HP Seeks to Block Competitor From Revealing Its Pricing 144
Matt Asay writes "On October 13, 2008, Hewlett-Packard sent a complaint to an open-source competitor, GroundWork, asking GroundWork to stop revealing HP's 'confidential' pricing. CNET has posted the letter, which indicates that HP doesn't want its pricing revealed, but which doesn't question the veracity of the pricing (which, not surprisingly, is 82 percent higher than the open-source vendor's). Does HP think its pricing is really a secret? It's publicly available at GSA Advantage. Guess what? HP software costs a lot of money, but presumably feels that it can justify the high prices. Why try to hide the pricing information?"
It's a stupid practice... (Score:4, Interesting)
Erm... (Score:4, Interesting)
If your prices become well known, you leave yourself open to being undercut or pissing off other customers who weren't as good at negotiating a deal. Conversely, if you're making a bid for an exclusive licence and the amount you're bidding becomes public, a rival can come in and bid slightly higher to sabotage you.
Sad. (Score:4, Interesting)
I remember when HP was run by Engineers, not the marketing and legal department.
Pricing is marketing (Score:5, Interesting)
This is a long standing scam, where there person 'handling' the deal gets credit for saving oodles of money on the list price, and the salesman has negotiating room to figure out just where he's padding his commission. The list prices are therefore completely unrealistic, and they don't want them published because that might stop people talking to them in the first place.
I can tell you for certain that we (as in, large financial sector company) get 50-75% _discount_ terms with quite a lot of our vendors of IT hardware. I don't know what the rate is with HP hardware (we do use it) but I know it's a substantial reduction on 'list' price.
IT pricing (Score:5, Interesting)
Just to keep regular IT types in the dark, some firms claim that their GPLs are trade secrets etc. but in fact that is not right. For example a big Network firm, who is obsessed with blue-green boxes and originated from San Francisco, do not give GPL to customers publicly, but their sales representatives hand out them as a very secret, job risking (!) favor. And while everybody know that their regular discount rate in my country starts at 32%, I saw some certified engineers of that company on the customer side, claiming obtaining an amazing 20% discount, thus buying equipment 17% above the market, and showing themselves as indisposable negotiators to some upper level managers, who do not know the difference (or lack of, depending on the case) between a computer and calculator...
Re:Differential Pricing? (Score:5, Interesting)
That's exactly what happens in the whole construction material industry (at least in Europe).
Every client (craftsman's business) gets a different price (or discount as they call it), depending on how a "good client" they are. (Depending on how much they like to keep you because you buy much and pay early, and so on).
I'm pretty sure HP does the same. It makes sense to handle good old clients different than that new company that can't quite guarantee a quick payment.
Of course, if that "bad" company starts to know how much they really can push the price, they might start making demands.
On the other hand, this is a typical monopoly problem, because in working economies, the client can do the same, and pay more for quality suppliers.
Same case for CAD/CAM/CAE software (Score:3, Interesting)
Re:Differential Pricing? (Score:3, Interesting)
The salespeople may be forced to do this. There are industries (eg. telco) where the procurement managers won't sign a contract unless there is a discount. If the salespeople know that then they are forced to advertise a higher base price.
On the other hand, in some cases the discounts and negotiations are ridiculous. I once experienced a router vendor salesman responding to a coworker's concern for the price with "oh, no problem. You can get 50% discount". That is a bit silly.
Haggling over the service, options and price is ok. I don't like haggling over the price only.
Re:Sour grapes much? (Score:3, Interesting)
Nobody outside retail reveals pricing. Pricing is almost always secret, from first class flights for executives to building materials to software.
Ever noticed that websites have "call for quote" instead of a price on enterprise goods? They want their sales people involved and they want to quote you a price based on your size and volume.
This is not Walmart marketing, this is very low volume sales in comparison.
Re:Erm... (Score:3, Interesting)
And? An open market means they're free to price their goods at whatever they want to whoever they want and people can choose to buy or not buy at those prices. It has nothing to do with making their quotes confidential.
On the other hand, a free market itself isn't all that great. For a free market to provide optimal results, a variety of other conditions must be met, one of which is that all market participants have perfect information.
Trying to keep prices secret is one popular way that companies try to give the middle finger to the Invisible Hand and profit off of engineered market inefficiency.
Re:Differential Pricing? (Score:5, Interesting)
That and public display of pricing often cause consumers not to Apples vs. Apples type of purchase.
Organization X get product A for $3,000
Organization Y is told their software will cost $5,000
Now the reason could have a huge amount of reasons.
Organization X can be good at paying the bill while Organization Y takes forever and needs numerous calls to get it paid.
Organization X has been a steady repeat customer. While Organization Y will purchase a product and will not purchase anything else in a long time.
