Empower your business with qualified business leads in vendor negotiations

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thank you well now we get to what's probably my least favorite tactic and the whole payables The Profit system and that is the one vendor negotiation and I'll tell you in a minute why it is I don't really like it very much but uh 101 vendor negotiation is is when you're talking to your current vendor or somebody you're already buying something from and you ask them for a concession you ask them to lower their price so let's talk about when it's the right tactic to use and then we'll get into the expert guide and how you actually employ it this is something that happens at a late stage of a purchase right it's not you're already buying something from a vendor and you go to them and ask them about it and I would use this for low impact low dollar purchases and low complexity purchases the reason I say that is for the higher dollars the higher impact the higher complexity purchases you probably want to invest more time a little more money and do a more robust sourcing process this one vendor negotiation doesn't give you a lot of Leverage so it doesn't always get the best results it can be still a thing to do if you have no other options and you're not going to take any action otherwise but otherwise I'd reserve it for the lower impact lower dollar lower complexity purchases and this is where you know who the vendor is the Leaning vendor because you're already buying it from that and you're not thinking about switching vendors you're just talking about getting a better price from that vendor and the effort required is low and so this is the Saving Grace of the one vendor negotiation it is a low investment tactic you can do it maybe in one conversation or one hour um but again you can't expect quite the same results ingly so let's take a look at the expert guide and how you do this and again I've copied all my provisos here and warnings and cautions because I only recommend that you take on the one event negotiation when you've really concluded that you're not going to do anything else unless you do this and when you've got good reason to know that the incumbent's pricing is not competitive there needs to be a rationale we'll get to that in more detail in just a second but you don't have the resources and again this expense is relatively small and it's not something that you can sort of bring some more effort to in terms of the sourcing process so so this is a tactic that's better than nothing and good in some cases and let's go into how you employ it you want to of course Define the project goals and in most cases we're just talking about lowering the price but you could be talking about well changing the loverable maybe increasing the quantity increasing the quality in some way at the same price and I want to ask you to go ahead and write down the reasons that you're not doing a stronger sourcing process this is worth documenting uh for a couple of reasons and one is the most important is sometimes you think well gosh we don't really have the resources to do more on this but once you write down why that is you realize well that's not a good reason and you decide to take another tactic but you'll want a record of this so write the reasons why you decided to do one vendor negotiation as opposed to another tactic and now this is important you want to list the reasons that you think the current pricing is not competitive you can't go to the vendor and just have no reason and say give us lower pricing give me give me give me right that's an annoying thing and without any context it just doesn't make sense and doesn't lead to a good long-term relationship so maybe you've heard from another uh colleague of yours at a different company that they're getting a much better deal on this with some other supplier maybe it's something where your prices have gone up recently despite what you think should be lower costs on the vendors part and so so that's your rationale it could be something that's more on you in terms of tight resources for something or a budget cut in one area I think that's not as good a reason but but that sometimes is the context but there needs to be some story this can't be just an open-ended conversation where you're saying lower our prices and there's no reason there's no timing there's no deadline and um yes so so once you understand those reasons then you want to go ahead and draft the story you'll probably only have one shot to have this conversation the right way and you don't want to say it the wrong way what's the wrong way we'll get to that in just a second but go ahead and draft up the reason and we'll go through the components in a sample illustration of that of that reason in just a second here um and go ahead after you've talked through that explanation or drafted it you want to practice it so review that with a colleague if you're going to do it over the phone practice it call up your colleague you've got your company over the phone and say hey this is what I'm going to say you play the role of them I'll put the role of us and let's try this conversation role play it see how it goes and and again you by doing that you want to just confirm your key talking points okay this is an important conversation um so we'll get to the components of that in a second but let's talk through what happens in the vendor negotiation uh you want to log of course when you have the conversation if you communicated the key points as you'd intended um when the date was and what their initial reaction was that they that they sound offended did they sound like they were expecting it uh what what happened when that first conversation happened whatever additional discussion notes