IBM Just Offered Me a TIP Letter...Now What?Joe Hertvik: Tech Machinist

If you’re working on a new Power system purchase and the IBM rep and business partner feel you’re close to purchasing, IBM may offer you a TIP letter to help you make a decision now instead of later.

A TIP letter is an IBM offer that if you buy a new or upgraded machine by a certain date, IBM will give you x amount of credit in IBM or business partner services on future purchases, as long as the specified purchase is completed and shipped by a certain date. A TIP can be used for new IBM hardware or software or to buy services from an authorized IBM business partner. It can’t be used to pay taxes and the used TIP amount will be paid out as a check.

TIPS also have an expiration date, usually within a year.

For example, if you’re buying a new Power 720 machine, IBM may offer you $5,000 USD in future services if you buy by the end of the month. TIPs are offered in varying amounts, and I’ve seen credits up to $50,000 USD for larger Power systems.

A tip is an incentive to buy, but unfortunately it doesn’t help reduce the cost of your currrent big-ticket Power system sale. It’s like getting a gift card when you buy a car or a washing machine. It may be helpful later, but you can’t use it now and you may even forget about it when the time comes. And in my experience, the amount is about what you’d expect for an incentive: 5% or less.

I see the TIP letters as an appeal to your emotions, to give you a little something extra to close the sale. Sure it’s money on the table, of sorts. But it’s a future purchase, not what you’re buying today.Here’s my best advice for dealing with an offered TIP during the sales process:

Ignore it.

I’d focus instead on bringing the price down, or getting your own specific concessions. A TIP can be a distraction that diverts you from seeing any flaws in the deal. It’s an attempt to get you to close without asking any more questions or haggling any more on price or features.

If you’re ready to close, great. But if you’re not ready or need a little more time to negotiate, that $5K trinket can actually cost you more in deferred negotiation and can be a negative when buying. Think of a TIP as an after-sale drink that you may or may not get. Don’t use it as a motivator to close.

If you do get a TIP after a sale, here’s a couple of ways to try to leverage it before it expires.

Use it for installation services on your new machine. See if your business partner will accept it to defray the cost of installation.
Use it to buy related consumable materials for your new machine. Can you find an IBM business partner who will let you use it to buy tapes, printer ribbons, or other consumables?
Use it to buy a piece of hardware that’s related to your Power systems sale. Maybe you can use it for additional tape drives for your tape library.
Talk to your 3rd party software vendors, and see if any of them will use the TIP for software transfer fees or yearly maintenance. I haven’t tried this myself but it’s worth a shot.

As I said, I wouldn’t go crazy and close a deal based on a TIP. But if you have one, see if you can get creative and use it for something you really need. A TIP isn’t worth doggedly pursuing but make sure you use it if you get it.