7 Steps For Negotiating Optional Procurements

PurchTips edition #311

 

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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:

  1. 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.
  2. Request pricing from the supplier.
  3. Advise the supplier that its pricing is too high and ask it to offer its lowest price.
  4. 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.
  5. 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

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