So this is a "how much information should I reveal when making a deal" type of question.
Obviously when one requires a service, one shops around to all of the different vendors that offer that service until they find the deal that will best fit their operation.
If a potential vendor asks what other options you're considering, it gives them a chance to compare themselves directly with their competition. You can also learn a little bit about how this company feels about its competition from the way this is handled.
Is there anything lost, or any downside to letting a potential vendor know which of its competitors you're considering?
This is an old thread, but it's still relevant since I found it via a search.
I agree that sharing some information can be a good tactic to encourage a bit of healthy competition; however, you should never share specifics. Most vendor proposals are considered the intellectual property of the vendor. Sharing prices and competitor names can land you in hot water should a vendor decide to pursue legal action. That said, there is nothing wrong with telling, for example, a Cisco vendor that you're considering Juniper from another unnamed vendor and that price is lower and the delivery time is faster. Again, nothing specific - just enough information to get them to sharpen their pencil a bit.
Some might strongly disagree with me here, but it can also be a good tactic to share your budget so long as you have a rough idea what you should expect to pay. For example, if you know a good deal is $50K, tell them your budget is $50K, or maybe a little less. NEVER disclose your budget if you don't know the market. Vendors will have no problem selling you $50K worth of merchandise for $80K if that's what you told them you'd be willing to spend.
The vendor is going to have a much better idea of what exactly your alternatives are, which will make it easier for them to underbid the competitor by only a very small amount, instead of having to guess what your best option might be and trying to beat that. It probably isn't in your best interest, especially if you were planning to bluff even a little.
Every market is a little different from others and you'll have to learn the ropes the hard way. Just remember the vendor already knows what you've yet to learn. But in general, I've found it best to keep a few cards close to the vest.
For me, I really hate spending time negotiating when I could use that same time to move an idea forward. I say let the vendor know who else you're considering (but not all the details of the other vendor's offer). One reason for this is that it will help the potential vendor better target his offering to you.
I would also ask the potential a very direct question: Why should I choose you over Brand X? Again, I wouldn't leak the details of Brand X's offer but I'd let the vendor know so he can tell you anything you might not yet know about Brand X which the potential vendor might already know.