A View From the Other Side - A Preview

A View From the Other Side - A Preview

Nobody is happy when their prices increase after January 1st. Many customers feel that by signing a pricing agreement (or contract) that they can use this document to restrict price increases. But somehow, spending is more than expected during the 3 - 5 year term of a contract. How could this have happened?

You are a _____ playing in a professional league.

The English language provides many words to describe someone who is an amateur such as:







-bush leaguer


Assuming you spend enough on lab supplies to get a distributor to begin to negotiate a contact, how often do you go through the process? Is this the first time ever? If not, did you negotiate 3 - 7 years ago when the contract was signed? Now consider that the company you are conferring with negotiates contracts every day and they have been doing so for decades! They have huge resources to dedicate teams of experts to this task. What are your odds of coming out with a contract that will protect your interests? The deck is stacked. Unless you have millions of dollars to spend on lab supplies, and the resources to hire experts who have extensive experience in this specific industry, it is assured that they will gain far more in the arrangement than you will.

They’ve got your number.

Distributors have many years of experience in observing how lab buyers behave. Here are some of the “givens”:

  1. The lab business is “sticky.” This term refers to the very high likelihood that you will continue buying from the same vendors. There is a huge reluctance on the part of laboratory managers and technologists to change products/suppliers regardless of price. “If it ain’t broke, don’t fix it.”
  2. Relationships matter. If a particular distributor has been doing business with a lab for a long period of time, especially if the representative is doing a reasonable job, they probably won’t change vendors and will tolerate larger price increases.
  3. There is a cost to change. Of course people hate change. One valid argument used against change is that it can cost an organization can range from 7 - 10%, according to studies. In other words, if you aren’t saving at least 11%, you may be better off turning down the deal.
  4. The lab wields a big stick. If the lab manager and workers are against a contract, they can, and frequently do, sabotage a deal, especially when strong bonds between the distributor rep and the lab exist.
  5. History is a good predictor. If you have never changed distributors in the past, chances are you won’t now.

Part of every distributors' game plan is to map out who all the players will be and how they will behave during contract negotiations. The analogy here is that they are able to review films of all the other players at the poker table. They can accurately predict who is bluffing and when to bet. All the while, you are wearing a blindfold.

What we have discussed in this series:

  1. Contract Terminology 101 - what are the components and what do they mean to you?
  2. Contact vs. Agreement - What’s the difference? Do you have the right to shop elsewhere? What about a “generic” or group contract?
  3. The Hot List and Price Caps - The pros and cons.
  4. Guaranteed Cost Savings - Hard vs. soft cost savings. Metrics. Penalty clauses.
  5. Cost Plus Pricing - Depends a lot on how you define “cost.”
  6. Rebates and Prebates - Sound too good to be true? Most likely it is.
  7. Profitization - How it’s done and how you can protect against it.
  8. LPS On Your Side - The LPS approach. How it addresses these issues and is a better fit for many lab