It’s Krunch Time!

by drjim on August 22, 2008

The Krunch negotiating technique is used by buyers to get lower prices from sellers

The Krunch negotiating technique is used by buyers to get lower prices from sellers

What the heck is a Krunch? In a nutshell, it’s a negotiating technique that a buyer can use to squeeze a lower price / better terms out of someone who wants to sell them something. I’ve seen this technique used most often when I’ve been buying a house – it’s a classic. I guess that I should confess that I’ve also used it when I’ve been selling a house

How Does It Work?
Here’s how the Krunch technique works. The buyer has to have more than one person who wants to sell to them. When the buyer has collected prices from each of the sellers, then the buyer can go back to every one of them and tell them “Your price is to high, you can do better.” Generally speaking, each of the sellers ends up lowering their price.

Why Does It Work?
To understand why the simple Krunch technique works so well, you’ve got to look into the mind of the seller and see what goes on when the buyer tells them that their price is too high:

  • Yeah, I built some give into my pricing just in case this happened.
  • I knew that what I was selling was too expensive.
  • The buyer must have a lower price.
  • Hey! The buyer is talking with me so they must like me.
  • Oh, oh – does the buyer know something that I don’t?

What Are The Drawbacks To Using It?
It doen’t take a rocket scientist to realize that sellers who keep getting Krunch’ed will eventually start to build up defenses to it. Specifically, what you can expect them to do is:

  • Boost their prices because they know that they’ll be asked to lower them.
  • Reduce the quality of the product being offered because they know the price will be lower.
  • Drop some services that used to be given.

What Countermeasures Can You Use?
What good is knowing about a negotiating tactic if you don’t know how to defend yourself against it? Here are three things that you can do when someone tries the Krunch on you:

  • Defend or describe your value. It’s not all about price so take some time to tell the buyer about why your offer is better than anyone elses.
  • Ask them how much better you have to do. There’s no need to lower your price more than they are expecting you to.
  • Buy yourself some time by starting to respond by saying “Hmm…” This will buy you time and will make the buyer feel obligated to fill the blank space with an explanation as to why they want you to lower your price.

Hopefully you’ve learned to set your negotiating goals high enough so that you will achieve more than you ever dreamed possible. Now that you know how to deal with the Kurnch tactic, next time we’ll have to talk about the “nibble”…

When was the last time that someone tried the Krunch on you? Have you built up defenses against it? Have you ever used the Krunch on someone? How did things turn out? Leave a comment and let me know what you think.

Tags: , , , , ,

Be Sociable, Share!

{ 6 comments… read them below or add one }

Eddie Prentice April 28, 2009 at 4:42 am

Thanks for a great article.

I get ‘krunched’ regularly. My reply is that our price includes guaranteed quality and on time delivery.

My old boss used to say ‘don’t give anything away with asking for something in return’ so I remind them that a price break is just another few rolls of ribbon away, and they can reduce the unit price they pay.

Reply

Dr. Jim Anderson April 28, 2009 at 7:10 pm

Eddie: I couldn’t have said it better! I really like how you take the time to expand what’s on the table by pointing out the extras that you are providing. Your old boss had it right – making the other side participate more fully in the negotiation is a great way to make sure that when it’s all over, they walk away feeling as though they’ve “earned” what you’ve given them.

Reply

Ted Linklater April 28, 2009 at 6:53 am

“Reverse auctions” are conducted in just this manner, only a formal and open basis.

Suppliers know their price and the lowest price is posted on the computer screen. Suppliers now have a given time frame, say an hour, to adjust their prices or just walk away.

Thus, within the time frame allocated, Reverse auctions have the potential of really bringing the price down.

The other advantage to purchasing is that there is no opportunity for suppliers to “bug” you with why their price is higher.

For the sales side, (and I definitely know about this), “Reverse Auctions” are the salesperson’s nightmare!

Reply

Dr. Jim Anderson April 28, 2009 at 7:14 pm

Ted: welcome to the 21st Century! You are correct – reverse auctions reduce the buying process to a numbers game. However, a good sales person never let’s an automated auction stand in his / her way. Getting involved in a discussion about what the customer is looking for BEFORE the auction is the best way to go, but participating in the auction, trimming your offering to meet the required price and then discussing with the customer what ADDITIONAL products you have to offer them provide you with work-arounds…

Reply

Zach Friedman April 29, 2009 at 7:03 am

I would advise against taking this tactic too far. I believe that it is perfectly acceptable to use the krunch technique as long as it’s only part of your negotiation strategy. If used in a “matter of fact” approach this can be very effective.

An example of this would be a supplier coming in with Widget A at $12.00 and Supplier B comming in at $11.50. There’s no need to tell either supplier what the price from the other is, just that there is competition and their pricing needs to be in line.

If you start to push too hard, then you run risk of hitting the defenses without getting any results. Ie. You get the speech about product quality, or services, which can sometimes be irrelevant to your decision. If you’re doing a proper comparison, then the services and quality of all considered suppliers should already be part of the equation.

Making the supplier feel like he can talk to you like a person, rather than just a number crunching heartless machine has always garnered better results for me.

Reply

Dr. Jim Anderson May 3, 2009 at 9:29 pm

Zach: you bring up a really good point – the Krunch is a tool, not a tactic. There are times that it is the right tool for the job, and times that it’s not. Your example highlights this – just the hint of competition can do the job sometimes. Finally, I agree that if you take the time and energy to build a relationship with the other side it will always pay out rewards. As one of my old bosses was fond of saying, “People don’t buy from companies, they buy from people.”

Reply

Leave a Comment

{ 2 trackbacks }

Previous post:

Next post: