Many negotiations revolve around price. Buyers want a low price and sellers a high one. When you need to get the best price in negotiations where it is unlikely you will be dealing with the other party again, you will want to extract as many price concessions from the seller as possible to ensure you get the best price concessions possible.
Before any discussions can occur on how to best extract price concessions, let me make it clear that there is a difference between a supplier and a key partner.
A supplier is a company that you choose to provide a needed product or service and is more of a commodity-based provider. Suppliers can be easily replaced with another supplier if needed, so there is little need to create a long-term relationship.
A key partner has a greater interest in your success. Key partners are more engaged in your process and help you provide a better product or service. Key partners are not easily replaced, and therefore, the advice in this post would not apply to key partners for whom you want to engage in long-term negotiations.
As a consumer, we have been conditioned to pay the list price for goods and services without question. If the price appears to be too high, we simply choose to not buy or look for alternatives.
As a business owner, you will frequently find yourself in negotiations with random suppliers. Sometimes the price is the price and there is no haggling or negotiations involved, such as when you buy something at a retail store. However, when buying higher-priced, customized, or used goods, or any kind of services, the price is always negotiable.
Probing for The Lowest Price
The first step in any price negotiations is setting an anchor price. Sellers of goods and services often have a list price. The list price is the ceiling. Your job in a one-off negotiation is to get it for less than the list price.
Sellers will start the negotiations off trying to prove value. They will rattle off a list of features and benefits to make you believe that their list price is more than fair. As they attempt to justify their price, your job is to listen to them layout all their arguments. You want them to put as many of their arguments on the table right upfront.
At the end of the seller’s pitch, many buyers launch into their own arguments attempting to convince the seller that much of the value the seller claimed is not as valuable to them to justify price concessions. While this may have some value in some situations, I advise most clients to resist the urge and leave the pressure on the seller.
At the end of the seller’s pitch, regardless of what price they provide, your best strategy to extract a price concession is to cringe or roll your eyes. Through the use of body language, the seller will know that their price is too far off the mark. Good negotiators will always follow up by saying something such as,
“Is that your best price?”
Let that statement hang in the air and use silence to your advantage. Resist the urge to break the silence. Many sellers will feel awkward and flatfooted with the silence and feel the need to add more information you can use to your advantage.
If the seller offers a better price, don’t be afraid to ask the question again.
“Is that really the best price?”
If you have cash, you may want to follow up with something such as,
“If I agreed here and now to buy, and agree to pay you in cash right now, is that your best and final price?”
As a buyer, remember that cash is king, You can often offer a low-ball price for cash deals because it plays to everyone’s need for instant gratification.
When you think they are near their walk-away price, often called the seller’s BATNA (Best Alternative To No Agreement), ask something such as,
“Has anybody else ever had a better price than the one you are offering me today?”
Or if you are negotiating for a product ask,
“Does this product ever go on sale?”
When it comes to products, this is where your prior research may come into play. When the item is a retail item that can be sold through Amazon, some tools I like to use personally are CamelCamelCamel.com and keepa.com beforehand to make sure that I understand the pricing history for an item. That way, I know when I have a good deal and if there is more wiggle room.
If you still think there is more room to negotiate on the price, you can always add that you think you can get a better deal elsewhere and see what the seller comes back with.
Once you get an agreement on what you think is the best price, it is time to verbally agree to the deal. However, with a price locked in, it is time to ask for a few more concessions.
After you agree on the final price, in the mind of the seller, they have a deal. But in most cases, you can still get a little more value by nibbling around the edges of the deal because the seller believes that the sale is a done deal.
As the name implies, “nibbles” are small concessions and not big ones that could become deal breakers. For example, if you were negotiating for a used conference room table, you might add a nibble that looks something like,
“For that price, free delivery is included, right?”
Since the seller is eager to close the deal, they are more inclined to agree to small last-minute price concessions such as free delivery. If they agree with your nibble, be appreciative and thankful and add another nibble.
“I assume that it will be delivered tomorrow?”
And so it goes, extracting concession upon concession until the salesperson finally says “No more concessions!”
Common nibble concessions are:
- Free samples of other products they sell
- Better terms
- Free shipping or delivery
- Add-ons, such as covers or cleaners
- Exceptions to procedures, such as extended return policies
- Extended warranties
- Altered time frames, such as faster delivery
- Free training
The Walk Away Close
By this point, you likely have extracted as many price concessions as the seller can provide. You can either accept the deal as you have negotiated or try one last negotiation tactic to extract that last concession nibble the seller was not willing to give by using the walk away close.
For example, you could add, “If you can’t get it delivered by tomorrow, I’m going to look at another option” and walk away. In many cases, the seller will not let you leave and will cave into your last request. If they do not follow you but you still want the best deal you struck with the seller, you can always pause for a moment and then turn around and say something such as,
“Ok, I think you’re right. I think this is a fair deal. Let’s make it happen.”
This is no time to let pride keep you from the smoking deal you have just negotiated. Don’t be afraid to tell them they are right and say that the deal is fair in your eyes.
Price Concessions Conclusion
In conclusion, the price concession tactics explored above are for extracting the best possible price from suppliers that either offer commodity products, services, or higher priced one-off products. These tactics should NOT be used on a seller that you hope to have any future negotiations with. The resulting deal you will strike will likely leave the seller with a bad taste in their mouth, making it less likely to do business with you in the future. If you want to do future business with a supplier, it is better to negotiate a Win-Win outcome using integrated negotiation tactics.
How can you apply your understanding of one-off price concession strategies in your next negotiations?