After 25+ years working in labs and in sales and marketing, I’ve learned that life scientists are truly at a disadvantage entering into negotiations to purchase tools, whether it’s a refrigerator or a $10M sequencer. How much do you know about the companies you deal with? Do you do homework and research their inner workings? They certainly do research on you as a potential customer. They know about your grants, your network, who you publish with, and more.
Here’s one example of why you should pay attention to companies and especially their financial reports if they’re public. Illumina just released their 2021 financials to their shareholders. GenomeWeb published a nice summary.
All of Illumina’s sequencing instrument sales increased in 2021 compared to 2020. They shipped 384 NovaSeq units. Each one of those instruments lists for up to $950,000. When was the last time you negotiated the price on something that expensive? You don’t do it very often, it’s either a house or a very expensive car. Life scientists are poor negotiators because they don’t do their homework. You might call your friend at another institution and ask how much they paid for an instrument, but that information is only good if they are a good negotiator.
The other piece of information that Illumina released is that in 2021, the average pull-through of consumables per instrument was greater than $1.3 million. So, when you’re negotiating with the sales rep and sales manager, if you say you’re going to do greater than $1.3 million per year in sequencing consumables that will most likely get you a better deal on the price of the instrument. The company isn’t interested so much in your one time purchase of an instrument as they are in the lifetime value of you as a customer. Sure, you might spend close to $1 million on their instrument, but you might spend $10 million during the course of that instrument’s lifetime.
The other thing to know about consumables versus instruments is that their sale margins, i.e. the amount of profit they make over what it costs them to make it, is greater for consumables than for instruments in most cases. More consumables over the lifetime means more profit over more years.
This is only one example of what you should learn about your tool vendors. More to come. Please send requests of topics as my goal is to make you better educated consumers.