7 Steps For Negotiating Optional Procurements
PurchTips edition #311
By Charles Dominick, SPSM, SPSM2, SPSM3
Do You Follow These Negotiation Steps?
For long-term, strategic relationships with suppliers, win-win negotiation is the preferred approach. However, a different approach is appropriate when your procurement meets these criteria:
- The product or service is unique yet optional for your organization and only valued if it produces a return on investment;
- The supplier is eager to sell the product or service, even at a discount; and
- Pricing won't affect product or service quality
For this type of procurement, here's a seven-step process that can get you the best deal when executed well:
- Determine the maximum your organization is willing to pay for the product or service to make it "worth it." Don't disclose to your supplier what this price is unless/until you reach Step 6.
- Request pricing from the supplier.
- Advise the supplier that its pricing is too high and ask it to offer its lowest price.
- Make an ambitious counter-offer. By ambitious, I mean very low relative to the supplier's last price. Your goal here is to make the supplier say something like "No, we can't go that low" without offending the supplier so much that it will refuse to ever do business with your organization. If your supplier says "yes," you are done negotiating and don't need to go to anynext steps. But it also means that there may have been a lower price to be had.
- Offer to "split the difference." In response to Step 4, your supplier will likely either make a counter-offer or restate its most recent offer. Assuming that the amount is less than or equal to the maximum your organization is willing to pay, offer to "split the difference" with the supplier and pay an amount that is exactly between your ambitious counter-offer and the supplier's latest price. If the supplier agrees, ignore the next steps - your negotiation is over.
Read Steps 6 & 7 on my blog at http://tinyurl.com/mavktqw
Do You Want a More Rewarding Procurement Career?
Are you tired of not getting enough opportunities, respect, and money out of your procurement career? Well, guess what? Nothing will change unless you take action towards becoming a world-class procurement professional.
Earning your SPSM® Certification is the action to take if you want to bring the most modern procurement practices into your organization and achieve your career potential. Download the SPSM® Certification Guide today to learn how to get started on your journey to a more rewarding procurement career!
Need Better Performance From Your Procurement Team?
Are you a procurement leader whose team isn't achieving the results you know are possible? Maybe it's not enough cost savings. Or frustrating performance from the supply base. Or dissatisfied internal customers.
You need a performance improvement plan that's easy to implement and quick to produce results. The NLPA can help.
Download our whitepaper "The Procurement Leader's Guide To A More Successful Team." You'll learn the 7 steps for transforming your staff into a results-producing, world-class procurement team.
Are You Getting The Most Out of Your NLPA Membership?
Members of the NLPA get more than just articles like this by email. As a member, you also get access to:
- The Procurement Training & Certification Starter Kit
- The latest Purchasing & Supply Management Salaries Report
- Leading-Edge Supply Management™ magazine
- Members-only webinars 10x per year
- And more!
If you haven't been taking advantage of these benefits, why not log in and start now?
Copyright 2014. 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.