Experience From The Plastics Industry – A CEO’s Perspective
What not to share, what to ask for, and timing.
Three weeks ago, we discussed 7 tips to help negotiate the best deal with your vendors – including knowing what you want, building a relationship with your vendor and doing your homework.
This week we’ll focus on what not to share, what to ask for, and timing.
- Don’t volunteer or initiate pricing with the supplier. Keeping a vendor in the dark about your project budget or price expectations will defend you against your vendor asking for as much as you’re willing to pay. Generally, a vendor won’t volunteer a price that’s out of line with normality unless you give them a reason to. One of the best examples of this was the one time I mentioned my budget. I was acting in good faith, and told my vendor I had a budget of $10k for the project. Miraculously, this is exactly the figure I was given at the end of the negotiation. I shot myself in the foot, but learned a valuable lesson. No doubt, if I’d known then what I know now, I would have gotten a price at least 20 percent less.
Be flexible – you’re only interested in the bottom line but the sales person may not be.
- Ask. Ask for their best price – to start. Of course, an experienced vendor will never give you their best price immediately. Ask if they can do better than this as you have other competitive quotes for the same product. Ask if they can cover the shipping cost. Ask for additional things at no charge that don’t cost them that much or are high margin items for them such as upgrades or an extended warranty (extended warranties are especially nice options if they don’t have any room to move on price and they are confident about their product).
If your vendor doesn’t come in with a competitive price, let them know. I used to follow up with the sales reps as soon as I had three quotes and in fairness tell them that they didn’t come in at the best price, but suggest they call me again if they had a special, sale, or could otherwise provide me with a better price in the near future. Strangely I was often told: “as a matter of fact, we are having a special next week” – it was an easy way for them to come back with a sharper price without loosing face.
- Try to understand where the sales rep makes their money to structure the deal accordingly. Some reps work on a base salary and only get commission on accessories and warranties. By suggesting you pay full price on these, the rep may be able to provide a deeper discount on the base unit. Be flexible – you’re only interested in the bottom line but the sales person may not be.
- If delivery is not critical, consider making the order near the end of the month, end of quarter, or end of year. Sales reps may need a quick sale to boost their overall sales numbers and will be more likely to cut a deal at these times.
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Search for corporate intelligence than can provide important insight into your vendors motivation to make a deal
- Negotiating price can also be helped by bad economic news. Check the website and the internet for company news. Search for corporate intelligence than can provide important insight into your vendors motivation to make a deal… like “last quarters sales were down” or “inventory levels were up”. Knowledge is power, and as far as knowledge goes, these pieces of information are as good as currency.
- If delivery is the big issue, you may want to accept a higher price but with faster delivery. We sometimes paid twice the price for emergency parts, but I still asked for a discount. Delivery can often be sped up if you impress upon them that this will be an important factor in selecting them for the NEXT job or order. Sometimes the local sales rep will hand-deliver at no charge if you ask – suggest that this might also be a good opportunity for them to get in front of you to show you other products or perhaps drop off some additional literature.
- Make sure you’re aware of the point of delivery (FOB) and the delivery charges – some foreign products may seem less expensive but when you factor in customs clearance, brokerage, duty, etc. they often end up being the same price as buying local. This is often the case for small value items. Always make sure to factor in the exchange rate for foreign currency transactions. Ultimately you need to be able to compare “apples to apples”.
Read the third post: How to close the deal.