Price, price, price! Seems all Buyers are interested in is your price. “Is this your best price?” “Can you lower your price?” “I can’t live with that price.” If you had a dollar for every time you’ve heard the Buyer use the word PRICE you wouldn’t be reading this Blog. You’d be relaxing on a sunny beach somewhere in the tropics, sipping a fancy drink with an umbrella in it.
But unfortunately, price is a reality that demands attention, no matter what side of the desk you’re sitting on. So if it has been determined that your quotation is technically acceptable, you will most likely enter the price negotiation phase of the quoting process. And depending on what company or Buyer you’re dealing with, negotiating can be anything from easy to complex, and from fair to bias. Some clients use the on-line bidding process to negotiate. Others use traditional face-to-face negotiating. It’s up to you to find out what kind of negotiating will be taking place in order to prepare for it.
So what’s the best way to negotiate price with Purchasing? Not an easy question to answer. In my Blog dated May 26, 2012, called “Gaining and Maintaining a Buyer’s Trust”, I discussed how important it is to build trust in a business relationship. And when it comes to negotiating, two things are extremely important: (1) trust, and (2) knowing your absolute bottom line. With that in mind, negotiating really comes down to two rhetorical questions:
1. How do you convince the Buyer that your final price IS the best price you can offer?
2. How do convince YOURSELF that your final price is the best price you can offer?
Let’s cover the topics of trust a bit further from The Buyer’s Desk. Developing trust early in the business relationship is essential, especially when it comes to negotiating. When you’re buying a retail product like a television, appliance or automobile, you’ll sometimes ask your friends, “Where do you shop” or “Who do you buy from?” What we’re really asking is, “Who do you trust?”
So right now, think of an individual you trust . . . an individual who, if you were buying something from them and they told you, “That’s the best price I can give you”, you would believe them without a doubt. It could be your spouse, a family member, a good friend or even another sales professional. Now that you have that person in mind, what is it about that person that makes you trust them? What is it about your relationship with that individual that compels you to believe he or she is telling you the truth? Have you known him for a long time? Has she ever lied to you? Do others view him an honest person? Is there something in her character or demeanor that ensures you she’s an honest person?
Arguably, the ultimate relationship is marriage. And what is the relationship of marriage based on? Continuous trust, uninterrupted commitment, constant assurance, unbroken faith. Of course, a business relationship is emotionally and physically far removed from marriage, but it still entails some of the same commitments as marriage: Continuous trust, uninterrupted commitment, constant assurance, unbroken faith. You’re looking out for the client’s best interest. You’re on the client’s side. You’re solving the client’s problems. You’re interested in the client’s needs. You’re creating an environment of preferred communication and support.
Now that you’ve maintained trust in the business relationship with the Buyer, let’s cover the two rhetorical questions stated earlier. 1. How do you convince the Buyer that your final price IS the best price you can offer? That’s where the element of TRUST plays into the negotiating process. What is it about YOU that would make people trust you if you said, “That’s the best price I can give you.”? Maybe ask some of your friends and family members these questions: What is it about you that compels them to believe you are telling the truth? Have they known you for a long time? Have you ever steered them down the primrose path only to later throw them in the thorns? Is there something in your own character and demeanor that tells others, “I can trust this person”?
Now let’s take on the second rhetorical question: How do convince YOURSELF that your final price is the best price you can offer? Have you done your homework? What have you done to ensure it’s the best price? How closely have you worked with your estimating department? How well do you understand the materials market? Have you reached your absolute bottom line? Do you even know what your absolute bottom line is? Is it based on cost plus markup? Have you questioned every aspect of your price? Have you educated the Buyer and informed him of how you have ensured you are offering the best possible price? Do you know what your competitors are charging for the same product or service? How have you negotiated with your sub-suppliers? So many times I have Sales Professionals say to me, “Well, let me go back to my sub-suppliers and see if I can negotiate a better deal with them.” Really? Why didn’t you do that the first time?
Again, from The Buyer’s Desk the two key things in negotiating best price is trust to convince me you offered the best price, and homework to convince yourself you’ve offered the best price. In a future Blog we’ll cover the difference between price vs. value and how to sell to the Buyer using both.