Margaret Peake’s Office, 6 Years Earlier

Carl Ritchie is about to present Margaret Peake with his deal on some equipment. It is quite a commonplace product, for which a market price of $400,000 has been established. Carl Ritchie’s sales director has made it abundantly clear: “We need to improve our customers’ payment terms and obtain a 20% advance on any order.”

Carl presents his customer with an offer pitched at $430,000. He has thereby established a negotiating margin, which is clearly needed when dealing with a buyer of the caliber of Margaret Peake. As expected, the buyer protests, demanding a competitive price and, having argued and defended his offer, Carl Ritchie ends up proposing a compromise figure of $400,000. Everything seems to be in order. All that he need do now is raise the issue of payment deadlines, a subject close to his boss’s heart.

Carl RITCHIE: Now, finally, regarding the payment deadlines…

Margaret PEAKE (interrupting him): You know our terms: 45 days end of month.

Carl RITCHIE: But that doesn’t apply for equipment of this type, for which we require a 20% advance payment when the order is placed. That’s nonnegotiable.

Margaret PEAKE: That’s out of the question. That would breach our company’s policy, with which you should be familiar.

Carl RITCHIE: Come on, Mrs. Peake, let’s be reasonable! I’ve made an effort on the price, so you could make an effort by agreeing to make a 20% down payment.

Margaret PEAKE: Why should I? Furthermore, even if I wanted to, my line management would never accept it, particularly in the current economic climate.

Two hours later Carl Ritchie was explaining to his sales director just why the requirement for an advance payment on the order was unrealistic in such a competitive market. The sales director did not dispute the explanation given.