By utilizing efficient buying techniques, you will greatly free up your valuable time and quickly negotiate for better prices. A need for a new office printer came up so I thought I would put these techniques to the test and the following is an extremely helpful example based on my purchase.
Here is how it works:
The example scenario: You need a new office printer and the ideal product costs $1350 at your current supplier.
Your goal: $150 off or a final cost of $1200
Time Limit: 15 minutes
Assumptions: you have moderate negotiation skills, a business account manager at your supplier (if not, get one, you will save money and receive a better overall buying experience), the account manager does not know that you are the decision maker in the process, and that you have the ability to create a good relationship with said supplier.
Other items to consider before proceeding:
Spifs: most business account managers are paid on commission but also from sales incentives on some products called SPIFs, these are payouts to sales people from the manufacturer on top of their regular commission. Knowing this will allow you to get a win/win situation on a lot of purchases. Most sales people are more willing to give up their entire concession range when they know that a backend bonus is coming.
Work with newbie’s: as long as you do not need the sales person to be knowledgeable or experienced, working with newer sales people will more likely result in a better price. They will usually resort right back to giving you a better price in order to get a sale out of fear of negotiating or because of their inability to explain the company’s price justifications.
Step One, Homework (5 minutes):
Go to www.froogle.com, search for the printer, scroll the list, scan the prices for an assumed price, and find an ideal supplier to use in negotiations.
Step Two, Contact your Supplier (5 minutes):
The key to working with an account manager is kindness; they are simply doing their job and (from my experience) want a pleasant interaction and a sale. When on the phone (to make this work, call them so they do not have time to think of decent rebuttals) explain in this order after 3 minutes of small talk:
1) “Your company needs printer model x, what is the best price you can do for me?” Make sure to flinch instantly after they give you the price, which should be about retail cost. (“$1,350!!” and shut up to wait for a small concession which should sound like this; “ok, we can go down to $1,335”) One minute for $15, you technically just made the equivalent of $900 an hour!
2) Next mention that your committee (remember the classic “resort to higher authority negotiation tactic”) has set a budget of $1100 for model x because they have found it from “discount printer supply” (found on froogle) for that price but you want to continue your great business relationship so against their wishes you thought you’d give them a chance. This will get the account manager to worry about losing the sale completely and since they already probably know how low they can already go, a new price will be given. In this scenario the cost may drop to $1,275 with the sales person leaving an ambiguous statement of checking with someone on his or her end. End the call saying that you could probably get the committee to agree to $1150 but not much more, ask for an emailed quote of their best price as soon as possible and you will bring it up to them.
3) Your last statement with the sales person should set the expectation that they will only hear from you again if the committee agrees with the price emailed to you. This will get the sales person to doubt what you will go with and give you basically the lowest price they can.
Step Three, The Rebuttal, Close, and Nibble (5 minutes):
1) Once you have the price, which should be pretty close to their company’s cost, get back to them one last time. For this example the price came back at $1220, which is pretty acceptable, but we can haggle for more. Ask for one more concession, “we are liking this price more but if you knock another $20 off we will take it,” they most likely will say yes to this because the ball is now in their court to accept the sale.
2) The nibble: once you have mutually agreed on everything the salesperson will have now let his guard down as he believes the negotiating and the sale is over. You say something to this extent: “alright, thanks for everything, you have been a big help… oh, this does include two day shipping, doesn’t it?” or you could ask for printer cartridges at cost, extended warranty, whatever you think may be a small upgrade that can easily be given. Be sure not to ask for this before closing the sale as it will become part of the negotiations instead of an after sale add-on.
3) A printer is now on its way for a hundred and fifty dollars below list with free upgraded shipping.
To summarize:
Through an efficient negotiation process you saved $150 in 15 minutes of work. This means that you technically made $600/hr!
As you practice these skills and use other similar techniques with your suppliers, getting the best price will become second nature to you. The key here to remember when purchasing is to get a great price but not to spend excess amounts of time doing so. Keep economics in the back of your mind to ensure you are staying on top of being extremely efficient. Good luck and happy negotiations!
