Negotiating Discounts From Manufacturers

By John Honovich, Published on May 26, 2016

Is there room for just a little more discount in your purchase order?  

This report outlines some common tactics that often work, and do not work, to successfully negotiate additional discounts with manufacturers.

They include the good using:

  • Trades
  • Timing
  • Software
  • Demo Equipment
  • Terms
  • Timeliness

And the bad including:

  • Rationales
  • Promises
  • Complaints

How Are Prices Set?

Before asking for additional discounts, it can be helpful to understand how a manufacturer sets prices.  Though they all use different formulas and methods, the general approach is typically the same, and there are four key prices:

  • MSRP - This should be a realistic selling price, but is sometimes inflated to make discounts seem better
  • Dealer 1 - Discount level for a new or low-volume dealer
  • Dealer 2 - Discount level for a typical dealer
  • Premier Dealer - Discount level for the largest dealers

Manufacturers generally have different marketing terms for dealer levels, e.g., "Bronze", "Silver", "Gold", "Platinum", etc.

If the manufacturer sells direct and through distribution, there will be a "Distributor Price" usually just below the Premier Account price.

Standard Discount Spread

Dealer 1 price is commonly 20-30% off MSRP, but can be much higher or lower, each additional tier typically adds another 5-10% of discount level. 

Get Notified of Video Surveillance Breaking News
Get Notified of Video Surveillance Breaking News

Manufacturers commonly rely on 1 of 2 primary ways they set MSRP and discounts.

It is important to understand a manufacturer's overall discount structure to determine how much discount is potentially available for a given order.  Most manufacturers will tell you what their discount tiers are, and what it takes to get there.

Who Can Approve Discounts?

In most cases, a Regional or Territory Manager can give a 5% discount at will to "get a deal done". This is often because few dealers will be at the Premier level and those that are commonly deal with a dedicated account manager, not a regional person, so a regional can give a small discount without the risk that the deal becomes unprofitable for the company.

Mid or higher level sales managers can often approve 10% discounts.

Discounts beyond 10% will often need the approval of a VP of Sales, or sometimes even the CEO or other persons, depending on reporting structure in the company.

Most salespeople, especially VPs, are measured not just on total revenue, but also on discounts given. Even though an RSM can approve 5% discounts, they have an incentive not to do this too often, aside from the fact that providing a discount reduces revenue (and thereby commissions) for them.

Trade For Customer References

Possibly the best way to get a discount is to offer something equally valuable in return.

Manufacturers are frequently looking for a good case studies.  If you have a customer/install that showcases some aspect of the manufacturer's product, or is in a key vertical, and the customer is willing to allow their name to be used in a case study, that likely has good value to the manufacturer.

Customers willing to be a reference for other customers are also valuable.  School districts, retail chains, energy, and critical infrastructure customers are among many that all like to talk to counterparts that have used a system before deciding to purchase on their own.  If you have a customer who would be willing to take calls as a reference for future sales, be sure to make this clear when asking about a project discount.  Similarly, if a customer is willing to allow other potential customers to come to their site(s) to see a product in action, that is discount-worthy.

Work With RSM On Timing

Many people assume the end of a quarter is the best time to hold orders and ask for discounts.  This can be true if the company, or RSM, is struggling, but if the RSM is on target they may not want the order in that quarter, they might prefer it to start off their next quarter strong.  If you have a deal that is likely to fall around the beginning/end of a quarter, call up the RSM and ask them how they would prefer to handle it, you may have better odds if you try a "teamwork" approach instead of trying to dangle the order for a discount.

Ask For Discounts Outside Of Hardware

Physical products have hard costs associated with them, however sometimes software licenses and professional services are easier to negotiate into a deal for free. For example, you might say to the RSM "The customer has a little extra budget, if you can give me 2 extra licenses I can probably get them to buy 2 more cameras."  Asking to have the manufacturer provide an SE or trainer to do a post-install training for the customer can be another way to reduce your overhead and shift some to the manufacturer.

If your company offers a warranty or maintenance plan, ask the manufacturer to include an extra year of warranty on their equipment.  Make it clear that the customer sees value in this, and providing a warranty period that goes above and beyond alternative options will help sway the deal.

Leverage Demo Equipment

Demo equipment can also be a good negotiating token.  If a demo unit is already installed at the customers site, and they decide they now want to deploy a full system, ask for the demo unit to be given at no cost.  If your company provided the installation labor on the demo unit at zero/reduced cost, be sure to mention that as well.  Sales people often have a demo pool budget, and can afford to lose some pieces of demo equipment, as long as it is not a new-release or hot item.

Negotiate Payment Terms

For larger jobs that will take a long time to complete (and thus get paid) you may be able to negotiate special payment terms on those projects.  While not a direct discount, extended terms can help with overall cashflow.

Pay On Time

In addition to any of the above suggestions, pay your bills on time.  It will be easier for the sales person to justify a discount, or ask upper management for bigger discounts, for an integrator who does not have a record of carrying a past-due balance.

BAD - Vague Rationale

Do not say "I need an extra 5 points (or 10 points) to stay competitive on this deal". If you are going ask a manufacturer to help keep you competitive make it very clear what discount(s) you have already applied to your own labor or materials.  Also clarify if other manufacturers involved in the bid have provided discounts, and be prepared to explain why the customer is more focused on price than value of your service/solution.

BAD - Future Promises

Do not say "I need to be really competitive on this first site, but after we win this we will get X more sites".  A customer that is price sensitive about 1 site is unlikely to suddenly have an open checkbook on the next 20 sites.  If you truly believe this, a better approach might be to say "I am discounting my own labor on this first site, but when the order for the next 5 comes in next month I am going to need an extra 10 points from you.".  This shows that you are doing your part to win the customer, and that you truly believe many more orders will come after this one.

