Have you ever brokered a deal for your company? Many companies have policies and budgets they are restricted by. When it comes time to purchase something the department needs or wants, how do you go about making sure you don’t pay too much for it? If you have a budget it seems to only be in you and your department or company’s best interest to find the best price. Sure it would be great if every company gave you their best price up front, however this wouldn’t make for good capitalism.
Please keep in mind I’m not suggesting this for small every day items. I mean big projects, tens of thousands of dollars at a minimum. Sure you can negotiate and broker a deal for smaller items but is it worth your time? It isn’t worth my time. In my experience we try to keep at least three vendors that can supply us with the product we are looking for. If you have ever had to deal with multiple vendors and some of the random product numbers, skus, and packages just getting quotes that are actually comparable can be quite a task. For smaller items and projects I would just stop right here with my 3 quotes and pick the lowest price.
It never seems to fail that vendors want to compete and this is especially true on big ticket items. If your company doesn’t have any policies against it, then why not facilitate this competition?
Lets set some rules to follow to ensure we don’t cross any lines.
1. You should not personally profit in the form of cash.
2. You should not accept gifts (unless allowed by employer).
3. You should follow all of your companies polices.
Number one should be self explanatory, any cash belongs to the company because you are not buying the product out of your pocket. Lets go over number two in some detail because I get asked about this a lot from co-workers. Now it is very common for vendors to take you and possibly co-workers to lunch for business meetings. This is fine with most, including me. However you should also make sure it is ok with your company. This is a great way to build a relationship with your vendor. However it can cause problems if you begin to feel obligated to the vendor. I would like to point out that it is in the vendors best interest to take you to lunch. The whole meal is tax deductible for the vendor company. They were going to pay the money in tax anyway so why not take a customer out to eat and talk business and/or put a smile on his or her face. These business lunches are an excellent way to discuss at a slightly higher view just about any business topic. It is also a great time to get the boss involved a bit. Everyone can give a little input on their experiences in the past and expectations for the future.
So now that we know where some of the lines are drawn we can get down to business.
Have your three vendors? Know what product you want? Get a quote from each vendor and make sure it is apples to apples. Take the lowest quote and lets say it is from vendor A. Now lets call the highest price vendor. Lets label them vendor B. Tell them that you want to see if they have any completive pricing available. This usually involves a call back where this vendor calls their distributor or finance department or some other person with approval authority for special pricing. If all goes well on their end you will get a much better price to “keep” your business. They usually expect to make it up in maintenance renewals. If they are unable to match or beat your lowest quote then you need to tell them right there on the phone that they are higher. Usually they will ask where they need to be. I usually reply with the number they need to beat. This may be the exact value of my lowest quote or maybe even 1 or 2 percent less. If they can do it they will send you a quote and they can stay in the competition. If they cannot, don’t argue or waste anymore time with them. They may try to explain how the provide value but usually this matters not. The bottom line is usually what is important.
Now it is time to call vendor A again. You play the same cards above. Ask them if they want to compete for your business as you have a quote that is lower. You can continue going back and forth here for some time depending on how aggressively the vendors are lowering their price. I have been amazed at how low some prices will go. I’ve even had vendors that were amazed at how low their competitors prices would go. So much so that they would ask for the quote from their competitor. This is basically calling you a liar. Your quote is confidential. You should consider the pricing your vendors give you special. If you are asked for a quote in order for a vendor to lower their price this means they have their prices as low as they can go and you do not need to negotiate with them any further. They are out of the race.
Lets assume vendor B was unable to beat vendor A’s price. We simply start this process again with vendor C. You can even start the process with all of your vendors at the same time. However this can lead to communication issues. Eventually all of your vendors will fall out of this competition as they reach their lowest price. I hope this helps you in your future business deals. It certainly has helped me in mine.