There was a good development. The Spanish company which had floated tender for the products that we offer returned with a favourable news. Our company was number 2 in the tender status. The buying manager of the Spanish company was saying that he is prepared to allot major volume of business if we could reduce our quotes further by another 10-12%.
The irony has been that all these months, the precise costing details are never shared with me. Like other things in this organisation, this practice was new to me. In previous organisations, cost sheets are always shared with the business development guys. This comes in handy during negotiations with the buyers. More than anything, one knows clearly the price level below which no reduction can be possible. The Finance Manager (one of the cartel) uses the word “confidentiality” to the good effect always, and I am denied detailed cost information. So in effect, the finance manager also acts as a pricing manager, which rightfully should have been my role. I decided to use the opportunity given by the Spanish Buyer to check the bottom level costings of our company.
I contacted the finance manager on Phone, and told him that the Spanish client is ready to confirm the business (I informed a higher volume figure than what the customer was prepared to give – a harmless lie) provided we give further discounts for each item. The finance manager could not straightaway say no to me, as this would mean saying no to the opportunity. After 30 mts, he called me back saying in a muted voice that there has been a mistake. While the finance manager hurriedly did costings, he forgot to check the current price levels at which similar products are being shipped to another client in Spain. After my phone-call, he had checked the same and realised that the pricing given by him are less than the current levels. He requested me not to make this an issue as it will be reflected badly on him. The other Spanish customer is being liaisoned by B, who out of his own insecurity refuses to share with me any updates or developments pertaining to the set of customers he is dealing with.
I derived a sadistic pleasure on hearing the Finance Manager’s predicament. The same guy was cryptically informing me the absolute price figures that I should quote for each enquiry, without sharing the cost assumptions. Every time when I am told by the customers that our prices are higher by 30%, 60% and in one case it was 1000%, I used to feel so bad. I always suspected that this guy must be adding margin to each costs, and at the end must be putting a margin below all costs as well. Who knows, he must be applying margin percentage on outgoing freight as well. The finance managers think they know-all about costings just because they have imported calculators at their disposal. They forget to consider that costing is a process that should involve idea contribution from all functions including that of Sales personnel for whom it is being worked out. It cannot be done in isolation by accounts or finance managers.
I asked him how much have we quoted cheaper in reference to current prices to other Spanish customer. He said 7-9%. I further asked him if the current quoted prices are at loss. He said no and conceded that 20% margin is considered in the quote.
I was happy now that I am in control of facts pertaining the business I am chasing now. Other spanish buyer is buying at higher price levels, so this customer is only trying to flex his muscles and wants more reductions. I knew what to do. I had kept 5% negotiation margin on the top of the price given by the finance manager. I will reduce 3-4% from the quoted price and will tell the customer that this is the lowest price we can quote.