Minimize the maximum price
By Ron Cune
Most organizations have more suppliers than buyers. When purchasing a computer, printing brochures, hosting a website, booking a flight, in short, when bringing aids into action for daily management, you are the client.
Negotiating is one of China’s national sports and it is almost surprising that it was not an official part of the 2008 Olympics. Most Chinese suppliers will present a maximum price, which is open for bargaining. These types of negations do not only take place at large conference tables or at a small retail level, it happens everywhere!
Deals can be made even with renowned companies and exerting a minimum amount of pressure can work to your advantage. A good example may be how we once saved hundreds of Euros by negotiating with the post office. An unthinkable situation in Europe, where on this level price and processes are directed by the suppliers.
During daily processes, a profit can be made by not by default agreeing with the initial price indications. In most cases, it soon becomes clear that the price can be lowered or that you can obtain more for the same price.
Do, however, pay attention that the time invested is proportional to the maximum attainable result!
Ron Cune, Dragondancers
November 16th, 2008 at 7:12 am
Ron, you have highlighted an important misconception regarding business; there is no such thing as ‘B2B’ (or Business to Business). At the end of the day, it is only ‘I2I’ or Individual to Individual. How else were you able to negotiate the costs at a post office?
In negotiating, once one understands that ‘people’ make decisions, not the ‘bricks and mortar’ one can start to focus on these individual’s needs.
I’ve developed a straight forward equation that one should consider when planning a negotiation:
Needs + Features = Benefit
Goodwill + Reputation = Trust
Benefit + Trust = Agreement
The ‘Needs’ are held by the customer (or supplier). However, don’t confuse ‘Needs’ with ‘Wants’. I ‘Want’ a mobile phone to call my friends and send SMS messages. But my ‘Needs’ lie much deeper, and may not even be initially known by myself. Here’s an example. At a recent training course I asked a trainee why she bought her phone, here’s the (close to) verbatim conversation:
Me: Why did you buy that phone? (pointing at white a Dopod Touch)
Trainee: Because I need to make phone calls
M: But why ‘that’ phone? There are thousands of phones you can buy in China.
T: I like the colour (referring to the white colour)
M: What do you mean by that?
T: I think the colour and shape of the phone is cool
(Need 1 = style)
M: Ok. So why that white phone? There are many white phones available. (Another trainee raised his own white phone – a Motorolla)
T: Oh, I don’t like Motorolla. I like Dopod.
M: Why do you prefer Dopod over Motorolla?
T: I don’t think Motorolla is a good company.
(Need 2 = brand/trust)
M: Ok. Any other reason you bought this Dopod, and not another version?
T: The price. It wasn’t the most expensive one.
M: And how much was it?
T: 4000 RMB.
(Need 3 = price *but at 4000 RMB there’s not many more expensive phones!)
That little exercise highlights that our ‘Needs’ for buying something are hidden, often to ourselves. What’s more surprising is that we often ‘consciously’ think that ‘price’ is the most important factor, but when questioned in a structured, open way, more often than not, there are other ‘Needs’ that are more important. After all, 4000 RMB is hardly a cheap phone.
Morry Morgan
ClarkMorgan Corporate Training