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Dirty deal?

What are your first words when you walk out of a customer’s room after closing a deal – “Damn!”, “Phew!” or “Bingo!”

Jayant regularly conducts a preparatory training course for IT professionals – the 4-day program prepares them for a Credential Exam. The application process for the exam can begin only after participants take part in prep course. Getting the Credential adds huge value to the IT experts – it can lead to better jobs, increments and promotions; so the course is valued.

Jayant regularly sends out mailers to give publicity to the Public program he conducts each month at locations across South India. He charges each participant Rs. 12000/- for the 4-day program, inclusive of cost of handouts and the food and beverages given during the program. There are some discounts given to Early Birds and for group bookings.

Occasionally he is asked to conduct a bespoke, or exclusive, program for the employees of one organisation. In those cases his price would be lower due to larger group sizes and reduced program administration costs. He does not have to hire a venue and equipment in such cases because the organisation would provide their in-house facilities. Only the trainer’s travel and accommodation costs need to be factored into his pricing.

Recently, Jayant received an email from Mr. Thomas, the HR Manager of Oasis Consultants, asking him to send a proposal for an exclusive session. Mr. Thomas said that Oasis will take care of the trainer’s travel and accommodation and the training venue related expenses; Jayant only had to quote the training charges. Furthermore it was said that there would 12-15 participants in the program.

It was an attractive deal and Jayant carefully considered the options – the trainer’ fee and printing costs cannot be altered, but his own profit could be reduced due to the higher returns possible based on number of participants. For his public programs he usually got 8 to 10 participants after a lot of follow-up by way of emails and telephone calls. Here he would get close to 15 participants in a single deal. Taking these factors into consideration Jayant sent Mr. Thomas an offer of Rs. 7500 per participants (37.5% off from full fee).

Mr. Thomas then asked for details about the trainer, client list, number of programs conducted, success percentage of participants who took the exam after the course – here it has to be noted that it was not mandatory to take the exam after the course. A lot of participants take the prep course and then delay taking the exam for a number of reasons – ranging from work pressure to lack of funds. After Jayant had provided all the information Mr. Thomas slipped in another sweetener – What if we can provide you 20 participants for the program?

Jayant was floating on air now – this looked like a great deal. He decided to go all out to bag this order. So far he had not even cared to find out who else has quoted for this opportunity or whether anyone had offered a rate lower than his. Jayant made a revised offer to Oasis Consultants offering Rs. 7000 per head for the first 15 participants and Rs. 5000 for the next 5 – his thought process was that the trainer’s workload was the same be it 15 or 20 participants and only some additional workbooks and test papers had to be printed.

What Jayant had not notice was that by quoting in this fashion he had opened another bargaining point for Mr. Thomas – Jayant had reduced the price further with his offer the HR Manager bargained hard using that point. Mr. Thomas played a new card – he said that when the matter was discussed with his Managing Director he was told not to send all 20 participants for training in a single batch and so it had been decided that they need 2 programs to which participants would come in batches of 10.

Fine so far – but here comes the sucker punch: Mr. Thomas had worked out the price based on Jayant’s offer and arrived at a figure of Rs. 6500 per participant (46% discount on full fee). Even this was OK! The next bit really takes the cake: Oasis Constructions wanted Jayant to do 2 programs at that price.

Which means that Jayant would not only have reduced his fee from Rs.12,000 per participant to Rs. 6,500 but he also had to provide the trainer for 8 days instead of 4. And the trainer was under no obligation to Jayant or Oasis Construction – he is an external resource hired on need basis by Jayant – he would charge double for 8 days, maybe a little less if Jayant bargained but definitely not 46% lower than his full fee.

What would be his feelings at the end of this deal?

What are the lessons to be learnt from this case? Let us debate it before I provide you my point-of-view!!

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  1. Sajan
    May 4, 2012 at 1:10 pm

    interesting case Jayadev but not rare I suppose – my lessons:
    1. If it sounds too good to be true, it probably is – so dont get too excited and let go of too much in case things seem to be working out too well
    2. In case of offering a discount its important to be clear of the conditions in which it is being offered and make it clear to the client

    Look forward to hear other views.

    • JayadevM
      May 4, 2012 at 1:16 pm

      Hi Sajan

      Thank you for the response ..like you said “Let’s wait for more responses”.

  2. JAYADEV VIJAYAN
    May 4, 2012 at 1:54 pm

    My lesson:

    Fix the deal before u give start to respond to bargain, like fix the number of persons, time date and other factors. Even when bargaining keep those factors constant. Any change to change the whole bargain.

    • JayadevM
      May 4, 2012 at 2:05 pm

      Jayadev

      Sound thinking! Shall wait before I give my inputs.

