An Anonymous Reader Asks ...
Question: “What kind of discount should one expect from a vendor?”
Vince Ciotti, Principal, HIS Professionals
HIS Pros Answer: Depends on how and when you ask the question:
- If you announce a “Vendor of Choice,” telling a vendor they just won your selection process, and now you want to sit down and deal, you’ll be lucky to get a few percentage points off of their list price: 5 to 10% at most.
- If you ask all vendors while still in your selection process to give a discount to become a “finalist,” you should see some reasonable numbers like 10-20% or more.
- If you announce two “finalists” and ask them both for discounts to become the winner, you’ll start to see some real numbers, 20-30% or more.
Saddest thing we consultants here when giving a “loss report” to the losing vendor is “what price would have won us the deal?” That is precisely the number you should tell each vendor before you make your final decision: you give them the price for which you’ll give them the deal, and that’s the best number you’ll see.
Remember, a selection process costs a vendor substantial sums, $100K or more for salaries and out-of-pocket expenses for demos, site visits, answering RFPs, dinners, flights, etc. If they lose the deal, that money is all wasted. A hospital has more bargaining power than it thinks it has, but you have to keep the selection/negotiations competitive in order to garner the best price.
Of course, there are a handful of vendors who do not discount, but only sell at list price. This is an indication of what their corporate philosophy will be in the implementation and service mode, so dock them accordingly. What kind of “partner” is it that only follows the corporate rule book, when it comes to prices or any other matter? A partner compromises, meets you somewhere in the middle, doesn’t insist on having everything go their way. So learn from price negotiations just what kind of vendor/partner you’re picking and chose accordingly.
marcdparadis says
As a wise man once told me, “You’ll never be in a better bargaining position than 1 hour before you sign the first deal”.
All great recommendations Vince, as a former pre-sales consultant and as someone who regularly negotiates now with vendors, you are spot on the money.
Other places that you can look for discounts are to research and find out if another department and/or a parent and/or affiliate company already has a deal with your prospective vendor(s). If they do, find out their discounts and also look to see if they have a near timeline for purchases of their own. The more total dollars you can bundle together into a deal, the better discount you can generally negotiate.
Another place to look is to see if you qualify for academic, government or non-profit discounts. Many vendors have built in deep-discounts, especially for academic and government organizations. Don’t be afraid to push for an extra 5%, 10% or even 15% beyond the built in discount.
In general the best quarters to purchase are calendar Q1 and calendar Q3, with calendar Q3 being a bit better. These tend to be light quarters where salespeople begin to worry about making their quarterly numbers (Q1) and their yearly numbers (Q3). Oftentimes they will give discounts just to get the deal. If you know a vendor or salesperson has had an off-quota year, try to close your deal in the last quarter of that quota year, again, they’ll cut you a good deal if the deal will get them materially closer to their quota.
Vince Ciotti says
Marc,
Good points and thanks for the kind words. I’d say any quarter-end is good, but best is the vendor’s fiscal year-end, which is not always 12/31. For example, SIemens is 9/30, McKesson is 3/31, etc.
Vince
Vince