Preventing you from sourcing. That’s the goal of many suppliers. And, as you learned in Part I of this series, using the Phantom Leverage technique is one way that suppliers try to convince you to forsake the sourcing process and just choose them.
The ammunition behind sourcing dissuasion is the perception of a good deal that suppliers try to create. In our recent office supplies sourcing initiative here, we refamiliarized ourselves with another “dirty trick” that suppliers use as a dissuasion method. We’ll call this one the “Car Mirror Discount.”
You know how car side mirrors often say something like “Objects in mirror are closer than they appear?” Well, we find that a twist on this statement applies to discounts quoted by office supply vendors: “Discounted prices are closer to the standard price than we lead you to believe.”
We’ve seen suppliers offer 70% discounts. Sounds good, doesn’t it?
Well, it does until you find out what price that discount is taken from.
Let me ask you this: If you were going to buy a ream of generic copy & printer paper advertised at a 70% discount, how much would you be willing to pay?
A dollar or so?
$1.50 at the most, right?
That would be if the 70% was deducted from the price that the average Joe would pay when buying paper at the store or on a retail Web site – $4 to $5. But the store/Web price isn’t the baseline price against which the discounted price is compared.
What is the baseline price from which the discount is taken?
Yep. A fifteen-dollar ream of paper.
Who on God’s green earth would ever pay 15 bucks for a ream of generic copy paper?
Still feel good about that 70% discount?
I didn’t think so. That’s the “Car Mirror Discount.”
This series will continue with Part III tomorrow (April 3, 2009). You’ll learn how we selected our new office supplies vendor.
And there is an interesting twist to the story. So be sure to check back!
To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
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