Vendor negotiations are always intense, especially for larger deals and sometimes for smaller amounts too.Traditional procurement wisdom is that vendor negotiation is a zero sum game, vendor have to lose for you to get a better deal.
Since 2008, procurement organizations are under tremendous pressure to reduce costs. So how do you effectively negotiate, so that you can reach the end results but at the same time vendors doesn't feel that they lost their shirt in the negotiations. So essentially, how to create a win win situation.
In a recent article on Harvard business review, the author of the article provides some tips for suppliers on how to overcome inertia of the negotiations and make it a win win deal. I believe the same principle applies for procurement too.
Start with a small talk: Starting with small talks breaks the ice and establish a rapport, the negotiations can be more conducive if both parties have a good rapport.
Focus on the issue: Dropping the price is not the ultimate solution for meeting your savings target. Discuss what is driving the cost reduction and figure out all the possible solutions which can lead to meet those goals.
Walk in Supplier shoes: Sometimes the vendors might not to be able to drop the price or keep the price same YOY(Year over Year), so it helps to understand what is driving that decision. For example, the vendor might be facing increased raw material cost for the last few years but now decided that they can’t absorb that cost anymore and decided to increase the cost. If you are buying that raw material at a lower price then you can but that on supplier behalf and that could lead to further reduction in price.
You can read the full article by following the below link