Reference no: EM132124651

CASE: OVERCOMING BARRIERS

OBJECTIVE

To understand how barriers to integrative negotiation can occur and to practice responding to such barriers.

PROBLEM

Vic Vendor, new sales representative for Do or Dye Tools, is uncomfortable with the way More Power has been selling its tools. For months, he has been saying to Kim Khan, assistant manager for tools, that the former Do or Dye representative, Axel Rod, let More Power “get away with murder” regarding pricing, return of defective products, placement of tools on its shelves, and various “deals” More Power has offered its customers concerning the sale of Do or Dye tools.

Do or Dye’s biggest seller is the Super-Deluxe 15-90 Power-Matic Reversible Drill/Screwdriver set. This product is Do or Dye’s premiere item and generally beats out all competitors in terms of quality. Do or Dye has advertised this product as “the only product you’ll ever need for all your drill and screwdriver requirements.”

The 15-90 retails for $159.95. There are also 27 different drill bits and 21 screwdriver heads available for the 15-90. The total package of drill bits and screwdriver heads sells for $59.95. If a consumer wants only drill bits, the complete package of 27 bits sells for $39.95. Similarly, the complete package of 21 screwdriver heads (straight and Phillips) sells for $29.95. Do or Dye also sells combination packs of bits and heads based on size, including “small to medium projects,” “large projects,” and “heavy duty projects.” Each of these packs consists of nine drill bits and seven screwdriver heads and is priced at $34.95. Do or Dye does not sell bits and heads separately.

More Power is generally pleased with how the 15-90 sells. But its price is often out of range for many customers. More Power likes to give customers options. Therefore, it places the 15-90 low on the shelf and places other less-expensive, lower-quality sets higher up on the shelves. Its rationale is that the truly dedicated “weekend warrior” or professional will look for the 15-90. Meanwhile, there are plenty of other good drills and electric screwdrivers to select from, in a broad range of quality and prices. Using similar logic, More Power places Do or Dye’s bit/head combination packs on lower shelves near the 15-90. But it also has numerous other bits and heads to select from, many of which are sold separately rather than in combination packs.

Vic Vendor learned early on that his predecessor, Axel Rod, allowed this practice. Apparently, Kim Khan made the argument that as a locally operated store serving a single community, More Power should not have to worry about shelf placement and the marketing of Do or Dye’s products in the way Do or Dye expects larger retail chains to market them. Kim further argued that More Power customers are turned off by the limited options concerning Do or Dye’s combination packs. To get around this, Kim often persuaded customers to purchase the 15-90 at Do or Dye’s recommended price by encouraging them to buy off-brand bits and heads. Axel Rod looked the other way. But not Vic Vendor.

Vic Vendor is furious. He upset with the low placement of these products on the shelves. Moreover, the sale of the 15-90 and the combination packs are part of a broader marketing strategy. While the 15-90 is a quality tool, the bits and heads are even more valuable. They are made of a special patented alloy. Do or Dye sells them in combination packs, rather than singly, to increase the demand for them in the market. Do or Dye does not want its bits and heads to be confused with any other brand on the market or to have consumers view them as “ordinary.” Selling them in combination packs is a means of protecting their unique qualities and value in the market. Vic Vendor believes that allowing even one exception in which customers are encouraged to buy off-brand bits and heads to be used with the 15-90 will have an adverse impact on the overall profitability of the 15-90 and the combination packs.

Vic finally tells Kim to either honor Do or Dye’s expectations for the sale of the 15-90 and combination packs or it would discontinue its relationship with More Power. More Power is generally pleased with all of Do or Dye’s tools, not just the 15-90. Although it sells other brands, the loss of Do or Dye’s business would significantly impact More Power’s bottom line. On the other hand, More Power has been frustrated with Do or Dye’s practice concerning the 15-90 and has always been concerned about its less than generous limited warranties, its return policy for defective tools, and service to customers after the sale. In all these areas, More Power has received complaints from customers that suggest that all Do or Dye cares about is “making a buck.”

Realizing this is an important issue, Kim informs Jim Talent about Vic’s ultimatum. Talent directs Kim and Joe to negotiate with Vic. Kim arranges a meeting with Vic. At the meeting, Vic brings a fellow sales representative, Sue Ply, with him.

Case Questions

1. What difficulties did the parties face when confronted with barriers to integrative negotiation?

2. How did these barriers impact the negotiation process?