The Currencies Triangle
Let’s take a contract with the following parameters:
| Price discount | = 10 percent |
| Volume commitment | = 10,000 units |
| Length of contract | = Two years |
As the supplier, you have put together this triangle based on market conditions and current rates. The parameters make good business sense and the deal is profitable. The customer responds that he wants a deeper discount—12 percent. He wants to extend the line by X (see Figure 4.2).
Figure 4.2. Pricing Discount
(Note: The inside area of the triangle must remain proportional.)
The supplier can then respond with two options:
If you want an extra pricing discount (12 percent), I want a larger volume commitment—say, 15,000 units.
If you want an extra pricing discount (12 percent), I want a longer contract—say, three years.
Figure 4.3 shows how the two options look as triangles. Making a concession on the pricing discount allows the supplier to get something of value in return, making this a win-win outcome.
Figure 4.3. Triangles for Option 1 and Option 2
