Definitely don’t begin by bellowing down the phone; you won’t make yourself any friends.
Negotiation is not about ‘winning’ or scoring points against a supplier, but about trying to reach a mutually beneficial agreement and maintaining a good relationship with your suppliers.
Even so, having some negotiation tricks up your sleeve will help you get the most from your suppliers without burning your bridges.
Before you pick up the phone and start making inquiries, get your objectives down on paper.
What product or service are you looking to get? What business issue will it solve? Who in the company will benefit from it?
If you’re not the person who will directly benefit from the product your looking to buy, ask the person who it will affect – what are they looking for and what’s wrong with what they’ve got already?
Then establish your priorities. Low price? Long-term value? Specific or urgent delivery schedule? Good post-purchase services and training?
Noting everything down and thinking through it carefully will help to clarify exactly what it is you’re looking to get out of the negotiations.
Don’t just pick the first company that appears on Google, select at least three suppliers who seem promising and get some initial quotes to get a feel for the different deals and prices.
Once you start negotiating in earnest, you can make reference to the fact that you’re getting quotes from other suppliers and play them off each other to get a more competitive price.
Understand your suppliers
But before you get serious, you need to do some detective work and understand the suppliers you’ve chosen.
- Do they have a monopoly or are they new entrants to the market? If the supplier’s a strong incumbent in the market with few close rivals, they have the upper hand, as there’s not such a pressing need for your business. But if they’re a new player or have lots of competition, they’ll be more desperate for your business, putting you in a stronger bargaining position.
- Are you a long-time or large customer of theirs? If so, you may have the upper hand. They already know you’re a valuable customer who means business, so they don’t want to lose your custom. You don’t, however, want to abuse this relationship – it’ll quickly sour.
- What do their customers think? If you know someone who’s used the supplier before, ask them about their experiences with the company. If not, ask the supplier to provide you with the contact details of their some of their customers and see what they have to say. You might be able to reference them in your negotiations.
- What are the actual costs? Try to figure out how much the product they’re selling actually costs to make. This gives you a much better idea of the wiggle room you have when trying to drive down the price.
Knowing your stuff (or at least sounding like you do) will make you look like you’ve done your homework and you’ll be less likely to be taken for ride.
Talk to the right person
You also need to identify the right person to negotiate with.
While the new junior might seem easier to push around, they’re unlikely to have the authority to meet your demands. It doesn’t have to be the CEO, but find someone with some power and clout in the company and match them with someone of a similar level in your company. Don’t get your new hire negotiating with the supplier’s CEO. It won’t end well.
At the negotiating table
Now for the negotiations.
Rule number one: never accept the first offer. Offer a counter offer, making the supplier come back with a revised price.
But be sure you can provide good reasons for why you’re asking for a price reduction or a better deal.
It might be that the price includes features or services that you’re not planning on using, or you’re looking to start a long-term partnership with the supplier, requesting a better price now with the assurance that you’ll be spending more down the line.
You also need to be aware of negotiating no-nos and the common tactics the supplier might use to pressure you into settling.
- The advertised price may be set high on purpose so the supplier can offer a perfunctory ‘price drop’ in negotiations.
- The supplier might refer to an urgent deadline on their side or say that an offer is only available for a few more days.
- Another is the supplier saying that they’ll need to check with someone higher up and get back to you. If so, take their full name (if you haven’t got it already), their phone number and email address and tell them that you’ll ring them tomorrow for an answer.
- If the price offered seems suspiciously low, check the offer. Is the quality up to scratch? Is it really good value for money? What sort of post-purchase service is there?
- Never say ‘between’. If you say, ‘we’re looking to spend between £5K and £10K’, which price do you think the supplier’s going to run with?
- If you’re tired of negotiating and just want to close, be sure you don’t sound like it. The supplier will take advantage of it and get you to settle.
- Always, always, always remain polite. Be rude and refuse to compromise and you’ll get yourself blacklisted.
Most importantly, however, keep in mind your objectives and priorities and focus on meeting them to get the most from your supplier.
It’s not all negotiation tricks
However, while getting the best possible deal in the short-term is important, barter a bridge too far and you’ll create a toxic reputation for your company. Negotiating is not all about the immediate wins; ideally you want to build a relationship with a supplier so you both benefit in the long term.
While you might not get such a great deal up front, laying the foundations for a long-term partnership with your suppliers might mean perks further down the line, whether it’s a priority software upgrade or a discount.
Odd as it seems, goodwill goes a long way in negotiation.
Hat tip to Eric Chan for the photo