Tips For Negotiating With A Sole Source
PurchTips edition #218
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.
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 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.
By Charles Dominick, SPSM, SPSM2, SPSM3
Other Editions of PurchTips:
|« 217 T & E Management: Procurement's Domain?||219 Using Collaboration In Negotation: 3 Steps »|