Over at Next Level Purchasing, Charles recently published a good article on How Suppliers Defend Price In Negotiation. In summary, if the supplier thinks that you are not on your game, it will defend its price with a steaming pile of bull-crap.
Of the 7 examples that Charles gives for a common supplier response used when you attempt to start negotiations, my favourite has to be:
We are the only company that provides this product/service, so we don’t play pricing games – our price is our price.
First of all, unless you have it in your head that you have to have an iPad, there is no single source provider of any product or service. Pick a product. Any product. I guarantee there’s a dozen variations of it out there, somewhere. Maybe not all providers can meet your volume demands, and it’s probably the case that not all have the same quality level, but still, unless you’re insisting on a name-brand product, there are always multiple options.
Second, any supplier who wants to sell something bad enough will negotiate on price. Very few companies have the power to set a price in stone, and they are all selling branded products or services, like iPads, Wiis, or Playstations. Everything else is up for negotiation. And even if the price on the base product can’t move, maybe a value-added service can be thrown in at a deep discount.
The price is the price ONLY if you pay it. Given a choice between moving a line in the sand or being stuck with a mountain of inventory, which choice do you think a supplier is going to make?
Now, this isn’t to say that you should be requesting unreasonable price concessions, as everyone deserves a fair margin, but that you shouldn’t believe that the price is the price.
And if I was asked to choose a runner up, it would be:
“Is price the only criterion on which you are basing your decision?”
Of course not, but don’t let the supplier distract you. If you’ve done a proper cost model and determined that the supplier has built in a hefty margin of 20%, compared to the market average of 10%, unless you’re getting very valuable value-added services thrown in for free, you need to cut that margin in half to stay competitive.