Customer requesting discounts / price matching

Some background - I was approached by a new potential customer a couple of months ago and asked to quote a batch of parts. Nothing too complicated and some reasonable volumes - the work is a pretty good fit for my shop. There was one feature that I thought could cause me a few problems initially so I quoted a little on the high side to account for this and sent my quote away.

The client came back to me a few day later and advised he'd been offered better pricing elsewhere and asked if I would match. The price he requested seemed reasonable and it had the potential to repeat so I agreed however due to prior commitments I quoted a slightly longer lead time and he placed the order elsewhere.

He came back to me recently with another set of parts to quote. I asked for target pricing on these ones which he was happy to give. I got quotes from my material suppliers and quoted accordingly. Initial feedback was good (even though I was higher the target price) however I was more expensive on one part in the package. I agreed to match that particular part so long as the order came in with the other parts on the quotation. He seemed happy with that and hinted at placing an order.

This morning I've received another email asking me to match another machine shops price to which I've said no. I suspect he went to other suppliers with the price I had quoted as a bargaining tool and when they lowered theirs he's now trying the same with me and will continue to do so until the price reaches rock bottom.

I suppose my question is how do you handle these situations?

I'm not overly interested in a customer who is only concerned with price. They'll leave you as soon as they find a supplier willing to undercut you. That being said I appreciate the feedback and opportunity to re-quote to win the work and build the relationship to the point where they are willing to pay a little premium because they know the quality of the work I do is top notch. I've got a few good customers who came on board because I quoted low on the first job then once the trust was earned they kept coming back for more profitable work. I don't like reducing my prices as I feel it undervalues my service and the customer will think I'm always trying to rip them off. But on the flip side the work would keep my spindles turning when they may otherwise be sitting idle.

I don't negotiate when I have quoted a price on a job. This goes for production jobs. I calculate my jobs after getting a real price on material and doing enough programming to know how long it will take to finish all the parts + scrap. The result is what I am willing to do the job for. No less.The risk of the job is reflected in the hourly rate I use for calculations.
The only exception (there is always an except right ?) is when there is a 1 piece prototype that is difficult to know exactly how long will take. I usually start out with a safe price. If they bite - fine. If they try to haggle it depends on how interesting the piece is and if they can convince me it's going to be worth it in the long run

The guy is a total time waster. I’d bin any further RFQ’s from him, he’ll get the hint (or not) eventually.

If it was a good customer with whom you had an established relationship then sometimes it might be worth price matching. I occasionally have this with a couple of my customers where I will quote a job, and I'm a little higher than another shop, but they would rather work with me than the other shop so they offer it to me for the price that the competitor quoted. These are companies that I've worked with for many years. I know that they're not just fishing for a lower price. This doesn't happen often either, and there's no hard feelings if I pass.

This guy that you're quoting sounds like he's just fishing for low prices. I've dealt with those guys before. You spend a lot of time quoting and get very few (if any) orders. If you do happen to win a job, it will likely not be very profitable. I wouldn't waste too much time on this guy.

Winning a bid does not mean you won anything. And I would not be surprised if he awarded you the job and came back at you wanting a lower price AFTER you made the parts. Race to the bottom.
Been there, done that, lost my T shirt.

send the guy packing. tell him this $ or nothing. simple. ive missed out on jobs i dont need. most need the parts and cant fit it in themselves due to time or breakdowns and I will ask them how much per part they need it done for and will say either i can or cant do it.

Thanks everyone for the replies. It's interesting to hear some other opinions on this. This is probably the first time I've come across someone trying to beat me down on price so aggressively. It happens sometimes and I don't mind that. What I don't want is to reduce prices significantly then my customers start to think I'm charging over the odds to be able to afford doing that. I've got a few material suppliers that try that with me from time to time and it annoys me immensely! One steel supplier was quoting over double what my usual supplier was. Thing was they had some material my normal supplier didn't and I didn't fancy splitting the PO as it was a fairly small order and shipping fees were high. I told them and they didn't even blink, just said yeah - we can do that. Talking something like £45 a bar for 10 bars and they were quoting £100.

Panza said:

The only exception (there is always an except right ?) is when there is a 1 piece prototype that is difficult to know exactly how long will take. I usually start out with a safe price. If they bite - fine. If they try to haggle it depends on how interesting the piece is and if they can convince me it's going to be worth it in the long run

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It's fairly low volume work so I accept sometimes I'm a bit out on the quote. That's why in the first instance I agreed to knock a bit off one of the parts as it wasn't much in the grand scheme of things.

red beard said:

If it was a good customer with whom you had an established relationship then sometimes it might be worth price matching.

