Many procurement teams that have reached out to us say they are having conflicting objectives at the moment. And not surprisingly, supply chain continuity is often the key issue. They say be it their Sales, BD or KAM teams – they are all reducing costs to the absolute minimum when negotiating with suppliers. And their biggest concern? The fear of defending price. Or more so, lacking the know-how to be able to defend price successfully to secure an account. Consider these 4 Ways to Defend Price in a Negotiation to secure your next supplier and get you ahead of your competition.
1. KNOW YOUR PRICE PARAMETERS
What many people say is their biggest problem when negotiating is that there is always the obstacle of the price that needs to be dealt with. Whether a simple or complex negotiation, to be able to defend price successfully you must first establish your value. And it is significantly easier to create value when you know the hard lines that form your price parameters. That is, if you know the edges you don’t intend to cross, you can be more flexible and creative with your offers. Consider:
How: High/low can you go? Long can you take?
What: Should you hold in reserve? Is reasonable in this situation?
When: Should you walk away?
Imagine you are a mountain climber. You should know how high the mountain is. That is, the point at which most climbers consider success. And know where beginners tend to drop out. By doing so, you can more easily plot your route and determine needed supplies. You can feel satisfied with your performance. That is because you can measure your success in line with the conditions that arose on your trip. Including, the weather, team experience, hazards, and so forth. You can determine whether to stay, climb, or go back. And all because you have a good idea of what is reasonable for the existing conditions. A good negotiator prepares first.
2. PROPER PREPARATION PREVENTS POOR PERFORMANCE
Just like climbing a mountain, prepare for your negotiation. Know your BATNA. Know Your Best Alternative To a Negotiated Agreement. That is, have a well-conceived plan that you are willing to execute if there is no agreement. Negotiating the right deal with your suppliers doesn’t necessarily mean getting what you want at the cheapest possible price. Rather, you may want to negotiate other factors such as delivery times, payment terms or the quality of the goods.
There’s a range of key considerations you need to bear in mind when setting objectives in a negotiation. These might include:
- Value for Money
- Payment Terms
- After-Sales Service
- Lifetime Costs of a Product/Service
3. CLEARLY DEFINE YOUR LIMITS TO DEFEND PRICE
Before you start to negotiate, draw up a list of the factors that are most important to you. Decide what you are – and are not – prepared to compromise on.
For example, if you’re ordering supplies in bulk you might want to find a supplier that will offer you a discount. Or if you’re investing in a complicated piece of computer software, you might want to make sure that training is provided as part of the deal.
Most negotiators would view a good deal as one that meets all their requirements. But there are many other factors to consider, such as whether you even want to do business with a particular supplier again.
But crucially – both sides should conclude a negotiation feeling comfortable and happy with the agreement. Negotiations can be unsuccessful if either side feels forced into a corner.
4. THINK OF TOMORROW
The key is to establish your preferred outcome. But remain realistic – if you’re not prepared to compromise, the negotiations won’t get far. You should also consider what offer the supplier is likely to make and how you’ll respond. Remember that if you want to do more business with the supplier in the future, you should aim to strike a deal that both parties are happy with. The HBB Supplier Negotiation Solution sets out how to negotiate a deal, including setting your objectives, understanding your supplier’s position, and using the right tactics. All with the goal of setting up a strong playing field for the next negotiation!
HBB Supplier Negotiation Solution Workshop
- Setting Objectives When Negotiating with Suppliers
- Understand Your Supplier
- Know Your Supplier
- Know Your Competition
- Establish Your Value Proposition
- Developing A Negotiating Strategy
- Negotiation Objectives
- Negotiating on Price
- Concession Trading
- Objection Handling
- The Law of Reciprocity in a Negotiation
- When to Walk Away
- When and How to Close a Negotiation
- Next Steps
All your training is tailored to your team and can be delivered virtually or F2F Onsite.
Gather your team and we will take care of the rest – learning and laughs included.
or call 1300 833 574 for a confidential chat.
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