Proven ways for creating a winning supplier negotiation strategy

8 tactics to spice up your supplier negotiation strategy

To maximize your chances of negotiating successfully, we’ve asked business owners who have already been ‘out in the field’ to share their experience and help you improve your supplier negotiation strategy.

Help them save time or cost

First on the supplier negotiation checklist is to ask them how your people can best deliver each order according to their production process or their ideal schedule, not yours. In other words, how can a little extra effort and mindfulness on your end, as a customer, help them save time, or cost, or inconvenience as a vendor on their end? 

Instead of using salt to berate a lower price, use sugar to work with each vendor, to earn a fair and equitable discount that helps you both. Be open to listening to each vendor, to learn how to engage each transaction so that your company can honestly earn a better, sustainable price going forward. 

Baron Christopher Hanson, Growth strategy and turnaround expert at RedBaronUSA

Do your research on the company

Have a specific alternative in mind when negotiating with a vendor. You should always do your research on the company and what they offer ahead of time, which will allow you to come prepared with a different solution when you actually meet with them.

This specific alternative will allow you to convey confidence and demonstrate that you have done serious consideration of the deal. Simply saying something along the lines of “can you do something better,” or “is there any way to bring down the price,” will not lead to a successful negotiation, and the vendor might perceive it as disrespectful.

Brian Donovan, CEO at Timeshatter

Don’t accept the first offer

When dealing with a vendor, the principles are the same as they are when dealing with any other business, and the most basic rule is to never accept the other party’s first offer. Instead, make a counteroffer or request that they contact you with a better price. 

You can justify this by pointing to the quantity of business you’ll be giving them, the fact that you desire a long-term relationship with them, or the fact that the price covers services or features you won’t use.

Brian Dean, Founder of Exploding Topics

Do price research and sell to the vendor

To get better pricing from a vendor, you need to implement two things in your supplier negotiation strategy: price research and sell to the vendor.

Price research will require you to, first, find out what the vendor’s wholesale cost is. You will need to consider things like packaging and transportation. Then, you should get quotations from multiple vendors. This type of market research will help you compare different options and ask for profitable pricing.

Selling to the vendor means you showcase your operations and profitability to the vendor. Vendors want to deal with businesses that can help them sell their products. Sell your sales team, and demonstrate how dealing with you will help the vendor meet their goals.

Nathan Hughes, Digital Marketing and SEO Manager at Diggity Marketing

Build a strong foundation relationship

Dealing with a vendor as a customer won’t get you any special deals even after hours of negotiating. But here’s a tip that will help you squeeze out the juiciest deals the vendor can offer.

When you have in mind that you will need to negotiate a price, don’t start by saying you want a negotiated deal. Start by building a foundation of understanding and business. However formal, develop a common ground.

Talk to them about business and market scenarios. Form a strong communication space that makes them trust you and even rely on you. This will form a bond and the vendor might give out a good negotiated price on your request.

Andrea Boyd, Community Director at Tailored Space

Be clear and concise about your demands

The vendors need a customer who will value their products and give a good price for the same. While negotiating costs it is always better to keep information handy about the basic market costs of the product as well as of the raw materials.

Once the buyer is aware of the price of the raw materials, they are able to gather the cost which the product is worth. The vendor might increase his margin of profit while negotiating.

Having a clear idea of the cost of the raw materials, one can gauge the market price and thus get a better understanding of what to expect while placing a price at the table.

While negotiating it is always better to ask about the price for a larger quantity of products which are available. Eventually, you can get to the exact details of the quantity when the other smaller details are finalized.

Hitesh Patel, Founder of RRPJewellers

Listen very effectively

The most important thing I do in my supplier negotiation strategy is to listen very effectively in order to better understand what the vendor really wants but isn’t willing to say outright.

From there I try to look at the other levers I can pull to get them there. In many cases, they are willing to trade margin for recurring revenue, better cash flow, or cross-marketing opportunities.

Aaron Alpeter, Principal and Founder of Izba

Be Nice

According to a study, the outcome of a negotiation may be predicted in the first five minutes. Always start out on a friendly note and try if you can establish some common ground. I’ve done a hundred of these, and it works out every time. Besides, it doesn’t cost you anything to be courteous and polite.

Work with them to find an acceptable compromise. Always put your best foot forward at the beginning of the engagement and see what will happen. Of course, you don’t want to be a softie for too long, but it’s much easier to increase the heat later than to lower it. Remember to be gentle with the relationship yet firm with the substance.

Brian Dordevic, Director of Strategic Planning at Alpha Efficiency

Conclusion

Having one supplier negotiation strategy that will work with every vendor is not possible, but that’s why we’ve listed 8 tactics from different business owners. Remember you will negotiate with a different person every time, therefore, having multiple tactics in mind can help you adapt quickly and negotiate successfully.