This guy that you're quoting sounds like he's just fishing for low prices. I've dealt with those guys before. You spend a lot of time quoting and get very few (if any) orders. If you do happen to win a job, it will likely not be very profitable. I wouldn't waste too much time on this guy.

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I've had a one good customer come to me and tell me another shop has quoted X but they'd rather put the work to me. Sometimes I'll match, sometimes I won't but I usually get the PO regardless.

BT Fabrication said:

ive missed out on jobs i dont need.

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I'm guilty of taking on a few too many of those! Nothing worse than having to turn away a good job because you've already committed yourself to a PITA job!

I read the original post full through once, and gleaned a second time, and from what I can tell, so far you have lowered your prices 2wice, once with a longer lead time, and so far got no orders yet?

To be upset with a customer about wanting to find the best price is fine, as long as you don't shop your material and tooling pricing. And just go with the one with the best looking sales gurl. (or whatever metric - other than pricing)

We all have strengths and weaknesses. I am sure that you are much more efficient at some types of work that I am not, and vice/versa. So for a buyer to search out to find what shops seem to excell at would only be diligence. And how would we know this other than comparing the quotes?

On the other hand, when I git approached by a new guy, sometimes you git this 6th sense that there is more than is what is shown on the surface. There were a few times early on that afterwards I got the feeling that my quote was used to beat down the current supplier, and likely had little intentions of sending the work to me.

Over the years I have gotten in tune to that a bit better, and tend to simply N/Q jobs (or buyers?) that instill that feeling. If I don't feel that the customer is overly likely to send the work to me even if my price is good, I don't want to be "that guy" that gave the buyer ammo to beat the current supplier down. Now, with that said, who knows, maybe I N/Q'd a job or two that could have been a HUGE deal and been a game changer? But I doubt it.... But that is always a risk that you take.

Another thing that you mentioned is the fact that if he is searching so hard to find the cheapest, how likely are you to git repeat work? But then, with the current status, the cheapest prices today is still 25% more than the last time that he placed an order for that same part. So ... It's gotta be tough to be a buyer in this environment, and still be able to peddle your end products at a much higher cost.

I have one job that I have been asked to quote at least 3 times so far this year. Not sure, but the RFQ's for that job may go back into last year too? I haven't looked that far...

Give the buyer the "hair on the back of your neck" test, and then decide how to handle it.


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Think Snow Eh!
Ox

Sam I said:

I suppose my question is how do you handle these situations?

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Tell him to pound sand and chase him outa your shop yelling loudly and swinging the closest threating object you can pick up..............broom, dead blow, chunk of round stock, etc.

I tell all new / potential customers that we will never be the low bidder in our first conversation. If they remain interested, we continue to talk. If they have an issue with that, we go our separate ways.

Ox said:

I read the original post full through once, and gleaned a second time, and from what I can tell, so far you have lowered your prices 2wice, once with a longer lead time, and so far got no orders yet?

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That pretty much sums it up. There could of course be no better offer and he's just chancing his luck - I've seen that happen before in a previous role. I quoted a customer who always free issues material but this once they wanted full supply which I missed. I get a call a few days after submitting the quote saying another local shop can do the work for X amount cheaper and can we match. I re-reviewed the quote and realised my mistake and re-issued the original quote with material. About a week later the PO lands on my desk! Still waiting to see how this one pans out though.

Ox said:

To be upset with a customer about wanting to find the best price is fine, as long as you don't shop your material and tooling pricing. And just go with the one with the best looking sales gurl. (or whatever metric - other than pricing)

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Not upset with the guy at all. He's got to turn a profit on the finished components after all. In this instance I don't want to be going round in circles until someone ends up doing it for barely more than material cost. I was polite and simply said on this occasion I can't match the price although I did say if I get the job I can re-quote on repeat work as the setup costs etc have already been accounted for so I could probably do better. Maybe I'll hear from him again or maybe I won't. I was just curious how others handle the situation. I'm getting lot more new customers enquiring than usual - probably because as you said prices are going up and buyers are trying elsewhere to see if they can minimise the impact on their products. My guess is this will start to become more frequent.

Price parts by what you need or feel is fair. If the company is solely going off price then they will either soon regret it or the parts are not worth your time.

Sometimes I'll quote my price and run a single part and send it to the customer without telling them. This has proven to be successful, albeit a bit time consuming.

Actually, I have told two or three of my customers to send out a few of my parts for quote elsewhere as I had to, or will be soon updating the pricing - substantially. One part came out at or maybe even slightly north of double.

