Getting discounts seems to be for many people the epitome of successful negotiation. But big rebates are much more the result of intense bargaining or even of power games in the negotiation.
aka: rebates, price reduction
Poor preparation – Heavy discounts
In my experience, a poor preparation for the negotiation leads to bigger discounts.
• If I do not know my arguments or cannot present them purposefully, I will have to pay with discounts.
• If I have not gathered enough information in preparation for the negotiation, I will have to compensate that with rebates.
• Without an absolute bottom price (GO – Away – Limit) discounts may be threatening my whole business.
Discounts are part of a learned power game
Unfortunately, this is common practice in many industries. The buyer will be paid according to how much price reduction (= discount) he achieves. And the suppliers have decided (together) to accept the position of power of the customer and the respective purchaser and to act accordingly.
Regarding that, discounts run on autopilot.
The downsides are the misalignments of resources and the work-on-the-expectation-strategies occasioned by that. The suppliers – and the suppliers of the suppliers – have learned and comprehend the process. Thus, future discounts are already calculated in an early stage.
Discounts and the price we all pay
Previous food scandals (horse meat, organic eggs) are partly due to the price battle that rages in retail. On the one hand in the store, from the commerce to the customers, on the other hand also from the commerce to its suppliers.
There, the price is pushed relentlessly, tenths of cents are bargained and at any time, the suppliers are threatened with delisting. And then, at some point, bottom-lines were reached, where only money is made if the producer “dodges”. At the same time, production companies become bigger and harder to control.
Discounts – completely insane!
How crazy it can be, I have experienced myself. The buyer rejected a rebate in kind of 10 + 1, which would be more than 9% cash discount and insisted on a cash discount of 5% instead. Just because it is in his objectives and he gets a bonus doing that exactly that way.
And who pays for all of the really big rebates we get offered in car showrooms and in the kitchen store? Partially, without even asking for it. I always wonder whether there is actually so much buffer zone in the prices and if it is, why does the „doing discounts“ must go on and on.