Vendor Negotiations: Timing Is Everything

PurchTips edition #93

 

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By Charles Dominick, SPSM, SPSM2, SPSM3

Picture of Charles Dominick, SPSM, SPSM2, SPSM3

Can Timing Impact The Deal You Get?

"Timing is everything" is a phrase used in topics from stock market investing to comedy to the Steelers' gadget play calling in the Super Bowl. It very appropriately applies to vendor negotiations as well.

In vendor negotiations, it's important to know not just what to say, but when to say it. Negotiating at the wrong time can harm a vendor relationship and even cost your organization money. Here are a few points in time and tips on whether or not to negotiate at those points.

Before The Proposal – Imagine yourself in a situation where you are discussing a product or service with a potential vendor prior to getting that vendor's proposal. If pricing comes up, you may be compelled to ask for big discounts. Don't! Why not? Well, if the vendor senses that you are going to push hard for cost cuts, how will he craft the proposal? That's right – he'll inflate the price so that you feel like you "won" the negotiation after wringing a price reduction. In reality, the vendor may have padded the price so much that your final price is more than you would have paid otherwise.

Immediately After The Agreement – After concluding vendor negotiations, some purchasers ask for something else due to a forgotten issue or wanting to win bigger. Negotiating after a "handshake" can hurt a vendor relationship. A vendor who negotiates in good faith only to have an agreement re-opened immediately will likely be on guard against you. This vendor may not treat you like a partner and may even behave opportunistically in the future. There are plenty of good vendor negotiation techniques to use prior to the handshake. You don't need to resort to bad faith to get the results you want.

Prior To Contract Expiration – The months prior to a contract expiration represent an excellent negotiation time. An incumbent vendor doesn't want to lose the business he has worked so hard to secure. Extending the contract would save time and money in a vendor's sales process. You can often negotiate excellent concessions if you dangle the prospect of extending the contract without going out to bid. But the key is timing. Doing this well in advance of the expiration creates the perception that you have options. And vendors are often happy to cut good deals to become your only option.

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