Driving too hard a bargain

Super pub

We were thrilled when the biggest super pub in the City called us and invited us to pitch for their business – we must be doing something right I thought.

At the time I was the General Manager of  Deasy’s, a Guinness subsidiary with depots in Cork and West Cork. We were drinks wholesalers and we delivered beer and soft drinks to the pub and off licence trade in these areas.

We had been doing quite well and this pub was one of those “prize” accounts that all our competitors were chasing. The business they were doing would probably be about 20 times the size of a normal pub.

This was an account we wanted so we put a really competitive price list together. There was enough in the price to win the business but still leave enough for us to make it worth our while.

Not good enough – we had to do better.

I guess this was no surprise as the incumbent wasn’t going to lose this business easily and the buyer  (in those days no one had a buyer but this crew had!) was going to quite naturally play us off against each other.

We sharpened the pencils and ate into our margins leaving a little left for us.

Not good enough – we had to do better.

At this stage we cut our margin on products across the board effectively giving them the cheapest prices we were giving anyone – this was crazy but if we wanted this prize account its what we had to do.

The buyer rang our Sales Manager – congratulations, we had won the account and they looked forward to doing business with us. Over time with the introduction of some new products and a few substitute brands we might be able to bring it back to some level profitability.

After our first delivery the buyer rang and told us that he had some breakages left over from his previous supplier that he wanted us to uplift. We would have a look at them and decide what we could do – even with out of date alcoholic products we would be able to reclaim the duty and pass the rebate back to them.

We inspected the breakages and there was a huge quantity of all sorts that he wanted to return – clearly they had done a clear out of their stock room and expected us to take back this rubbish that had been accumulated for years. Many of the products were non-alcoholic and some were brands that we never stocked and would not be able to get credit from anyone.

We carefully assessed the breakages and informed the buyer how much credit we would be able to manage. He informed us in no uncertain terms that he would pull the whole contract if we did not give him a 100% credit at our list prices – he was being totally unreasonable but he was serious.

We reluctantly collected the “rubbish” and processed the credit.

The account continued in this vein – he wanted emergency deliveries at a moments notice whenever he ran short, often at quite unreasonable times.

He pushed us so hard and continued to do so – so much so that there was no win left for us and we were starting to feel quite abused.

All of a sudden it wasn’t our prize account, it was a thorn in our sides. We started to get strict with them – they had to order properly, we cut out emergency deliveries. We maintained a good level of service  but now it was on our terms.

From time to time our suppliers would give us beer fridges and promotional events that we could allocate where we chose – needless to say we never passed these onto our “prize” account.

After six months we got a call from their purchasing manager who wanted to do another round of “squeezing” and was inviting us to submit our best prices.

This time we did a full review of our price list, increased the prices across the board and politely let someone else be a busy fool – that was the last time we set foot in the place.

James Caan - The Real DealIn James Caan’s book “The Real Deal” he spoke about a valuable lesson his dad had taught him from his leather trading days – it was always vital that you made sure there was a “Win-Win” left for both parties in a deal.

In our case there was certainly no win for us and in truth the supplier also lost out – they pushed us to the point where we didn’t actually care about their business any more.

Be careful not to drive “too hard” a bargain and make sure you walk away before the point where the business just isn’t worth it anymore

Greg Canty is a partner of Fuzion

Fuzion are a Marketing, PR and Graphic Design firm in Ireland with offices in Cork and Dublin

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13 Responses to “Driving too hard a bargain”

  1. helenacodyreHe Says:

    I really like this post Greg – an old MD I worked for insisted that we should let the prospects who but on price weaken our competitors

  2. Fergal Bell Says:

    It’s a frustrating lesson to learn, Greg. I’ve had this on occasion in the past when an apparently big account becomes an unremitting pain in the backside. It gets to the point that your heart sinks when you hear they’re on the phone.

    Like a bad relationship, sometimes you go through the pain before you decide to call it quits. It can be a nice feeling when you call time on a win/lose arrangement like that.

  3. Paul Allen Says:

    Hi Greg, I totally agree with the Win-Win scenario. My businesses involve buying and selling and I realise the need to be a value customer to my suppliers.
    Your post reminds me of a recent event whereby a friend rang to tell me how clever she was in negotiating the price of a tiler downward from €300 to €250. Her armory was her knowledge of tilers pricing per square yard.
    I wasn’t surprised when she rang back 2 days later complaining about the quality of his workmanship. I refrained from informing her that the price per square yard did not encompass the many cuts and difficulties in tiling her under-stairs toilet.
    A few years previously I had a need of a crew to build a glass block wall as the builders I had employed had been avoiding it. They informed me of the difficulties and of there being no margin for error.
    A recommended crew arrived and priced the job at €600 and said it would be done in 1 day. I told them I was happy with their price and I would increase the payment to €700 if they did a good job.They worked on the wall for 2 days, with a perfect result.

    Good negotiation skills involve much more than the price, therefore the cheapest price does not ensure the best value,

    • Greg Canty Says:

      I love the €600 to €700 example.

      Another person would have squeezed them to €500, enjoyed the one minute “win” and spent a lifetime looking at the shoddy job!

      Thanks for sharing Paul

  4. Jane Leonard (@Really_Useful) Says:

    Timely post Greg, Sometimes it is the clients we decline that create the space for the clients we can help. The relationship should be a mutually beneficial. it is not always easy but sometimes you have to walk away.

    I think you and Michael Port would have a lot in common http://blog.getsatisfaction.com/2010/10/21/red-velvet-rope-policy/

  5. Tim Keane Says:

    Very true, have all ways believed that( one as and old saying goes ) must leave a little salt on the bread,in other words the deal has got to be good for both involved .But today people want all for nothing, and then go, to the better and more expensive to complain, because they are not getting the service that is included in the more expensive deal.

  6. Gerard O'Sullivan Says:

    Hi Greg

    My son sent me a link to this article while ago after I had told him of my recent experience with a multi-national customer of 24 years standing with whom I had parted company during the week. In ways, my experience with these people was even more extreme than your Deasy experience with the super pub in that we would be in a guaranteed deficit on their business had I agreed to their proposal.

    I had no chance whatsoever of turning a profit and yet it was with a heavy heart that I advised them that I was withdrawing from negotiations. I’ve no doubt one or maybe even two of our self styled competitors will shortly be announcing,with some triumph, the acquisition of a new prestige contract, God helps their heads as my grandfather used say! I’ll try not take pleasure in watching the busy fools further weaken themselves servicing their new trophy client.

    I can only concur with previous contributors. Win – Win, leave something for next guy, call it what you wish, has always been part of my business philosophy and always will be

    • Greg Canty Says:

      Hi Gerard, Sorry to hear that news. Let your competitors use their energy servicing this loss making account while you make your money somewhere else. Thanks for sharing #WinHappy

  7. Derek Beahan Says:

    Fair play Gerard, I know just how you feel. The best of luck to them.

  8. Linda McCormick Says:

    Great piece Greg. So important to know what you are buying into with a ‘deal’. I whole heartedly agree with Jane, whilst it is painful to refuse business, long term we have to ensure we are not displacing high yield contracts in lieu of low margin, big names. One in the hand vs. Two in the bush has been a mantra for so long, it can be risky but often pays off to sit tight for the birds in the bush! Great work on CAS Greg, congrats on nomination!

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