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As consumers, we have been trained to pay the price marked on goods or services without question. If we feel the price is too high, we abandon the sale and look for cheaper options. But it could work better. You need to know some important things about the service or product you want to buy before you begin negotiations :. Of course, the initial price named by the seller may anchor you at a higher price, and this is where doing your homework can help. By knowing the competing prices, you may be able to significantly lower your anchor before negotiations start.
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After that, every counteroffer will be higher. The classic model of negotiation is that two parties offer different prices, eventually settling somewhere in the middle.
How to Negotiate Better Prices, Deals and Wages - USAA Community -
Lee rejects that because the middle is too high of a price. If you are going to make the first offer or name a price in a counteroffer, make it ridiculously low. Not only does it set the price anchor very low, but it puts the seller on the defensive. They instead focus on getting a price higher than what you offer, and not what they want. The end result is a much lower price than what is considered reasonable. This can be difficult advice to follow, as you may be afraid of being considered a jerk. Many sellers know that ridiculous offers are part of the negotiating process and are very unlikely to refuse to make the sale.
Furthermore, studies show that when faced with a ridiculous offer or counteroffer, a negotiator gains satisfaction from getting concessions from the other party. Do you want to be liked, or do you want to save a lot of money? You need to gauge what is important to the seller. Silence between two people can be uncomfortable, and you can use that to your advantage after someone names a price.
Instead of responding, look thoughtful without saying anything.
This makes the seller fill the silence, and often, he or she will try to justify the offer. Ask for a break if you need one. Each time you agree to a point, clarify that you've understood it correctly and write it down. In some trades, suppliers set artificially high prices that are then permanently discounted.
If this scenario applies to your business then ensure that any concessions the supplier gives are real -negotiate discounts that go beyond the standard level. Never accept the first offer - make a low counter-offer in return.
The other party is likely to come back with a revised figure. Always ask what else they can include at the given price. If the price is suspiciously low, ask yourself why. Are the goods of sufficiently high quality? Do they really offer value for money? What will after-sales service be like?
You can also try to make the asking price look high by exposing any ongoing costs. Ask about repair costs, consumables and other expenses. If the current state of the supplier's market means prices are falling, point this out. If the price includes features you don't need, try to lower it by asking to remove those features from the deal. Use your bargaining power to get a good deal. For example, if you're a big customer of the supplier, you could ask for bulk discounts. But remember that if you squeeze the price too low - perhaps by threatening to walk away from the negotiations - you may end up getting a poor deal.
The supplier may have to cut costs elsewhere - in an area such as customer service, which could prove costly to you in the long run. Even if you are a supplier's main customer and enjoy most of the bargaining power, forcing it to meet prices at which it could go out of business won't protect your reputation as a highly valued customer.
The supplier will soon look for other customers and is likely to feel resentful. Before signing a contract with any supplier it's essential to carry out due diligence to check it can fulfil the agreement. You should credit check potential suppliers to ensure they have the cash flow to deliver what you want, when you need it.
This is especially important if you're entering into a long-term contract. For example, if your supplier is the only available supplier of Customer Relationship Management CRM software you are installing, you need to be sure it isn't at risk of going out of business. The supplier will probably also run checks on you to ensure you have the means to pay for its goods or services.
It's also a good idea to get references for the supplier from other customers. The supplier should be happy to put you in touch with some of its previous clients. If not, ask yourself what he is trying to hide. However, remember that he's unlikely to put you in touch with a dissatisfied customer. Sometimes a manager in a business bids for contracts and then passes the account to someone else.
If this is likely to be the case, make sure you're happy with whoever is being assigned to do the work - and that you'll be able to deal with the manager if any problems arise. Once all the points have been negotiated and a deal has been agreed to it's best to get a written contract drawn up and signed by both parties. Although verbal contracts are acceptable and legally binding, they're very hard to rely on in court. Depending on who holds the bargaining power in the negotiations, the terms and conditions used may be your own, the supplier's or a mixture of the two.
Aim to get a contract that protects your interests and that shifts legal responsibility for any problems to the supplier. Notify the supplier in writing how you intend to use its supplies and ask for written confirmation that what it is selling you is suitable. It's a good idea to explicitly ask about any hidden problems and to keep a written record of all assurances given. Make sure that your contract covers the level of after-sales service you require. Build into the contract what will happen if there are any problems with the goods or services.
When negotiating with suppliers, make sure they know you are someone who will give them repeat business, over the long term. If you have a track record of past purchases, let them know how much business they can expect from you based on those purchases. For example, you can negotiate to reduce the amount of your down payment, for a discount when you purchase in bulk, for faster shipping without additional expense to you, or for improvements to the warranty, such as its length or comprehensiveness. In addition, if you request and are granted longer terms, you will improve your cash flow.
You can also ask for additional discounts when you pay your invoices early.
11 Effective Negotiation Strategies & Tactics to Score a Great Deal
In order to encourage competitive pricing, talk to at least three suppliers and let each of them know that you are getting other quotes. Explain to them that you will go with the supplier that offers you the most competitive bid. Suppliers are concerned about their accounts receivable just like any other business owner, so another way to secure bigger discounts is to offer large deposits on your orders.
If the supplier knows they will receive 50 to 60 percent from you up front, you will increase your bargaining power, and they may be more likely to deal on the prices. Instead, you can issue a counter offer or ask them to get back to you with a better price. Suppliers love business owners who order a lot of product from them, and oftentimes those people get deeper discounts and other perks from the suppliers.
But before you make the transition, call the supplier and talk to them about increased discounts in exchange for all of your business. Be sure to pay your bills on time, maintain open communications, and treat the relationship as a partnership, where both of you get what you need.