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Negotiating Prices

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Organizations can lower costs and save money by instilling that all purchases should be negotiated and no purchase should be accepted at the sticker price.

Contents

[edit] Rule of thumb for purchases

  1. Make a counter offer
  2. Everything is negotiable
  3. Every employee should negotiate the best deal and value for the organization

[edit] Make a counter offer

Okay, let’s keep this as simple as we can. “Make a counter offer!” That’s it. You can go now. Class dismissed. The main lesson is over, all the rest is commentary. It’s important commentary, but next to “Make a counter offer!”? It all pales by comparison.

That’s a huge simplification of the negotiating process. There’s a lot going on before we ever get to this point, but if we’re not making at least one counter offer, then we’re not negotiating at any level worth speaking about. The result? A lot of what we’d like to achieve will be forever beyond our reach.

There’s an old observation, as true today as when it was first spoken, if your boss has never said no to your request for a raise, then you’re underpaid. The same is true when you’re buying a car, or a house. If the seller didn’t turn down at least one offer from you… then you paid too much.

[edit] North American purchasing habits

In North America, consumers tend to dicker only over two products; Cars and Houses. For practically everything else? We follow the sticker price. If we can’t afford that? Either immediately or via the wonder of credit (and compound interest rates), then we walk away. We don’t bargain… it’s not what we do, it’s almost beneath us.

Those of us born of parents from other societies, such as Europe, all have memories of being embarrassed when Granddad bargained everywhere. How much is this? How much if I pay cash rather than with a credit card? Granddad was perhaps ignorant of our modern ways, but he knew the basics of human nature. It costs the merchant money to accept a credit card, he’d rather have you pay in cash and is willing to pay you to do so. Granddad knew this… there is always wiggle room inherent in any sticker price.

Here’s a story about negotiation that contains two gems, one’s obvious, the other less so. |

New York milliner Mr John P. John, most famous for millinery for Vivien Leigh in Gone With the Wind, knew the value of what he brought to the negotiating table.

A client entered his store and asked him to design a hat for her. He created a work of art on her head with a ribbon he had handy. When asked his price, she was outraged at the $100 he requested.

Nonplussed, he took apart his creation and handed her the ribbon as a gift. Stating, "Madam, the materials are free."

The first lesson, the obvious one, is the issue of what exactly are we negotiating for? Time? Ability? Raw Materials?

The second one is more subtle. How is the seller setting the price? The honest answer is that it’s nearly always set by what the market will bear. Mr. John asked for $100, but without hesitation threw the creation away and ‘lost’ the $100. Would he have accepted some lesser price? Possibly… providing he was not also trying to protect something more important in the long run. The integrity of his price point. Unless we know what is important to each participant in the human dance of Negotiation Tango, it is difficult, almost impossible to arrive at that most elusive of destinations, the state of win/win.

[edit] Everything is negotiable

In addition to the original bit of advice, “Make a counter offer!”, there’s another basic rule about negotiating. Everything, without exception, is negotiable. This does not mean that we’re always going to be able to change the terms of the transaction, but it means that we can always… make a counter offer.

If you’d like to try your hand at this, I’ll present you with a little challenge. Consider it a warm up exercise. Find out where the majority of your office staff buy their coffee in the morning as they head into work. Have a chat with the store manager and see if you can arrange a 10% discount for all of your staff. You could do this in at least two different ways. You could make the arrangement that if they show their corporate identification then they get the discount, or perhaps a buy 9 get one free arrangement. (A little test: Which of these does the merchant prefer? Which does the staff? Which do you propose first?)

If you have any success with this, then could it work with every supplier? Office suppliers? Printing Services? Post Office? Local parking? Cinema? Theatre? Newspapers?

Here’s why everything is negotiable. Suppliers need customers. They are motivated to both retain customers and add new customers. They are willing to spend money, in the form of discounts, to achieve both those goals.

[edit] Conclusion

Negotiation isn’t something we should leave just to the purchasing department, it’s the responsibility of every employee to achieve the most value with our available, and ever dwindling resources. To do that we don’t necessarily need to head to a course on negotiation… (and if we do? If we pay what they asked for the course, then it was not, almost by definition, worth what we paid. ) what we need to do is follow granddad’s lead… find the wiggle room in the asking price… and make a counter offer.

[edit] Related Best Practices

  • Cost Controls
  • How to Set and Negotiate your Freelance Business Rates

[edit] Other Resources

[edit] Author

The author of this article is Peter de Jager .

Template:Peter de Jager



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