OT how to approach this situation with a dealer.

I have a customer that I have been working extensively with for 4 years. He asked me to quote on some new Hmi's from a well known company. I sold him the first of these Hmi's from this company about a year ago.
I talked to my dealer and asked him to quote me a resale price for the components. My customer then calls the dealer and gets pricing, which is lower than what I quoted him because I didn't actually get resale price and got list. When I quoted I added 12 points.

The dealer then asked me if it was this customer that I quoted, I said yes, and he says that since they have been talking to them for 4 months they will go direct.

I have held this customers hand extensively, introduced him to programming and gave him a lot of free help.

I am kind of choked with my customer and the dealer on this one. The dealer is an easy solution, I just won't buy anything or send him any leads. The customer is another story, he recently bought a new machine he wants to automate and I feel it's going to be a challenge for him.

How would you guys handle this?

Glad to see you are keeping busy.
As for the Supplier, that is greasy but i have been burnt this way before as well. Infact yesterday i was quoting a 1 day quick job, and my 1 supplier sent me a quote and his "deal of the day" price was higher than what his website says the thing is, and so i should have got an even lower price since i buy a bunch through him. had to call him out on it... Luckily i hadnt sent it to the customer yet for approval. As for the customer, i would mention to him that the guy must have screwed up the price quote to you, because it should have been on par, but as for if they buy direct and you dont get to sell parts, that can sometimes mean higher rates... or if you dont make much working for him, he gets pushed off for more important customers...

I would say to the dealer that your discount makes you uncompetitive and that unless they improve you will have to buy elsewhere

I agree to tell the customer the dealer gave you the wrong price.

And maybe you need to find a better customer but i know that isnt easy

I think that possibly the story of the "too high price" is just a way for your customer to have an excuse for dumping you.

As I see it, your customer has the whole time been wanting to get into upgrading machinery by himself.
Tthink about it, if you are into upgrading rather than buying new, then it is because you are cutting costs. Doing it by one self and by self learning will take longer time, but may save on the costs for external consultants. So thats the compromise, it takes more effort and may take longer time, but you are doing it on the cheap.

Your way of keeping this customer is to become indispensable because there is something he cannot do.
If the machine is relatively simple, the customer may think the "hey, I can do this by myself".
I am thinking that making sure that a machine is safe is something not everyone can do, and it not something that cannot be skipped or taken lightly. Do your customer know about the safety aspect, and that if someone gets hurt in the machine he has upgraded, it can close his business ?
edit: I dont know how it is in Canada, but in the EU you have to provide a "declaration of conformity to EC laws". That is a legal document that amongs other things states that the machine is safe. This document has to be signed by someone high up in the company. For a small to medium company it must be the owner or the CEO. I am guessing that there must be something similar in Canada. Is your customer ready to do that ?

I have learned a lot of lessons from this type of thing going on over the years. It's not unique to you, it happens all the time.

First off tell both parties you are unhappy about what they did. Then they know where they stand. Don't refuse to do work for the customer - make the money back up slowly in other ways.
It's tempting to tell them both where to get off but in my experience you have to have a business head and private head. Suck it up - and put it down to experience (but of course don't forget)

I have had plenty of 'going behind my back' when they now feel they know what they are doing...........invariably they don't. And my pricing gets subtly adjusted (that probably wouldn't have until...)

I used to have a business mentor (now sadly departed) that gave me so much advice on these type of things. Especially the 'business head' and 'private head'
Off topic I know but he used to say ' if the customer is being horrible to you - or blaming you for something that isn't your fault or, or or etc Don't get upset
Just put something extra on the bill when you do it..........they never know but you feel much better.

Edmhydraulics said:

The customer is another story, he recently bought a new machine he wants to automate and I feel it's going to be a challenge for him.

How would you guys handle this?

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Hate to say it.... but when he comes back and he will, charge extra

I try and give everyone a fair price, I do not try and kill anyone with the price just because they 'need it' there are a few items that we make and we are the only ones that make them, we do not charge a lot for them just because we can and know they will sell regardless of the price, we just want to pay our bills and make a living... but we do need to make a living so when I put a extra effort into a customer and they do something like that (and its happened many times) when they come back I get something back the next time.

