Member Article

Two equine ‘friends’ will unseat your sales efforts

Part 2 - The Stalking Horse.

The Stalking Horse is a similar situation to the Trojan Horse - and is usually (but not always) confined to the private sector. Here the buyer has an incumbent supplier who has been on the programme for a long time, has got the solution right and supplies the product or service on time and to specification. All is going well - but the supplier now knows that he has the upper hand. It will cost a lot of money to find another source to replace him.

Such costs are called ‘a barrier to entry’. In technology markets they are very substantial and are one reason why a bid must do a good job for you and WIN - you may not be able to afford to bid later as a second source. In engineering, aerospace, power or oil and gas industries, qualification monies or tooling costs will not be available.

So the lucky supplier starts to dig his heels in at the annual negotiation and improves his margins. He says that the experience curve has flattened out and he can no longer offer a 5% price reduction each year. He may even put the price up as he wants a cash cow which he can milk to put money into his R&D or marketing efforts.

At the same time the programme is in maturity and is under price pressure in the market place. The buyer has been told to get the component prices down. What does he do? He needs a stick to beat the supplier with. The threat of competition is the only weapon he has, so he calls you.

Identifying a ’stalking horse’ scenario

The buyer may well approach several companies with a bid package. Don’t be the sucker who responds to it.

You can identify the Stalking Horse because;

• the programme is established
• the specification documents have had few changes to them in recent times
• the buyer will not allow you to talk to technical personnel.

The last point is a key one. If the supplier is doing well, then the technical people are happy with the performance of the product or service. They do not get involved in price rows - pricing is a commercial operation and companies go to great lengths to make sure that engineers do not know prices.

Also, a specification for a piece of equipment which is doing well may have a few changes during the qualification phase and will then stay virtually unchanged for the life of the project. If the supplier is in trouble, specification changes are one way for the company to help out the supplier and save themselves the massive cost of requalification and logistic change. Your technical people should always search out such information when they receive a specification.

If you suspect that you are being used, you must find a way to talk to engineering or technical people. Better still, try product support. If they say that all is well and there are no problems in the field, then a stalking horse is being used. And you’re it.

What to do next

Unless you have a virtually identical product or service that can be substituted without extensive requalification, then decline gracefully. Say that you’re too busy to make a bid. The odds are really stacked against you.

Once again, commitment = need and here there isn’t any.

So, the key points to remember;

• No engineering or technical contact allowed
• The buyer is secretive and obstructive
• No field problems

You have been warned!

By the way, the public sector frowns on the use of stalking horses, although it’s not unknown. Instead, they limit the duration of contracts to allow retendering after a few years. They may also rotate their buying staff so that no-one gets too cosy with supply chains.

It’s infuriating when you’re trying to a build long term relationship!

This was posted in Bdaily's Members' News section by GreyMatters Academy .