Reference no: EM131174977
Read the scenario given below and answer the questions that follow:
Case on Negotiation
Wheeling and Dealing: The Zirconia GT
It was a beautiful Summer day, typical of early June in Rochester, when Marcia Mirsk pulled into the dealership. She came directly from her service station, where the mechanic gave her 1980 Chevy Cavalier two to three months left to live. Without much thought, she got out of her rusting heap and began to peruse the new cars. Within seconds, a nicely dressed, middle-aged man approached her, introduced himself as Darrel DeRidder, and asked, "What can I do for you today?"
"Well, I just started looking because my car is about to fall apart. I'm not really sure what I want,'' Marcia replied honestly.
Seizing the opening, Darrel whisked Marcia way from the practical into the sporty. He showed her the red Zirconia GT, a little sports coupe with a not-so-little price . "This baby 's loaded : sunroof, A/C, power steering, power brakes, AM/FM Quad stereo, magnesium hubs, full options package. They've been very popular with our 'young professional' customers, '' he added, knowing full well that there would be a $400 bonus waiting for him if he unloaded this overloaded model that had been stuck on the lot for weeks.
Marcia could hardly contain her excitement. "I've always wanted a car like this!" she exclaimed, her eyes reflecting genuine enthusiasm .
"Hey, take it for a test drive and tell me what you think" Darrel tossed her the keys and sat back to prepare his strategy .
Marcia returned, her hair tousled (she had obviously tried out the sunroof) and looking as if she had genuinely enjoyed the drive. "How did you like it?" Darrel asked, knowing full well how the Zirconia would outclass a 1980 Cavalier.
"Nice ... really nice," she responded, "but it's a little more than I need." It was obviously wise to guard her true feelings. "How much is it?"
There, the question had finally been asked. "The sticker price, including all options and dealer preparation, is $15,750.'' Darrel noticed the immediate slumping of her shoulders. "Of course, there is a $1,000 factory rebate or 2.9% manufacturer's financing available." She was still looking at the ground. "And you do have a trade-in. Let's have a look!" With that, the wind was returning to her sails, and something of her previous smile returned to her face.
"Not too bad. I think that we could give you $1,000 for it. Of course, I'll have to have rny 'trade-in specialist' look at it. Can I give him your keys so he can check it out more closely?" Darrel asked. Marcia handed them over and they walked back over to the Zirconia GT. This time Marcia looked more closely at the sticker. ''l know what Suggested Retail Price, options, and rustproofing are, but what are the charges: $300 for A.D.M. and $200 for N.D.A.?"
"Well, A.D.M is a dealer prep charge; for instance, cleaning and checking the car out," he admitted, acting a bit annoyed at such an obvious question.
"And the N.D.A.?" Marcia persisted.
"That's the National Dealer Advertising charge, for those ads on TV. Advertising is very expensive for us, you know."
Marcia paused a moment. $15,750 was a lot of money for her budget. Finally she began to speak, "Even with the trade-in, the price is ...." Sensing that the intoxicating new-car aroma was beginning to wear off, Darrel interrupted, ''I'll give you the rustproofing, fabric finish, and floor mats at cost That's $300 off, only $13,450 for the car after trade-in."
"l don't know," Marcia said, with Darrel's arithmetic going by pretty quickly .
"Come back into my office ond we'll work this out." With that, Darrel led her into a small office near the rear of the dealership. He spent the next fifteen minutes convincing her that she could not find a better deal on such a popular car.
Suddenly, Marcia interrupted with conviction. ''I really don't need the magnesium wheels, Quad stereo, or most of the options, '' Darrel was surprised by her sudden assertiveness. He explained that the car was a package and that they just couldn't take the options out of it for her. Marcia was beginning to feel claustrophobic. With no windows and the door shut, she wondered if she would ever get out of this small office. With a mental start, she realized that even if she escaped, she no longer had her keys.
Seeing that he wasn't getting anywhere, Darrel decided to go for broke . ''Since you're such a nice person, and I would like to help you out, I'll give you the wheels and the stereo at cost if you take the car today. That's another $400 off, $2,700 off sticker price, or $13,050 with your trade-in!''
"I am not sure that I can afford that much," Marcia responded .
"How much can you spend per month on your car?"
"Under $350."
"Well, we can stretch the payments out to four years and that makes it only, let's see , .. $337 a month. What do you say?" As Darrel leaned over his desk awaiting her response, Marcia began to reconsider buying a new car, especially without shopping around first. She got up to make her escape and to thank Darrel for his time when he blurted out, "Are you a first-time new car buyer?"
"Why . . . yes," Marcia answered .
"I almost forgot,'' Darrel announced, "I can offer you $300 off invoke just to get your business and begin what I'm sure will be a long-term relationship with this dealership. Even if we don't make anything on this car, we're in it for the long haul. This will bring the payments down to $329. You can't beat that; the car you want at your price, But we have to make the deal today. There has been a lot of interest in that particular Zirconia and I'm not sure how long it will be around." That was just enough to halt her exit; besides, at this point, Darrel was really trying to help her out. Marcia took the deal.
"Just let me clear this with my sales manager," Darrel explained as he left the room. When he returned, he was solemn. "He didn't go for it. He got after me for getting carried away, especially with the new buyer discount. Bottom line, he says you can't have the new car buyer discount and the options at cost." Marcia was angry with the sales manager, but empathized with Darrel's predicament and agreed to his suggested solution of giving up the magnesium wheels. After a quick check, Darrel indicated with evident relief that the sales manager had accepted .
Now it was time for the paperwork. Darrel began by filling in the sales discount. Marcia noticed an $80 processing fee, but she did not mention it because it was printed on the form and therefore must have been a standard charge. Darrel filled in the proper price,
$15,750, and the $1,000 factory rebate, but then wrote in a mysterious $105 charge . "What's that?" Marcia inquired .
"Oh, I forgot about that. That's the paint sealant we put on all our cars to protect our customer's investment,' Darrel replied.
The next line was the trade-in value for which Darrel had to check with his "trade-in specialist." Darrel left the room and returned with the specialist who stated that the 1980 Cavalier was in worse shape than Darrel had thought and the dealer could only offer $500 for it and would probably lose money even at that price. Marcia thought back to the morning. Five hundred dollars was close to what her mechanic said it was worth, so she had to agree.
Darrel said that he felt terrible. "I thought that we could get more for it, but he's the expert." Darrel added, "You know, with a new car like that, you really should have an extended warranty. I have a 6-year/60,000-mile warranty available on the Zirconia. We usually sell it for $750, but since I was wrong on the trade-in, you can have it for $500." Knowing that she would have the car for a long time (the payments alone would last four years), she took him up on the offer.
"Now just take this over to the finance department and I'll meet you out front with your new car. It's been a pleasure." With that, Darrel smiled and led Marcia to the finance window.
The finance manager looked over her papers and asked Marcia to sign on the dotted line. A last check of the forms revealed a $230 life insurance fee, which would pay off her auto loan if she died before she could . Angered by this late addition, Marcia thought back over her three-hour ordeal and, not feeling too well, reasoned that life insurance might not be such a bad investment after all. So with a sigh of relief, she signed the papers not knowing how much she really paid for the car or whether or not she got a good deal.
1. Was it a good deal for Marcia? Why or why not? Give reasons.
2. Would you call it a win- win negotiation/deal or not? Give reasons.
3. What were Darrel's strengths & weaknesses as a negotiator?
4. If you were in place of Marcia, how would you have proceeded with the negotiations (assuming that you did want to buy the Zirconia GT). Give your answer quoting specific instances from the case.