Tips For Negotiating With A Sole Source
PurchTips - Edition # 218 November 30, 2010
By Charles Dominick, SPSM
Do You Dread Negotiating With A Sole Source?
Buyers often dread sole source situations because they think they don't have leverage in the negotiation. But that doesn't have to be the case. Here are some strategies for negotiating more effectively in sole source scenarios:
- Find out what motivates the vendor and make it win-win. Every vendor has underlying motivations for closing a deal. For example, it may be their end of quarter; they may have a stated goal to grow recurring revenue from license agreements or maintenance; the sales person may need the deal to achieve their quota. If you can find out what makes it attractive for a sales rep to close the deal - and the timing of those motivators - you can leverage that and trade for concessions.
- Look for small "value adds" to enhance the deal. Once vendors know they are getting a deal in a sole source scenario, they are less likely to negotiate on pure price. But they often will add small things to the deal, which can be of real, tangible value to you. Your requests might include complimentary training hours, extended warranty periods, and extra services. You'll be surprised how often vendors will add these to the deal at no cost.
- Create tiered risk/rewards scenarios for Service Level Agreements. Vendors often will agree to service and performance levels - and put some skin in the game on the risk side - if they stand to be rewarded with more revenue for exceeding performance expectations. You can create a motivation for the vendor to perform well, and this is a "win" for you.
- Agree on an objective price adjustment method for the future. Sole source situations can lead to repeated, futile negotiations and unreasonable inflation year after year. Strive to agree in writing that any future price changes will be based on the changes in independent indices or pricing data published by industry organizations or associations. This prevents you from being "beaten up" by the vendor every year.
Sole source negotiations can be challenging, no doubt. But these tips can help you achieve a better deal.
(keep reading for a FREE Offer)
Spotlight On Professional Development Opportunities
Are you tired of not getting enough opportunities, respect, and money out of your purchasing career? Well, guess what? Nothing will change unless you take action towards becoming a world-class purchasing professional.
You see, today's employers refuse to reward employees for yesterday's skills. They demand that purchasing professionals like you use the most modern skills and achieve unprecedented results. They want you to save more money, achieve better operational performance, and reduce risk.
Earning your SPSM® Certification by completing the Senior Professional in Supply Management® Program is the action to take if you want to bring the most modern purchasing practices into your organization and achieve your career potential. Learn how to earn your SPSM® Certification (and perhaps get an iPod) at:
The Latest Purchasing News
- Are you struggling to develop a plan for improving your team's performance? If so, visit: www.NextLevelPurchasing.com/benchmark
- Considering a career move? Browse jobs preferring candidates with the SPSM® Certification at: www.NextLevelPurchasing.com/jobs
Are you frustrated with your inability to get procurement information that you can actually use to support your cost savings strategy? Then be sure to attend the FREE webcast "Navigate Your Way From Information To Savings In 5 Steps" offered by Next Level Purchasing and Zycus. This FREE webcast is scheduled for December 9, 2010 at 11:30AM!
"Navigate Your Way From Information To Savings In 5 Steps,"
follow the instructions at
Copyright 2010. This article is the property of Next Level Purchasing and may not be copied or republished in any form without the express written consent of Next Level Purchasing. Click here to request republishing permission.