Business Negotiation August 23, 2013

The Krunch

A buyer solicits three bids on a printing job.   The three sellers are unaware that the prices bid are $5,000, $5,400, and $5,700 respectively...

A buyer solicits three bids on a printing job.  The three sellers are unaware that the prices bid are $5,000, $5,400, and $5,700 respectively.  Anxious to bring the price below $5,000, the buyer tries an old negotiating tactic.  He calls them individually and says, “You’ve got to do better than that.”  The odds are all three will come down, including the low bidder.  Why?

Three factors contribute to making the Krunch effective.  The first is that salespeople are sensitive to competition.  They lose more jobs than they win and rarely learn exactly why.  They perceive an invitation to “do better” as a “last ditch” opportunity to stay in the running by reducing the price.

The second point favoring the buyer rests on the fact that the typical salesperson tends to resent the price he or she is forced to offer the customer.  Most are convinced that management sets prices too high and thereby makes their lives difficult.  The third factor is the salesperson’s discretionary authority.  Salespeople usually have some freedom to lower the price in response to competitive pressure.  These factors combine to make the Krunch so popular with buyers and difficult for sellers to resist.

What should you do when you hear, “You’ve got to do better than that”?

  1. Don’t drop your price until the buyer tells you specifically why you should.  Ask the buyer in what specific way you must do better and why.  Whenever you are faced with a general objection by the other party, make them be specific.

  2. Don’t drop your price quickly.  Keep selling your added values and benefits.

  3. Never assume that the final buying decisions will be based on price alone.  It rarely is. Product, service, terms, delivery, and quality are major decision criteria.

  4. Ask for something in return when you make a concession.

  5. Calibrate the buyer based on their history of negotiating.  Do they back down if you don’t?  Many buyers ask for a lot and are willing to settle for far less.

Finally, there is another precaution that can easily be taken.  The next time you are invited to the buyer’s office to discuss a bid, ask yourself in advance, “What will I do if the buyer says, ‘You’ve got to do better than that.’?” A bit of forethought can help make an opportunity out of the Krunch instead of a problem.  With forethought you may be able to do better by getting the buyer to increase the order size or by finding other creative win-win ways to make a better deal for both parties.

General Negotiation
May 10, 2017

Patience really is a virtue

“All you need is a little patience.” We’ve heard that for years, in church sermons, from our teachers, our parents, even from pop songs.

Read More Group 7
May 10, 2017

Are there rules for effective negotiations?

According to Anthony Tjan, founder of Cue Ball, a venture equity bill, there are four main rules for effective negotiations.

Read More Group 7
May 10, 2017

Negotiations involve change: price increase, scope of work modification, request for discount, union demands, reduction in volume, change supplier, design change, people changes.

Read More Group 7