How To Ask A Current Vendor To Reduce Their Price

How to negotiate with a current vendor while preserving the relationship.

Can you remember a time when a customer told you that your fees were too high? How did it feel?

Many of us have been on both sides of that conversation at one point or another, and it’s usually not much fun. If you come to me and tell me I’m charging you too much, it’s almost an insult. Pretty soon it feels like we’re arguing about money, which is rarely productive. Changing your approach to that conversation can lead to a very profitable discussion.

I call that “The Value Conversation,” it’s simple and extremely useful.

Because when you tell your vendor their fees are too high, ultimately you’re saying that the difference between their price and the benefit you are receiving is not big enough.

It’s not one number: it’s really the difference of two numbers – we’ll call that Value.

And if I’m the vendor, and I take offense when you question my rates, it’s because I’m frustrated that you don’t see that value, or that you don’t appreciate the cost I incur to deliver my services, and my need to make a profit.

Both Value and Profit are forms of Surplus. A solid relationship has ample surplus for the buyer and the seller. The buyer’s happy, the seller makes a profit.

In other cases, it may be imbalanced in favor of one party, or it may seem like there’s very little surplus at all.

When that’s the case it’s tempting to talk about price. But you’ll get much better results focusing on value. Here’s how you do it:

First – have the conversation face-to-face if at all possible.

Second – draw the picture.

Something magical happens when you draw this simple bar chart, and it doesn’t take much artistic talent. Instead of being threatening, it turns into a shared challenge that you are solving together. Put it on paper.

Third – use the right words. If you say “you’re charging us too much” or “we can’t afford you,” you don’t position yourself for a great conversation.

Instead just talk through the picture… it might sound something like this:

“Tim, I’m coming to you because we’re in a bit of a jam here and I value our relationship. Where your rates are right now, it’s so close to the benefit we’re receiving that as things stand it doesn’t make sense for us to go forward. Now I know you need to make a profit, and we don’t want to ask your firm to extend yourself in a way that won’t be good for you long-term.

So, I’m wondering if there is anything we can do to create more value in this relationship? Could you work on your cost side in a way that would make lower pricing could work for your firm? Or is there some way we could demonstrate a higher benefit to my company to keep them from going to the street?”

How does that feel?

It won’t necessarily be an easy conversation, but you’re certain to learn something, and you may come up with some creative solutions to keep working together in a highly profitable way.

Give it a try, and if it works for you then pass it along.


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