Organization X may have less need or proven to to be less of a support sink, while Organization Y is a constant problem.They
Organization X may put a Powered by Your Company on its page. While Organization Y will not.
They don't want their prices public because they don't want to know how they rank and value their customers. This is not evil or greedy, it is business. You want to keep good customers for the long term so you will be willing to cut your margins. But if the company is a problem and you don't see much opportunity take what you can get.
You tend to do the same thing as an employee. You are willing to work for less per hour if you know you job is relatively stable like you will have consistent paid work. vs. if your a 1090 employee where you charge 3x as much per hour for your work because you know there could be weeks or months you may not get paid for, and if your quality isn't up to snuff you may not get paid for your work. Or if there is a job you don't like or have to work hours you don't want to you usually ask for more pay to do undesirable work. The same thing with companies and their customers. If the customers try to rip them off then the company will build in padding to prevent this.
Some big companies will take a 10% discount off the top if they pay on-time for your services as part of the contract (after they agree the rate) so what happens when it is time to re-contract the rate the client will add 20% to the price. While their other client who is more friendly may get a deal which is 10% less then the the first company at start because they have been good at paying on time.
Companies like to reward good customers. But unfortunately if the reward is public bad companies see it as being punished as bad customers.
The bible passage explains this well: Matthew 20:1-16 (You don't need to believe in the mythicism but take it as a philosophical example)
Re:It's a stupid practice... (Score:4, Interesting)
It's not technically illegal. As long as the consumer knows how much they are paying before the sale is final, that's all that matters. If you go into discounts retail shops you will see the price listed as the manufacturer printed them on the box. This is the list price (MSRV) and then somewhere there will be a sign saying "All X some percent off" or even "all X this price".
You can and do have price points in marketing and certain customers can and do get different points based on a number of things too. I have one vendor that gives me almost 50% off the lists price if I spend over $10,000 a month (they have steeper discounts but I never have hit higher then this for an average). The rest of the time, the price point set me at 35% below the price. Where it becomes deceptive is where it costs more then the advertised price or when the customer doesn't know the real price before ordering/paying.
I'm willing to bet that if you check your state's false advertising laws or deceptive business practices laws, there is some requirement for it to harm consumers or be potentially harmful to consumers before it can be enforced.
Re:Differential Pricing? (Score:3, Interesting)
bad companies see it as being punished as bad customers
So where's the problem ? If I'm fed up with a resource-hogging deadbeat, I let them know and they are free to hog someone else's time instead. They stick around because they have nowhere else to go, or they know the competition sucks...
If HP has a legitimate reason to charge a different price, I think they should man up and be perfectly frank about it, like saying "Shitty clients pay more, because they cost more to support".
Coddling those shitty clients only leads to more shitty clients draining your resources, often at the detriment of your awesome clients... unless you're in the business of cleaning shit up.
Re:Differential Pricing? (Score:3, Interesting)
they sell it to you for less than list price, and you're a happy customer who hopefully has repeat business based on your positive experience
However, the next time you *will* pay full price or at least closer to it.
Or worse, over full price. A friend of mine asked his regular Dell accountmanager for a quote. When the quote turned out to be over the expected amount, he checked the website, and lo and behold -- the website price was lower :-) Turns out they give you a very low first price, then sometimes try to errrr... make up for that :-)
Re:Differential Pricing? (Score:5, Interesting)
Actually actually, that's not how it works at all. I work for an enterprise software vendor, and the list price is where we start quoting from. If you buy ten seats, you get list price. Buy a hundred, we round it down to the closest round number. Buy thousands of seats, you get a big per-seat discount.
We do this because we make it up on volume, not to mention the services large installations require, the kudos associated with big-name references, and so on. We never inflate list prices in quotes. In fact, I believe that is a termination offence at my current employer.
That's not to say, of course, that some quotes don't get padded up before getting slimmed down again in front of the prospect's purchasing team, but we are talking about things like 24x7 support which can be negotiated down to 10x5, or using one pricing model when another might be more advantageous, but all of these are based on an unalterable price list.
hp stung by HD manufacturer (Score:4, Interesting)
I was working for Compaq during their merger and one thing that came to light during that time was that one of the HD suppliers was charging hp more (about $0.80 more if memory serves) for the same drives they sold Compaq. Not a lot for one device but in bulk it's huge. I heard there were some pretty heated "discussions" with the vendor shortly thereafter. This is why manufacturers do not like having their pricing known.
Re:Differential Pricing? (Score:3, Interesting)
Competing products? What are you talking about?
I was just mentioning that big companies do get better deals on pretty much everything.
Perhaps due to buying more (and therefore deserve it) or perhaps just because they can put pressure (and then it is questionable whether they deserve it or not).