Bargaining Power – 7 Powerful Strategies To Close Better Deals
So what do you mean by bargaining power? Is it the ability to find better deals? Or the ability to create the best deals out of difficult sellers?
For today, we are going to take a closer look at what bargaining power means, how it is used by procurement managers, and how you can take advantage of several strategies that will guarantee success when you are bargaining.
After reading this article, you’ll probably be the best when it comes to bargaining power
Bargaining Power – The Works and How it Affects Procurement.
The word “bargain” has been around for ages. We all probably remember how our mother, brother, or friends would bargain for an item that they want to buy for hours. Bargaining is a truly useful skill, especially in procurement. This is because bargaining affects the final price of an item.
So in Procurement Tactics language, bargaining power is the ability of a firm’s customers to influence the prices of the services and/or products it sells and suppliers to set the prices that the firm pays for the materials and services that it buys.
Was that a mouthful? If your answer is yes, then just think of bargaining power as the final price set by the supplier based on how much your company or organization’s customers are willing to buy. Of course, other factors may also affect your organization’s bargaining power, such as product sourcing and the availability of supply chains.
What is Bargaining PowerAffected By?
The bargaining power of parties during a negotiation is affected by information, alternatives, status, and social capital. We are going to discuss each in detail, so you might want to pay attention. Alternatively, this is explained in greater detail in our Negotiation Gamechanger course, so you might want to enroll in case you need a more in-depth explanation:
- Information – This is all about information coming from the other party. How much do you know about the other party’s concerns, restraints, and preferences? The more information you have, the better informed you are to negotiate. You also have a higher chance of reaching the agreement that most benefits your business or organization.
- Alternatives – For this one, your BATNA comes in as an important piece of the puzzle. The strength of your BATNA will always affect the strength of your bargaining power. When you have strong appealing offers compared to the other party, then you are more likely to come out victorious at the end of the negotiations.
- Status – Your bargaining power is also affected by how your business is viewed by other companies. The higher your company status, the more bargaining power you have. It’s almost common sense to think so.
- Social Capital – Your company’s social media presence can also affect your company’s bargaining power too. The number of professionals who follow your company blog or social media page can give your bargaining power enough weight to give you an advantage during negotiations.
Your StrategyWhen Negotiating with a Strong Buyer
Just like most days, there will come a time when you’ll be faced with a stronger buyer. Or you might be experiencing a slight slump in your company and your bargaining power is not as strong during negotiations. For that, never fear. Here are some very simple strategies that you can use should you encounter a negotiator with a stronger buying power:
1. Research is the Key
Again, do your research. Find out the actual buying power or strength of the other party. Look for signs on what makes their buying power strong. If you can’t find out, at least try to look for a way to create an alternative so you can get something out of this losing deal.
2. Find out why the Other Party is Negotiating with you
Sometimes, knowing the reason why the other party is trying to negotiate with you can give you an advantage. Try to learn why they are negotiating with you and gauge just how much they want you for your services or products.
3. Emphasize the Value and Strength of your Company/Business
It is never a problem to emphasize the value and strength of your company or business to the other party. You can openly declare those qualities to them or you can ask someone to vouch for your company/organization.
4. Encourage conversation with the Other Party
Rather than looking to create a rigid and tense atmosphere during the negotiations, try to foster pleasant conversations instead. You already know that you are on the losing side of the negotiations, so at least try to appeal to the other side’s sense of goodwill.
5. Look for Creative Alternatives
Your BATNA might be weak, but it doesn’t mean that it won’t work at all. Try to find creative alternatives that can give you a slight gain after the whole negotiations. Besides, small gains are better than having none at all.
6. Know your Limits
If you feel that you are already at your limit and there is no possible way for you to get something out of the whole negotiation, then acknowledge that fact. Don’t try to force the issue; it will only come out bad for you.
7. Don’t Be Afraid to Walk Away
Finally, don’t be afraid to walk away. Remember, this is just one negotiation. You can try again during a re-negotiation or just take this to memory and try to get better bargaining power next time.
Masterthe Bargaining Power!
With our Negotiation Gamechanger course, you can become the ultimate bargaining master. Never be afraid to bargain with the other party ever again!
Negotiation Course For Procurement Professionals
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