Solex-Digital Negotiation Strategies

SOLEX-DIGITAL: EFFECTIVE NEGOTIATION STRATEGIES

Marilyn Boldt, a sales rep for Solex-Digital—a large semiconductor manufacturer—is negotiating with the chief buyer for National Computer Company (NCC). The buyer, Howard Logan, a thirty-year employee of NCC now nearing retirement, is such an aggressive, greedy bargainer that mostsalespeople hate to negotiate with him. He views each sales negotiation as a contest to be won, so he won’t agree to sign a contract unless he feels that he’s gotten the best of the supplier. Salespeople who do agree to the usual “seller lose–buyer win” agreement with Mr. Logan usually try to salvage a little profit on the contract by cutting some corners, usually on product quality or service. But this strategy often leads to dissatisfaction by NCC, so Mr. Logan usually moves on to another supplier for the next contract. The NCC account could be very valuable since its annual purchases of semiconductors exceed $4 million and are steadily increasing by about 5 percent a year. Mr. Logan, however, makes sales to NCC very dicey by insisting on squeezing out most of the profit margin and then switching suppliers if performance is less than fully satisfactory. Mr. Logan’s assistant, Dale Mobley, seems to be much more reasonable; but he doesn’t say much in negotiations since Logan always dominates. Most of the sales reps who call on NCC seem to be looking forward to the day when Mr. Logan retires because they often subtly ask receptionists about his retirement plans.

Mr. Logan has just demanded that Marilyn give him a whopping 20 percent discount on all NCC purchases—or, as he bluntly states, “I won’t be buying anything from Solex-Digital.” If the 20 percent discount is provided, Mr. Logan promises to give Solex-Digital all of NCC’s semiconductor business this year. Marilyn knows that her company can’t make any profit if she agrees to a 20 percent discount, and she’s quite sure that no other semiconductor supplier will offer such a large discount. While Mr. Logan continues talking, Marilyn wonders how to respond to his demand.

Questions

1. Is it worthwhile for Marilyn to negotiate with Mr. Logan when his demands are so unreasonable—and unprofitable, if she agrees to the 20 percent discount? Explain.

2. Should Marilyn do like most salespeople who “win” orders from Mr. Logan—simply cut back on product quality and/or service and be relatively unresponsive to complaints, so that her company can make a little profit? If she follows this strategy, Marilyn realizes that she probably won’t get any orders from Mr. Logan next year, and it may hurt her company’s reputation—not only with NCC, but with other companies through negative word of mouth.

3. Marilyn wants to keep NCC as a customer because it could become a valued account when Mr. Logan retires. So she’s thinking about calling her sales manager to ask if she can offer the 20 percent discount and accept a loss on the contract in order to keep the customer relationship with NCC. As her sales manager, what advice would you give Marilyn?

4. What role, if any, does customer relationship management play when dealing with difficult buyers like Mr. Logan?

Case prepared by Dheeraj Sharma and Woodrow D. Richardson, Ball State University.