Definitely don't begin by bellowing down the phone; you won't make 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. After all, they're running a business, too.
Having a few negotiation tricks up your sleeve will help you get the most from your suppliers without burning bridges.
1. Get strategic
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 you're 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.
2. Shop around
Don't just pick the first company that appears on Google. Select at least three suppliers who seem promising and ask for an initial quote to get a feel for the different deals and prices.
Once you start negotiating in earnest, you can reference that you're getting quotes from other suppliers and play them off each other to get a more competitive price.
3. 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 is 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 keen 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 experience. If you don't know anyone, 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) makes it less likely the supplier will take you for ride.
4. Talk to the right person
There's nothing worse than wasting all your negotiation prowess on someone who can't sign the deal. Make sure you 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.
5. Own the negotiating table
Now for the negotiations.
Rule number one: never accept the first offer. Make a counter offer so the supplier has to 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 tactic is the supplier saying 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 they offer seems suspiciously low, check the deal. 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 or 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
Though getting the best possible deal in the short-term is important, barter too far and you'll create a toxic reputation for your company. Negotiating is not all about the immediate wins; it's about building a relationship with the supplier.
While you might not get such a great deal up front, laying the foundations for a long-term partnership 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.
[This is an older blog post that we've updated in 2018]
