Executive Briefings

IT Vendors' 'Used-Car' Pricing Approach a Big Turn-Off

Last year, Salvatore Emma began searching for a new enterprise resource planning system for medical device manufacturer Arrhythmia Research Technology after top executives decided that ART's aging software could no longer support its growth-through-acquisition strategy. After narrowing down an original list of five potential vendors to three whose software had the functionality that ART needed, Emma's team began to talk price.
"We told them we wanted to avoid the typical used-car sales approach, where they start with an artificially high price, then we go back and forth before agreeing on the real price," says Emma, ART's director of IT.
Instead, two of the three vendors started with high prices, which they later negotiated down. One of those, Emma says, proposed a price of $840,000 for software and implementation services before eventually agreeing to $260,000, a discount of nearly 70 percent.
Rather than jumping at that apparently attractive deal, however, ART went with a different vendor, one that had bypassed the artificially high initial quote and started with a price much closer to the final number. The final fully implemented price was higher than the heavily discounted competition, but the manufacturer was satisfied.
"What we were looking for from the beginning was a highly professional sales process," Emma says. "With the vendors that started high, we got the feeling that they were trying to take advantage of us and to make an obscene profit. That made us feel as if we couldn't trust that vendor."
Source: Managing Automation, http://www.managingautomation.com

Last year, Salvatore Emma began searching for a new enterprise resource planning system for medical device manufacturer Arrhythmia Research Technology after top executives decided that ART's aging software could no longer support its growth-through-acquisition strategy. After narrowing down an original list of five potential vendors to three whose software had the functionality that ART needed, Emma's team began to talk price.
"We told them we wanted to avoid the typical used-car sales approach, where they start with an artificially high price, then we go back and forth before agreeing on the real price," says Emma, ART's director of IT.
Instead, two of the three vendors started with high prices, which they later negotiated down. One of those, Emma says, proposed a price of $840,000 for software and implementation services before eventually agreeing to $260,000, a discount of nearly 70 percent.
Rather than jumping at that apparently attractive deal, however, ART went with a different vendor, one that had bypassed the artificially high initial quote and started with a price much closer to the final number. The final fully implemented price was higher than the heavily discounted competition, but the manufacturer was satisfied.
"What we were looking for from the beginning was a highly professional sales process," Emma says. "With the vendors that started high, we got the feeling that they were trying to take advantage of us and to make an obscene profit. That made us feel as if we couldn't trust that vendor."
Source: Managing Automation, http://www.managingautomation.com