Customer, this Agreement shall be deemed to be automatically amended, effective retroactively to the effective date hereof, to provide the same prices, warranties, benefits, or terms to the Customer; provided that Customer shall have the right and option at any time to decline to accept any such change, in which event such automatic amendment shall be deemed to be null and void effective retroactively to the effective date of this Agreement. 

The provisions of this section shall survive the closing and termination of this Agreement.

Notes:

(1)        Insert any limitation describing the type of customer or business, such as “aerospace.”

(2)        Insert any geographic or other limitation, such as “located in the Commonwealth of Massachusetts” and/or “purchasing a system with a list price of $1.2 million or more.”

(3)        Insert earliest date Vendor will agree to accept.

(4)        Insert latest date Vendor will agree to accept.

(5)               Insert any descriptive limitations based upon the type of transaction involved, such as “purchase” or “lease.”