  3. vijay
    May 4, 2012 at 5:39 pm

    Instead of quoting per individual, he could have quoted the price per batch ( and mention the minimum & maximum number of participants allowed per batch). He could have listed down what would be the deliverables from his side and what should the client provide.

    • JayadevM
      May 4, 2012 at 7:14 pm

      Vijay

      You are right. That is an option too. Customer have a way of hammering down prices if one is not careful.

      If you quote a price on batch, or cohort basis, they they would probably say that someone else with similar features has quoted lower and so on.

      Maintaining your price line is a strong man’s game.

  4. May 4, 2012 at 7:04 pm

    Here onwards no bargaining. Only Fixed price 🙂

    • JayadevM
      May 4, 2012 at 7:10 pm

      Excellent thought … If it’s the right price! 🙂

  5. Jamy
    May 4, 2012 at 10:04 pm

    I think Jayant jumped ahead before getting his ducks in a row.. as simple as that! Always keep the ball in your court before you drive it home for advantage- Jayant gifted the client with a juicy full toss which the client utilised fully to their advantage 🙂

    • JayadevM
      May 5, 2012 at 4:14 am

      Good analogy, Jamy!

      You have described the situation well. Will give my response bit later

  6. Raaj
    May 5, 2012 at 1:28 am

    Jayan…

    Jayant is probably a very good trainer…
    But this is what happens when one doesn’t have much experience in the fine art of negotiation. It is possible that this was Jayant’s first ‘corporate’ deal… or at least the first encounter with someone who knows a trick or two about negotiation. So he got suckered into it.

    There are a lot of things Jayant could have done differently, but that’s all in hindsight.

    What is left to do is to use this as a learning experience and not let this situation repeat itself, in any form, ever.

    • JayadevM
      May 5, 2012 at 4:19 am

      Hi Raaj

      Wow! That trainer bit hurt …. it bit me!! ;))

      But I’ll let that pass. You are right when you said that practical experience is needed to hone and improve skills.

      When everything is lost what remains is experience!:)

      Yes, Jayant can learn a lot from this episode.

      Thank you for the input

  7. Sajan
    May 5, 2012 at 4:25 am

    some great thoughts Jayadev…I particularly liked Jamys point…would be great to hear your thoughts…

    • JayadevM
      May 5, 2012 at 4:40 am

      Hi Sajan

      Will wait for 2-3 more responses and give my view a bit later in the day.

      Am happy you are interested to know.

  8. vijayenggster
    May 5, 2012 at 10:29 am

    Lesson 1 : Terms & Conditions to the client should be in a such a manner that ball should always come in our court.

    Lesson 2 : We need to give the options to client, where all the options are smartly worked out to get the profit in our hand. (Client is always happy to see the options & sometimes it will restrict the customer to think out of our Options).

    Lesson 3 : Detail discussion with the customer is always required to understand the real situation on the client side, to understand the time limits, budget & off course to understand about the competitor if any.

    Lesson 4: The reputation with the client should be made in the very first meeting. (This will avoid competitors & bargaining will be less). All the clients want quality & quantity.

    • JayadevM
      May 5, 2012 at 10:41 am

      Hi Vijay

      Enjoyed reading your comments. Lot of valid points there. Am preparing the reply to all the comments received. Please read my next article.

      Thank you for reading and responding.

  9. Saju Chandran
    May 5, 2012 at 1:59 pm

    I thing its a win-win situation for the HR manager and the trainer in the end though the trainer was subdued to the final situation step by step by the HR guy. Trainer was slightly apprehensive and hence the real driver of the whole discussion was the customer. If that was a strategy adopted by the trainer to explore the opportunities to the maximum,then its absolutely fine. and hence its Win-Win

    • JayadevM
      May 5, 2012 at 5:33 pm

      Hi Saju

      I like this perspective; if you are a buyer of training I am sure you will relish meeting vendors like Jayant in the case discussed. However, the caveat for all buyers is to check whether they are attracted purely by the price? What if you end up getting an inferior product – you would have skipped the ideal solution because it was being offered at a higher price.

      So, this is a reminder to check the entire package before you decide.

      The seller obviously was desperate to please and had not studied the situation well either – in the bargain he gave away a lot.

  10. Kailash
    May 7, 2012 at 9:04 am

    Jayant should have given discounts based on conditions apply. He should have maintain his stand assertively that any change in number of batches/peoples rates would be changes accordingly as doubling the batches is straightaway doubling his own efforts and time. Somehow he kept himself in a position where the other party was driving the deal and he left with very minimum to say/do. Lesson – Be assertive in your negotiation, Keep all the window of your mind open to think, do lots of homework about the client/deal/tricks (may come) etc.

    • JayadevM
      May 7, 2012 at 2:08 pm

      Hi Kailash,

      You got it.
      Yes, you were a bit late so I could not include your comments. Thank you for responding.

      Cheers!

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