More and more customer purchase agreements include Most-Favored Customer (MFC) clauses. The customer’s goal here is to ensure that they get the very best price—as low as, or lower than, you offer to any other customer under any circumstances.
These MFC clauses are typically accompanied by additional clauses that give the customer the right to look at your costs in detail, including receipts for material purchases and labor costs.
Unfortunately, the customers who insist upon these clauses are usually the large, must-have customers that can make or break your business (because you wouldn’t agree to the MFC clause otherwise, right?). You have to find a way to give them what they want while also protecting your interests.
You might be tempted to push back on the MFC clause and refuse to include it, but I think there’s a better way to handle the situation:
- Let them know that you define “equipment” as hardware only
- Let them know that you define “products” as hardware plus the benefits and results the customer receives, which include:
- Performance specifications (what the product is intended to do right away)
- Payment terms
- Delivery timing
- Field support
- Problem solving
- Performance improvement (what the product could do in the future)
- Let them know that the product they’re buying from you is unlike any other product you sell to other customers. Therefore, there is no real basis of comparison.
- Let them know you’ll agree to their clause as it relates to products. In other words, you agree that you won’t sell the same product—including all of the associated benefits and results, as explained above—to any other customer for less money.
- If the customer insists on auditing your costs, tell them you agree, but that you won’t be able to share any confidential information regarding other customers—such as costs, specs, delivery, terms, hardware, or anything else. This assures the customer that you’ll protect their confidential information as well.
That should do it.