Your bargaining power increases in direct proportion to your potential supplier's need for your business. However, if the supplier has a number of competitors - or is a new entrant to a particular market - you'll be in a much stronger position. Also, the supplier may already be offering good deals in a bid to increase its market share. Alternatively, a supplier may need your business to get rid of old stock or to fill spare production capacity.
Try to find out as much as you can about the state of its order book. If you're a small supplier's main customer, your leverage in negotiations may be considerable. But tread carefully - if you push too far you may erode its goodwill, which could damage the service you get. There's also the risk they could drop the product you require, or even go out of business. Try to identify the key staff in the supplier's business to negotiate with.
There's no point trying to squeeze concessions out of a junior member of staff who doesn't have the authority to grant them. Negotiating at the right time can be an important strategic tool. For example, a salesperson may need to meet a monthly sales quota. It's essential to plan your strategy in writing before beginning negotiations. This will help you set clear goals and work out where you will draw the line and walk away from the deal. Start by defining what your priorities are, such as low price, high specification goods or a specific delivery schedule.
Think about different offers the supplier could make and what you are willing to concede or compromise on. For example, you may decide that you'll only pay the full price in exchange for fast turnaround. Write down your negotiating strengths and how you might use them to get the concessions you require. Consider ways of defending the weaker parts of your argument and negating the supplier's main strengths. Once you've set out your strategy, it is also essential to get your negotiating team right.
Make sure it has skills in all the necessary areas.
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You'll need to ensure you match the seniority of the supplier's representatives. For example, you shouldn't send a junior account manager to bargain with their managing director. Make sure each member of the team is familiar with your negotiating strategy. The more confident they sound about what they want, the more likely they are to get it. Before you start negotiating, state the aspects of the deal you're happy with and the points you want to discuss.
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Ask the supplier to do the same. Make sure both sides are satisfied with what is being negotiated. Get the supplier to restate any discounts offered and payment terms. Keep these key bits of information to hand. Do not indicate that there are things you're prepared to concede or compromise on too early in the negotiations. Try to give the impression you're approaching the negotiations positively without revealing your position.
For important or large purchases suggest setting out the key points of the deal in writing. For example, for the purchase of company cars, these might state your requirements, such as the make, year, model, the interior specification and delivery times. You also need to be aware of common negotiating tactics. If the other party keeps referring to urgent deadlines or a person they need to confer with, remember they may be using pressure tactics. Use such tactics yourself with caution. Don't allow pressure to force you into agreeing to a point you're not happy with. Ask for a break if you need one.
Each time you agree to a point, clarify that you've understood it correctly and write it down. In some trades, suppliers set artificially high prices that are then permanently discounted.
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If this scenario applies to your business then ensure that any concessions the supplier gives are real -negotiate discounts that go beyond the standard level. Never accept the first offer - make a low counter-offer in return. The other party is likely to come back with a revised figure. Always ask what else they can include at the given price. If the price is suspiciously low, ask yourself why. Are the goods of sufficiently high quality? Do they really offer value for money? What will after-sales service be like? You can also try to make the asking price look high by exposing any ongoing costs.
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Ask about repair costs, consumables and other expenses. If the current state of the supplier's market means prices are falling, point this out. If the price includes features you don't need, try to lower it by asking to remove those features from the deal. Use your bargaining power to get a good deal.
For example, if you're a big customer of the supplier, you could ask for bulk discounts. But remember that if you squeeze the price too low - perhaps by threatening to walk away from the negotiations - you may end up getting a poor deal.
The supplier may have to cut costs elsewhere - in an area such as customer service, which could prove costly to you in the long run. Even if you are a supplier's main customer and enjoy most of the bargaining power, forcing it to meet prices at which it could go out of business won't protect your reputation as a highly valued customer. Pick up those calls from recruiters. They know what people with your experience and expertise are worth, so use it to your advantage! You may not get a specific number, but even a range is helpful. It can be tempting to ask for something in the middle of the range, but instead you should ask for something toward the top.
Turns out, when employees use a more precise number in their initial negotiation request, they are more likely to get a final offer closer to what they were hoping for. Have you been at your job for a year? Have you been exceeding expectations rather than just meeting them? Turns out, timing is everything. Most people wait until performance review season to ask for a salary adjustment, but by that time, your boss has probably already decided what raises will be doled out to the team.
You want to demonstrate your value to your boss. Doing so raises testosterone, which influences confidence and reduces the stress hormone cortisol. Keep your head high and smile when you enter. Starting things off with a positive vibe is very important, no matter how small it is.
Win-win, win-lose & real life
Remember that brag sheet? Research from Columbia Business School shows that people—especially women—tend to do better when they negotiate for someone else, reports Stern. Negotiation may be scary, but you should always keep the conversation on a positive note, recommends Forbes. I believe my roles and responsibilities, and my contributions have risen. You should always be the first person to mention a number so that you, not your counterpart, controls the anchor. You should always ask for more than you actually want.
Psychology shows that your bargaining partner will feel like he or she is getting a better deal if he or she negotiates down from your original ask. In other words, never give a range: Negotiating for a new job?
Re-frame any metric your negotiation partner uses—like percentage differences—as market value, re-focusing the discussion on hard dollars. Research shows that rank-ordering is a powerful way to help your counterparts understand your interests without giving away too much information. You can then ask them to share their priorities, and look for opportunities for mutually beneficial tradeoffs: Chances are, your co-workers are dealing with similar situations.
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