you have there and then always ask for a due date ask for a specific time when they're going to follow up don't leave this open-ended make sure that they have a a schedule where they're going to get back to you and then see what the response was so so they responded in writing they need to sit in writing in some way was that appropriate was it enough and you really need to decide if those changes were enough and you're going to accept it and move forward in which case you'll you'll track the savings and go forward or or if it wasn't in that case if the vendor's response was not satisfied tree well then you should have some sort of action plan that should be in the next few months it shouldn't linger forever uh it might wait a month or two but this quarter something should happen as a response that vendor not responding to your request uh to give concessions and give lower prices so let's jump now to a couple of important tips when you're having a one vendor negotiation so I want to make these pretty strongly you don't want to over promise you don't want to suggest that you're not going to take some certain action if you get this and and of course if that's the case then you can communicate that but for example I would want to say to a vendor look if you get to this price we're not going to go out for and do an RFP for a year I wouldn't dare say that unless I knew it was absolutely true and how would I really know it's true so it's much better not to say that because you don't know the future what you get almost as much benefit from and is much easier to say much more honest is simply to say look if you make this conception if you give us this lower pricing under these circumstances it's going to look really good for you we're going to be a lot happier they'll be much less likelihood that we'll go out and have to do something in the marketplace soon so it'll position you well can I make any promises no I can't but but this will this will work well for you Now that statement again is much easier to say because it's true and it's not Camille So my strong admonition is don't go for and say um yes if you do this we'll do this make it somebody where you're asking and maybe imply some some concessions or some better positioning afterwards for the vendor but don't promise um and the second note sort of goes along with that is assuming the best if you go to a vendor and you say hey you guys have been overcharging us or why are the rates so much higher than our competitors are paying that's not going to bode well that kind of puts them in a defensive position you want to put this in a way where they have Grace if the goal is to keep the vendor and get a lower price then you want a good relationship and you want them to have a graceful way out so they can say yes we are going to give you this and they're going to look good in the process but if you come in and say hey we're getting a bad deal and you know you you treated us wrongly by giving us these prices then that's the tone that's probably not going to help you in the long term with that vendor and as I mentioned this before uh in this when I said don't over promise don't Bluff just uh be sure that you're asking with the rights consequences and the right context and um if if for example if you say look if you don't roll these prices then we're going to go to somebody else next month well if that's really true then maybe you can say that although I question even then if it's going to be most helpful but um because you don't want to meet really in a situation where you're blackmailing your vendors or sort of forcing them into things manipulatively but it's much better just to say hey can you do this for us it'll help you dump off so here's an example of the one vendor negotiation a conversation excuse me okay let's let's go back let's try that again so here we are and this is what you want to include when you're talking to the vendor and asking them for that concession so uh I'm not going to read through the whole text but we'll hit the components briefly and explain what they are obviously you want to say hello you want to give them the Strategic context for why you're having this conversation so again you're not coming to them saying hey we want you to compete we're going out to the marketplace you're just saying can you do something about this and so what is the context it's usually well we've seen the expenses in this area creep up or we've seen that this is something that does not appear to be competitive and it's gotten the attention of of the higher-ups as something that we need to look at and where we need to save money so you need to put them on notice that their costs have been seen and that some action may be taken because you're dissatisfied if you can you want to clarify and specify where that area is and the cost if you can say look it's on this specific component not on these others then you want to say that if it's we feel like this is at least 20 percent too high then you want to say that um and you may imply that imminent greater competitive tactic for example a full RFP um don't say it unless you get into it but if you if you simply say look I'm not sure what's going to happen these phrases as they are they can't we can't really work with that it's not competitive so if you're not able to work with us here I don't know what's going to happen but something's going to happen soon that will leave the implication that it's going to be competed you'll go to RFP or something like that um and um and you want them to understand that this is only where action was likely to follow then ask for the concession itself um don't commit anything as we've already hit earlier and give them that deadline just like we talked about before thank you foreign