I asked them to send out for quote so that they know that when they see my price, that I am not trying to screw them over. These were legacy parts/pricing and were way out of date before, and then add in the increased costs today, and ....

So, that is another reason that a buyer would be shopping.


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Think Snow Eh!
Ox

I've had this happen as well.
The customer is checking to see if his preferred supplier is being honest with him.
The fact that you're in the ball park on everything, and he doesn't react negatively, tells me he wants to make sure the other guy is not trying to get away with something.
Had this happen to me a few times.
After a while, I started to charge for quotes, and it stopped.

If you want the business, don't play his game and beat your competition on faster delivery, not lower cost (if you can, quality cannot suffer).

Otherwise, what some others here have said, like Ox and DouglasJRizzo.

Keep your pricing and your pride

If the guy calls back, tell him you are bored with him shopping your prices around, straight up. This is not a game, it is what you do for a living

When you price match, you expect to get the order right now, period.

He doesn't even know if you make decent parts
He is playing a game you do not wish to play

You will not regret losing this guy

triumph406 said:

I'd rather be flexible, to a degree, then sitting there with no spindles turning and my pride intact.

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A wiser business owner than me once explained that it is better to let machines sit, than to have them running garbage filler work when the right job presents itself.

I have a REALLY hard time remembering that when things get lean, but it has proved to true many times over the years.

boosted said:

A wiser business owner than me once explained that it is better to let machines sit, than to have them running garbage filler work when the right job presents itself.

I have a REALLY hard time remembering that when things get lean, but it has proved to true many times over the years.

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So true.

I recently became a toolmaker running a stamping operation because everyone in that business was quoting long lead times on a hot job. I'm pretty sure I'm making $2 parts for $12 a piece.

If he doesn't have you do the job the instant you agree to a slight adjustment, he can pound sand at that point. I don't think it's smart to be hard nosed about everything (where people say the quote is the quote, period) as I've had some good work come out of situations where that was the case. However, you also don't want to get taken advantage of and know that he is going to shop you around on literally every part. There's something to be said for being fair and consistent and having a good relationship with the customer. I don't really care about having customers that will go behind me to save a few dollars. The best is when they do that and then end up paying for parts twice because they aren't happy with low bid.

kazlx said:

There's something to be said for being fair and consistent and having a good relationship with the customer.

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Something? To me that's everything.. And I completely understand that I DO NOT represent all
shops.. I get that sometimes, its just #'s and an essentially faceless customer.

So.. I have one customer.. He does some pretty cool stuff. He does it smaller than he used to,
and that's fine.. He's never going to make me rich, but he adds 5 figures to the kitty by the end
of the year, depending on what he gets.. Its been 6 figures before.

Whatever relationship we've developed, and whatever I did to develop that relationship, he doesn't
go anywhere else for his machine work anymore. Got a PO from him the other day, I've had the material
that he bought since last week.. "Hey, some of these prices are BS".. "I know, I just had to get it
down on paper"...

Even better is some of the parts on that PO, are over runs that I had sent him in the past, so I'll get
paid for doing nothing. PO is for 9, I had already sent him 3, I send him 6, I get paid for 9..
PO is for 24, I had already sent him 40 extra on 1800 pieces.. I get a free $120.

Guy down the street.. Do This.. OK...

"Repair work, or for a machine you're making?"

"Repair."

"How hard can I hit it?"

"not too hard.. Good customer" or "They screwed me, hit 'em hard".. Or.. "No, that's
not $35 each, that's $120".... Or... "They need 10 of these for a repair on a 10 year
old machine, but we'll need 30 in 3 months for a new machine"...

So we do an invoice for $300 setup, and 10 @ $25. and then a separate invoice for 30 @ $10.

I win, I make good money.. My customer
wins.. They get more profit on that new machine.. And their customer wins, they can keep their
production line going, and its local and FAST!!! and fast is more important than cost, depending
on the season.

Relationships are REALLY important.. If you are big time, maybe not.. But when you are small
time, any relationship you can cultivate will result in profit.. Maybe not huge profit, but at least
consistent work, which makes consistent profit.

Example: A welded assembly you have been doing the finish machine on for almost 20 years now
(WOW, I'm getting old).. The finish part either gets sold as a single item, or is part of an assembly.
They probably have 4 or 5 grand into it, its getting sold for probably 7 grand.. Are they going to go out
for quotes, to somebody that doesn't "know" this part to save $25? Or are they going to just
go with the sure thing?