Some of our time and effort needs to be written off as customer service and just goes away but we also need to survive and make a living, you can blame your customer I think we all look for the best price and service, but that is also what you are providing

If your business model is to make money by marking up parts, you've gotten what you deserve. If you mark up parts to cover the trouble of purchasing parts for a customer as a service for them, then I'd explain to your customer what you explained to us. You also need to talk with your supplier to find out what kind of customer he thinks you are.
Next, you need to figure out the balance between 'free support' and customer charges. For example, if you have a customer that never asks for free support, and always takes you bid or accepts a T&M quote, you might charge him $100/hr. But the customer that calls with questions that are in documentation that has been provided or he should be able to figure out without help, you might want to charge $125/hr. Many guys post a standard rate, but give their 'good customers' a discount off that price. If you have a customer that asks for your help in designing the solution, but then doesn't use you to implement the project, you might want to charge him for design help, or alternately you might be better off without him as a customer.

Thanks for the insight everyone, I slept on it last night and now I am only just a bit annoyed at the whole thing. But its part of business right?

Like I said, I know how to handle the dealer, he just doesn't get my business, there is another dealer in town I can work with.

The customer I will not worry about for right now. He may need help with his hydraulics in the future which is the other side of my business. Especially since he bought a new machine and he is now dealing with a large burner system that I have experience with.

As for variables rate depending on the customer, I already do that, now this customer gets put on the "High" rate rather than the "Medium" rate for preferred customers.

As the saying goes, "All is fair in Love and Business".

Thanks again.

Being a distributor is sometimes bad enough, I can't imagine being a reseller.

I have in the past, went straight to the manufacturer for 'Special Pricing'. This way the distributor could not under bid me with my customer.
I also let the manufacturer pick where he wanted me to purchase the equipment.
keep in mind that you need a good working relationship with the manufacturer to do this.
Regards,

I am a one-man shop. I don't often do builds or furnish hardware. When I do, I explain up front that the customer can probably negotiate a better price from the vendors than I can get. I quote the job with the hardware as a separate (optional) line item.

Generally I like to sell parts and service for a job, just like the big shops. If its a package deal that I am selling, like a whole system including programming, panels, installation and commissioning. They get the system price.

I rarely just sell components to a customer as they are generally looking for a total solution or upgrade.

I do have distributor rights from a few manufacturers for specialized equipment, but I really have not started to develop that side of my business yet.

Right now being a small player, I dont have a whole lot of purchasing power to go direct to manufacturers so I am stuck dealing with sometimes shady distributors.

Edmhydraulics said:

Generally I like to sell parts and service for a job, just like the big shops. If its a package deal that I am selling, like a whole system including programming, panels, installation and commissioning. They get the system price.

I rarely just sell components to a customer as they are generally looking for a total solution or upgrade.

I do have distributor rights from a few manufacturers for specialized equipment, but I really have not started to develop that side of my business yet.

Right now being a small player, I dont have a whole lot of purchasing power to go direct to manufacturers so I am stuck dealing with sometimes shady distributors.

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In my experience, to get any decent line with any existing business, it takes a very large investment in money, time and manpower. The better lines are going to require a minimum sales force and sales goals to be met and many times they want you to stock as well. It's a two-way street though. I wouldn't expect a non-distributor to be able to buy near distribution level. This would raise a lot of flags.

There's a reason I'm spending time promoting your line. If you're just going to take business direct, add additional distributors in my area and sell to resellers at my discount, you're not a good line for me anymore. I'll still sell it but not actively and I'll just quote low margin with no support.

In my business i never sell any components that can be bought off-the-shelf, since all of my customers are capable of buying it themselves.

I also figure there is very little money to be made on off-the-shelf parts, compared to the time it takes to make quotes, get deliveries, send them out, send invoices, handle wrong parts/warranties etc. You need to be a big company with a big volume being sold to be able to do this efficiently.

Sometimes I specify for them what to buy, but I charge for my time (and knowledge) so I don't care where and how they buy them.

Everyone has their thing but for myself I'm always trying to think about what business I'm in. In my case, I'm in the knowledge business. So I don't want to sell any parts.

In hard times it's always easy for the customers to change suppliers or pressure them into lower their prices. It's much harder for them to replace knowledge with something cheaper. The more specialized and unique skill set you have, the harder it is for the customer to replace you.

Sometimes it's not even knowledge that could be your unique thing. It could be that they can get a hold of you at all times, that you're fast or placed close by or a hundred other things.

Instead of helping someone for free, you could offer them a course. Help them save money but of course get paid doing it. Help them do simple jobs on their own and then of course you're going to be the expert that they contact when they don't get it to work or if they have problems.

I normally ask the customer to buy direct from dealer, as my customers are way bigger then i am. No risk forme however i do get my money by installing and servicing , and in many cases i get a bonus from the supplier as they have sold a unit with help from me.