One of the most valued skills in vendor management is negotiation. Careers can be made through artful negotiating if it gets your company the deals it needs in order to grow and be successful. For some people, it comes naturally. For others...not so much. But that's okay. Becoming a strong negotiator isn't determined by your DNA. With these tips and some practice, you'll be able to negotiate with any supplier with the confidence needed to close the deal.
10 Tips to Negotiate Better Deals With Your Vendors & Suppliers
1. Do Your Research
Knowledge is power, and the last thing you want to be in any negotiation is powerless. It's essential that you have a full understanding of the topic you're going to discuss with your supplier prior to the negotiation.
For example, if you're trying to renegotiate terms of an agreement with a supplier, you need to know as much about those their industry as possible. That includes what it takes to provide the service, who the vendor's competitors are and how they differ, and any other information relevant to their company.
This shows the supplier that you know there are alternatives, which gives you more leverage in the negotiation. Without this leverage, the supplier gains power and you could end up having to make larger concessions than anticipated.
2. Control the Logistics
You should dictate when, where, and how the negotiation will take place. By being too accommodating, you lose control and any perceived power you have over the supplier. And, according to this study, the more power you have the more likely you are to get a favorable deal in the negotiation.
The deciding factor for controlling the logistics is the medium through which you want the negotiation to take place. Will it be done by phone? Face-to-face? Email? Each of these are acceptable ways to conduct a negotiation.
However, according to this research, gender plays an interesting role here. Women tend to do better at face-to-face negotiations, while men are better with email.
As the study shows, when we meet face-to-face, we're more likely to assume our traditional gender roles. Females exert more caring and communicative behaviors, while males become more aggressive and dominant.
When scheduling the negotiation, try for an early appointment as this will allow for ample time to discuss everything that needs to be covered.
During The Negotiation
3. Establish Rapport
Even if you've known the supplier with whom you're going to negotiate for a long time, it's important to set a positive tone right away. Start by disclosing something personal and unrelated to the negotiation. While it might seem counterproductive, it helps the other party see you in a more 'human' way and can prevent them from getting too aggressive.
4. Sell Your Value To Them
Have you used their product or service before? If so, how much? Can you offer more business for them?
When negotiating with suppliers, it's important to think of their needs, too. They are, after all, a business just like yours who wants to grow, sell more products, and maintain great relationships. Mention your track record of purchases with them so they know how much business to expect from you in the future.
5. Mention Competitors
In your research prior to the negotiation, you should have gained knowledge of their main competitors and what they can offer.
Let them know this.
Nobody likes to lose, and the sound of a competitor's name will make them more eager to work with you. Just be sure not to disclose any pricing information you've received, as it can give them more leverage in the negotiation.
6. Don't Accept the First Offer
This goes without saying, but it's worth repeating. If you accept the first offer, all that power you built up to this point is moot.
Instead, come back with a low counter offer. Once they respond with a revised figure, see if they can include anything else in the offer.
7. It's Not Only About Price
If the supplier won't budge on pricing, think of other ways to get more for your money. Faster shipping, a lower down payment, or a discount if your purchase product in bulk are always on the negotiation table even if standard pricing is not negotiable.
8. Take Your Time
Never rush through a negotiation. If you feel pressured by the supplier, let them know you will need more time to think about the offer. Remember, you control the process.
After The Negotiation
So, you've spent hours going back and forth on several key points in the agreement and you're both satisfied. Congratulations! You have a deal. What do you do now?
9. Send a Thank You Email
Do this as quickly as possible. Chances are the negotiation got a little heated at times, and you want to reinforce your admiration and desire to work with the supplier.
Use this email to summarize the terms discussed and to compliment the negotiating skills of the supplier. This study done by the Wharton School of Business explains that the supplier will be more satisfied with the deal, and will be more likely to negotiate with you again in the future.
10. Thoroughly Read Through Final Agreement
Before you sign the contract with the supplier, read through it carefully. While it's unlikely they will intentionally try to include terms not agreed upon, a simple human error is possible.
Negotiating is not an easy task. But if you work in supplier management, it's an essential skill needed for success and these tips will help. Keep in mind that you want to be somebody the supplier wants to do business with. Establishing a solid, lasting relationship with your supplier or vendor is good for your business and their's. It might also result in more incentives once they see your loyalty to their service.
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