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Jim Green's blog

For New Buyers #5

January 30, 2012

One of the most critical errors made by new (and many experienced) buyers in their mastery of effective negotiating skills is entering into a bargaining session without any pre-determined strategy. A merchant should be keenly aware of the fact that negotiating terms of a buy, whether price, payment, discount, shipping, or lead times can be the difference between a good deal and a great deal, a good relationship and a great one. The adage that ‘you don't ask, you don't get', is not just an old saying, it is a business absolute.

Negotiating with a Plan

It is imperative, if one is to be an effective, successful negotiator to enter the discussion with a strategy. There are two main elements to the plan. One must be clear on two questions. 1.) What do you want? 2) What are you willing to give? Going into any negotiation one must be certain, quantitatively what the objective of the negotiation is. What is the desired result? Whether it involves price concessions, overall discounts, shipping advantages, shorter lead times, or combinations of these goals, the buyer needs to define them before the negotiation even begins. The objectives should be identified clearly and precisely.

The second part of the equation is determining precisely what one is willing to part with to achieve the objectives. Keeping in mind that a good negotiation is one in which both parties win, the buyer must determine the absolute maximum he/she is willing to concede. From this point, the buyer must decide where to begin. This may take two forms. First, the buyer must define the original offer of what he/she will propose. Along with that, the buyer should define what can be termed ‘hip-pocket concessions'. These are elements the buyer keeps to him/herself to be introduced later in the negotiation.

For example, suppose there is a sofa that a buyer believes he/she can promote very successfully and sell through in high quantities. The sofa's cost is $350 and the buyer needs it at $310 to promote at $599 at his/her required margin. He may, stating his reason is to sell a lot of them in various promotions, ask for a price of $300 knowing that he has a little leverage above that price. The vendor counters that he needs to sell it at $325. At this point, the buyer may come back and say that he cannot pay more than $310 BUT (hip-pocket concession) he will only buy in trailer loads, knowing that this will increase the vendor's interest.

To gain success the buyer needs to plan the strategy beforehand.

If your company employs new buyers or buyers that you would like to see become more effective negotiators, I can help. Email me at jim@furnitureindustry101.com or call me at 727 347-1201.

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