How To Negotiate with Powerful Suppliers
In the dynamic world of retail, the quest for success hinges on more than just having shelves stocked with quality goods. It's a dance of strategy and finesse, where finding the right supplier is akin to discovering the perfect partner.
You are on a mission to secure not only top-notch merchandise delivered like clockwork but also a deal that makes financial sense for your business. This is where the art of negotiation with B2B suppliers’ steps into the spotlight, transforming a simple transaction into a symphony of collaboration and mutual benefit. In this article, we will explore how to deal with B2B negotiations.
Preparing for B2B negotiations
Preparation is key in any business arrangement, and B2B negotiations are no different. By adequately preparing, you can show up confidently for negotiations with suppliers and get the best deals for your business. Each negotiation process will look a little bit different, but generally, it starts with an inquiry. As the buyer, you can cast a wide net and request quotes from a variety of sellers. Once the sellers provide quotes and you see who could possibly meet your needs, you can move into more formal negotiations.
Negotiations can take place in person, on the phone, or in messages over the internet. The seller lays out exactly what they can offer, and the buyer comes back with questions and requests. It is normal for there to be a bit of back and forth before a deal is reached.
With that in mind, here are a few important things to keep in mind throughout the negotiation process.
1. Choose a strategy - Strategy is important when negotiating deals with B2B suppliers, and luckily, there are several strategies to consider. One popular sales strategy is the “good guy/bad guy” technique. Basically, the sales representative acts like they’d like to give you a better deal, but a decision-maker is standing in the way.
As a buyer, you can flip this situation around and ask to speak directly with the decision-maker. This lets the salesperson know that you are not interested in playing games and that you are serious about making a mutually beneficial deal.
2. Demand exact pricing - When you're negotiating with suppliers, they might give you a price range at first, which is fine when you're just starting to discuss. But when you're getting serious about the price, it's important to know the exact cost.
Don't agree to any deal until you know exactly how much it will cost you. This way, you'll avoid any unexpected surprises later, and both parties can be clear and open about the terms.
3. Leverage other offers - A great way to negotiate is by using offers from other suppliers to your advantage. If one supplier knows their competition is offering a better deal, they might lower their price to win your business. This can lead to a good long-term relationship where both sides benefit.
4. Be confident and firm - Confidence is key in any negotiations. Other than being prepared and knowledgeable about the deal you’ve negotiated, being firm can help to exude confidence. It’s worth noting that being completely rigid and unwilling to waiver may not work in your favour.
After all, negotiations are back-and-forth processes to find a solution that benefits both the buyer and seller. Go into negotiations with a little bit of flexibility to make “meeting in the middle” a bit more comfortable.
5. Pitch your business as a “blue ocean”– a new or untapped market - Big suppliers sometimes get caught up in their day-to-day transactions and may not see the bigger picture. However, if you present it in the right way, they might be interested in expanding into new industries or markets.
Identifying what might grab their attention might take some brainstorming and creativity from both sides. To make the deal even more appealing, you could consider extending the contract period, which can reduce risks for both parties involved.
6. Be prepared to negotiate well - Negotiation is a process that requires time and patience, often spanning weeks or even months to achieve desired outcomes. When dealing with large suppliers, it's essential to be prepared for various negotiation tactics they may employ.
Here are some common ones:
a.) Limit of Authority: Suppliers may claim that decisions are beyond their authority and require approval from higher-ups, such as a VP or CEO who may be unavailable or based overseas.
b.) All or Nothing: Some suppliers may insist that you either contract for all their products and services or none, leveraging their market power.
c.) Indifference: Suppliers may adopt a "take it or leave it" attitude, stating that it makes no difference to them whether you proceed with their proposal or not.
When faced with challenging suppliers, it's crucial to be creative with your counter-tactics. Ideally, these tactics should be developed with input from a diverse team, including commercial, technical, and strategic experts. This collaborative approach can help you navigate negotiations more effectively and achieve favourable outcomes.
7. Consolidate your demand - Combining all your company's spending into one contract or purchase order is a smart way to spend money and can give you more power when negotiating with suppliers. The trick is to work together within your company to identify how much you need to buy in total.
If you work for a small company and don't buy enough to negotiate with big suppliers on your own, you could join forces with other small businesses in your area. This can make your buying power stronger. Big suppliers might seem tough to deal with because they're not always flexible to what you need. But with the right negotiation skills, you can handle them and even turn their strictness to your advantage.
By getting ready beforehand, you can negotiate successfully with big suppliers to get the best deals and the lowest prices for your business.
Let’s go through an interesting example of Walmart.
Walmart, a big store, wanted to pay less for the products they buy from Procter & Gamble (P&G), a big company that makes things like soap and shampoo.
Steps Taken by Walmart:
1. Preparation: Walmart looked at their sales and figured out where they could save money.
2. Setting Goals: Walmart wanted to pay less to keep their prices low for customers.
3. Initiating Negotiations: Walmart talked to P&G about lowering prices.
4. Building Rapport: Walmart said they like working with P&G but wanted to save money.
5. Presenting Their Case: Walmart showed P&G why they needed lower prices.
6. Seeking Solutions: Walmart suggested ways to save money, like buying more products at once.
7. Negotiating Terms: Walmart and P&G talked about prices until they agreed on a lower price.
8. Reaching Agreement: They agreed on a new price for the products.
9. Documenting Terms: Walmart wrote down the new prices in a contract.
10. Follow-Up: Walmart checked to make sure P&G stuck to the new prices.
Walmart negotiated with Procter & Gamble to pay less for products, and they both agreed on new prices.
By leveraging effective negotiation strategies, you can secure better deals with your suppliers and optimize your business operations.
Thank you for reading this article.