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[G2] CO 6 Rules (Changing the Rules (You can change the Rules (But others…

- - - - Antitrust laws
        
        Which contracts are legal
        
        may lacks some perspective
        
        R&D cost
- - - - The Guaranteed Rebate
  - - - Allows you to charge your own customers low prices without threatening tour rival's customer base
      - Encourages customers to become loyal, even attract price shoppers
    - - In rewarding loyalty in cash rather than kind, doesn't raise your added value
      - Is ineffective on small-ticket items
    - - Healthy Imitation
        
        More Winners
- - - - The seller's perspective
        
        pros
        
        Makes you a tougher negotiator
        
        Reduces your customers' incentive to bargain
        
        cons
        
        Makes it harder for you to target one of your rival's customers
        
        Makes it easier for a rival to target one of your customers
      - The customer's percepctve
        
        pros
        
        Ensures that you're not at a cost disadvantage relative to rivals
        
        Allows you to benefit form any better deal subsequently offered to other customers
        
        cons
        
        When others have MFCs, it's harder for you to get a "special" deal
  - - - pros
        
        Takes the guesswork out of biding - you know what bid you have to beat
        
        Lets you decided whether to keep the customer
        
        Reduces the incentive for competitors to bid
      - cons
        
        Allows competitors to bid without having to deliver
- - - - PROS
        
        Reduces risk to your supplier, in return for which you can ask to pay less
        
        Reduces a rival's incentive to come after your customers by making retaliation a near certainty
      - CON
        
        Increase severity of price war if deterrence fails
      - Often see
        
        in agreements to purchase commodity inputs, electricity, even cable programming.
        
        face large fixed costs relative to variable costs
        
        the supplier to store the output
        
        buyer have enormous power to beat down price