Negotiation

Negotiating with suppliers is important to get the right deal for the goods/ services. Negotiations can be done to get lowest possible price or best deals on other factors like delivery times, payments terms, after-sales service and quality.

Tips for good negotiation

 

Setting out Important Factors for Purchase

Before initiating negotiations, it is important to list out all the factors that are most important for purchasing the product, i.e. those factors that should not be compromised. This would help in identifying areas which can and cannot be compromised during negotiations.

For instance, if you are purchasing a complex software/ product that require adequate training and after sales support, one can ask for same to be included in the deal during negotiations.

Similarly, if the product is required in a very short time, you may not be able to negotiate substantially on prices.


 

Research on Vendor

Doing basic research on the selected vendor can help in getting better deals through intelligent negotiations.

It would be useful to gain insights about vendor with respect to:

  • Number of competitors
  • Experience in business
  • Type and number of clients
  • Discounts offered to clients


If the vendor has several competitors, you can do a better bargain on prices. Similarly, if the vendor is relatively new to the business, you can negotiate lower prices from him as compared to that offered by his competitors who are in the business for a longer time period.  

It is useful to gauge information on the type of clients that the vendor has and if possible, information on purchase prices offered by the vendor to other clients. If you are a major client for the vendor, you may be able to negotiate better on prices. Information on prices offered to other clients would help in getting even better terms.

 




Develop Negotiation Strategy

After listing down most important factors for purchase of goods/ services and conducting due research on the vendor, you can plan your negotiating strategy accordingly.

Assess you strengths and weaknesses: You can highlight your negotiating strengths (such as being an important client for the vendor, possibility of long-term relationship, etc) and think of defending weaknesses, if any.

Plan scenarios: It would be useful to work out rough ideas about various scenarios that the vendor can come up with. For each scenario, you can assess your willingness to agree on those terms. You may also work out the best and the worst scenarios for your firm before conducting final negotiations.

 



Apply Negotiation Tactics

Following tips can be useful while conducting negotiations:
 

  • All members of the negotiating team must be aware of the negotiating strategy; one should not contradict the other during negotiations
  • Do not reveal your position immediately, if you are willing to do some compromises
  • Do not get pressurised into accepting all terms and conditions laid by the vendor; take time to think over agreed points
  • Do not accept the first offer, rather make a low counter offer
  • Use your bargaining power to get better price deal
  • If price is very low, re-examine vendor’s capability with respect to quality, delivery and after-sales service
  • If the product includes additional features not desired by you, ask for removal of same in exchange for lower prices
  • Try to argue for lower prices citing additional costs that are likely to be incurred such as transportation, taxation, repairs, etc.

 

Source: The article has been adapted from ‘Grow your business’ articles on Businesslink.gov.uk