How To Bargain When You're Clueless
Do You Bargain With Vendors Without Preparing Properly?
PurchTips Edition #381
By Charles Dominick, SPSM, SPSM2, SPSM3
In a perfect world, every procurement professional would be given the time and resources to properly prepare for bargaining with vendors. But, the world isn’t perfect, is it?
So, how do you bargain with vendors in circumstances when you haven’t done your homework – in other words, when you’re “clueless” as to what a great deal would be? Well, here are three tips to use after receiving a vendor’s initial price.
- Use the 10% Rule of Thumb. Not every vendor pads their pricing. Just like not every vendor puts out an initial price that is insanely inflated. So, if you can’t research what an appropriate price is before bargaining, making a counteroffer that is approximately 10% lower than the vendor’s initial price is often appropriate. It is not too big of a discount so as to seem unreasonable. And it’s usually not too modest of a discount to underserve your organization.
- Make Your Counteroffer Conspicuously Specific. If your counteroffer requests an exact 10% discount or is an “on the nose” monetary value (e.g., $200, $10,000, etc.), your counteroffer will make it seem like you’re bargaining just for the sake of bargaining. This will likely compel your vendor to refuse your counteroffer. Psychologically, you want your counteroffer to seem like it is based on careful and informed calculations. So, make a counteroffer like “Based on my research, I believe that a fair price is $10,091.43. Would you prefer to accept this price via a purchase order or a P-card?” If your counteroffer is expressed as a discount, make it a two-decimal place percentage, like 10.19%.
- Don’t Let Yourself Be Clueless. Giving tips for bargaining when you’re clueless might make it seem like it’s OK to be clueless. In most situations, it’s not! Sometimes, internal customers can exaggerate deadlines, robbing you of your ability to prepare for bargaining. I have had internal customers say things like “I said I needed it sooner because I didn’t want the procurement department to take too long to get my order placed.” So, diplomatically question internal customer deadlines to see if you can get the time needed to do to some of the things necessary to determine a fair price: issuing a request for proposal, researching prices paid by a sister company, creating a should cost model, etc.
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