BAD - Technical Difficulty Complaints

Do not tell the manufacturer that you need a discount or a refund of some kind because the product was more difficult to install than expected, unless you have clear documentation or proof of a product deficiency or installability misrepresentation.  These kinds of requests are often not approvable without upper-level engagement.

Working With Distributors

If you are purchasing through distribution, you can also ask the distributor for a discount, though many operate on very small margins.  It may be better to ask the RSM if they have a recommended distributor that is known to offer better pricing.

It may also be possible to price-shop distributors, ask multiple distributors for a quote and tell them upfront that you are looking for the most competitive pricing.

Some distributors offer configuration services or other time/cost-saving options at competitive rates. Ask your distributor if they can offer any services that will save you time, even if these are not direct discounts.

Comments (7) : Members only. Login. or Join.

Related Reports

Coronavirus Hits Manufacturers, Standing Now, Worse To Come on Apr 06, 2020
Coronavirus is hitting security manufacturers, though overall modestly for...
Avigilon Aggressive Trade-In Program Takes Aim At Competitors on Oct 20, 2020
Avigilon has launched one of the most aggressive trade-in programs the video...
Door Fundamentals For Access Control Guide on Aug 24, 2020
Doors vary greatly in how difficult and costly it is to add electronic access...
Disruptive Free Lead Generation Added To IPVM on May 15, 2020
IPVM has added lead generation for sellers, for free, disrupting the...
Manufacturers Doing Better Than Expected Against Coronavirus on May 05, 2020
Coronavirus impacts are not hitting manufacturers as badly as they feared,...
Faked Convergint Fever Camera 'Expert' Marketing on Jun 16, 2020
Convergint touts they are "THERMAL CAMERA SOLUTION EXPERTS" while faking...
Worst Manufacturer Technical Support 2020 on Oct 15, 2020
4 manufacturers stood out as providing the worst technical support to ~200...
Mobile Access Control Usage Statistics 2020 on Sep 21, 2020
Most smartphones can be used as access control credentials, but how...
Tiandy Super Starlight Cameras Tested on Apr 30, 2020
Tiandy is taking aim at China competitors Dahua and Hikvision, with a new...
AHJ / Authority Having Jurisdiction Tutorial on Aug 06, 2020
One of the most powerful yet often underappreciated characters in all...
Dahua Revenue Grows But Profits Down, Cause Unclear on Oct 20, 2020
While Dahua's overall revenue was up more than 12% in Q3 2020, a significant...
Mobotix Thermal Detection Camera Tested on Jun 09, 2020
For years Mobotix has struggled but now sales are surging driven by Mobotix's...
Face Masks Increase Face Recognition Errors Says NIST on Aug 04, 2020
COVID-19 has led to widespread facemask use, which as IPVM testing has shown...
WDR Cheat Sheet and Camera Tracking - 30 Manufacturers on Aug 26, 2020
Manufacturers are regularly cryptic about what WDR support they actually...
Access Control and Video Integration Statistics 2020 on Oct 08, 2020
Video Surveillance and Access Control are two of the most common security...

Recent Reports

ISC Brasil Digital Experience 2020 Report on Oct 23, 2020
ISC Brasil 2020 rebranded itself to ISC Digital Experience and, like its...
Top Video Surveillance Service Call Problems 2020 on Oct 23, 2020
3 primary and 4 secondary issues stood out as causing the most problems when...
GDPR Impact On Temperature / Fever Screening Explained on Oct 22, 2020
What impact does GDPR have on temperature screening? Do you risk a GDPR fine...
Security And Safety Things (S&ST) Tested on Oct 22, 2020
S&ST, a Bosch spinout, is spending tens of millions of dollars aiming to...
Nokia Fever Screening Claims To "Advance Fight Against COVID-19" on Oct 22, 2020
First IBM, then briefly Clorox, and now Nokia becomes the latest Fortune 500...
Deceptive Meridian Temperature Tablets Endanger Public Safety on Oct 21, 2020
IPVM's testing of and investigation into Meridian Kiosk's temperature...
Honeywell 30 Series and Vivotek NVRs Tested on Oct 21, 2020
The NDAA ban has driven many users to look for low-cost NVRs not made by...
Ubiquiti Access Control Tested on Oct 21, 2020
Ubiquiti has become one of the most widely used wireless and switch providers...
Avigilon Aggressive Trade-In Program Takes Aim At Competitors on Oct 20, 2020
Avigilon has launched one of the most aggressive trade-in programs the video...
Mexico Video Surveillance Market Overview 2020 on Oct 20, 2020
Despite being neighbors, there are key differences between the U.S. and...
Dahua Revenue Grows But Profits Down, Cause Unclear on Oct 20, 2020
While Dahua's overall revenue was up more than 12% in Q3 2020, a significant...
Illegal Hikvision Fever Screening Touted In Australia, Government Investigating, Temperature References Deleted on Oct 20, 2020
The Australian government told IPVM that they are investigating a Hikvision...
Panasonic Presents i-PRO Cameras and Video Analytics on Oct 19, 2020
Panasonic i-PRO presented its X-Series cameras and AI video analytics at the...
Augmented Reality (AR) Cameras From Hikvision and Dahua Examined on Oct 19, 2020
Hikvision, Dahua, and other China companies are marketing augmented reality...
18 TB Video Surveillance Drives (WD and Seagate) on Oct 19, 2020
Both Seagate and Western Digital recently announced 18TB hard drives...