Lead the Dance

When you are ready to face off with a vendor, do your best to drive the discussion. Get as much information about the vendor and their product and service before price enters into the discussion. Just like car buying, pick out your car (or choice of cars) before you negotiate a price. If you find that the discussion is prematurely heading toward pricing, bring the conversation back to understanding the product or service itself. If you're not ready to talk price, say something like "Right now, I am just evaluating your product (or service). Unless I think there's a real opportunity, I'm not prepared to negotiate price right now."

Pricing for hardware, software, and services follow very different models. Hardware prices are fairly standard unless the product is new. Usually, the mark-up on hardware is very small (1-15%). On the flip-side, the mark-up for software is huge (100%+). Software is priced based on value, not the cost to the vendor so you can usually negotiate software prices down substantially. Services are usually based on labor rates and are marked up based on the demand for those skills (15-50%).

When you are ready to discuss pricing, take the lead in the dance. Here are the steps to follow (in this order):

1. Make the vendor throw out the first offer. Never be the first one to suggest a price. Although rare, you could hear the question "how much would you be willing to pay for our product?" A good response would be "As little as possible. What's your offer?" This response puts the ball firmly in the vendor's court. Remember, if you've done your planning, you really do have the answer to this question, but your job is get a price far below your maximum, so don't tell the vendor up front!

2. Express concern. Never get excited about the first offer no matter what. If you're considering other alternatives, you may be able to get a better price. My favorite tactic is to say nothing and simply make a non-verbal expression of concern. Usually, the vendor will come back with either "but I'm sure we could sharpen our pencil", or "we could probably come down lower if that price is too high", or the ever popular "but we're willing to work with you". You may also be prodded with "You don't seem to like that price. I seem to be out of the ball park. What price would you be comfortable with?" Here's where the dance gets interesting.

3. Make the vendor throw out the second offer. This can be difficult, but by making the vendor throw out more prices, you are lowering the ceiling of the negotiation going forward. If, in step 2, the vendor says "we could probably come down lower if that price is too high. » immediately respond with "How much could you come down?" or "It seems you didn't give me your best price to begin with. What's your best price? » Latch on to what a vendor is saying and keep asking questions. Stay on this step as long as possible and try and keep the vendor to continue to provide better pricing.

4. Counter offer. Propose a different price than what's on the table. Be reasonable. If you've done your homework and checked the going price for the product or service, you know what the range is. If you throw out a price that you know is ridiculous, it will look like you don't know what you're doing. However, if you counter with a price that demonstrates that you've done your homework, the vendor will know you are serious. Justify for your counter offer. For example, you may want to reveal that you've done some market analysis by saying "I've researched the market a little and think my offer is more in line with market prices." Obviously, the vendor may disagree, but at least you're backing up your counter price.

5. Trade. Unless you can land on a price outright, there will likely be gives and takes on both sides. Go back to your to plan and begin proposing trades. Always make trades that bring you little to no value but may be perceived as valuable by the vendor. This can be very difficult, but can pay huge dividends.

Here is a perfect example. Let's say you want a service contract to outsource your help desk (technical support phone service). Let's say you really want the help desk to answer your calls within 1 minute (you've already figured out this requirement in your plan) but the vendor's first offer is to answer your calls within 30 seconds. Let's also assume that price is more important to you than having your calls answered 30 seconds faster (remember- the vendor doesn't know this). And let's say the offer on the table is $5 per call. A great trade proposal would be "Your price is too high for me. I can recognize that you need enough people to answer those calls within 30 seconds and that has value. I would be willing to sacrifice an extra 30 seconds on each call if you could bring your price down." If the vendor responds with a counter-offer, circle back to steps 4 and 5. Try and keep the counter offer / trade cycle going as long as possible.

6. Nibble. Just as you and the vendor are about to agree to terms and everyone starts smiling and shaking hands, start asking for the gravy. Let's say you've just negotiated a software deal and you would really like some training. Just when you think the vendor believes the negotiation is at its very end, you could say "I am really glad we could work this out. I'm looking forward to using your software. One more thing- would you mind spending a couple days showing me how to use your product. A little training could be useful. Is that ok with you?" You run the risk of opening up the negotiation, but you stand a better chance of getting a few extras free of charge.

7. Walk The Talk. If you've set your maximum price and you can't seem to negotiate what you want even with trades, walk away. Be firm and truly be prepared to walk away. Be blunt. "It seems we're not getting anywhere. I think I'll take my business elsewhere. Thanks for your time." Shutting the discussion down can sometimes break the log jam. If a vendor really thinks they're going to loose the business, they may suddenly move.

8. Patience is a Virtue. Negotiations take time. Before you begin, know what your timeframe to make a decision is. Never act hurried or anxious. Come across to the vendor as relaxed and confident (but not cocky). The message you want to send to the vendor is "I've got all the time in the world."

9. Never Lie. Although this happens in many negotiations, telling lies will hurt your reputation and could poison vendor relationships. I am not a proponent of outright fibbing. Be honest but don't give away your hand.

Follow these steps, and you will strike better deals and build confidence in your ability to negotiate. What I have left out in the steps above are standard questions that vendors love to ask. Let me leave you with these questions, their underlying motive, and what you should say. The trick is to always put the ball back in the vendor's court to better your position:

Question: "What's your budget for this project?"

Motive: Setting the price floor

Answer: "That's confidential. Why do you need to know that?"

Question: "What's most important to you? Price or service levels?"

Motive: Prioritizing your trades

Answer: "They're both important to me. I'm looking for the best package"

Question: "How soon do you need to make a decision?"

Motive: Setting the timeframe

Answer: "I will make a decision when I can get the overall best deal"

Question: "Can you make decision quickly. I've got to make my sales quota and our quarter is ending soon. I can't guarantee I give you the same discount"

Motive: Apply pressure

Answer: "I'm not going to rush my decision because of your company's business calendar. We may need to re-think things..."

There are others, but always maintain your control, patience and poise and always take the lead in the negotiating dance!

Text 2. Business contracts.

A business contract is a legal promise made between two or more parties. A contract may be drawn when the associated parties wish to enter into a transaction like buying or selling, performing services, leasing properties, collaborating in joint ventures, advertising, manufacturing, distributing or selling goods, etc. The business contract is considered a surety against cheating by any of the associated parties.

The length of a business contract depends on the number of clauses being mutually agreed upon. It may be of a single page or it may run into a dossier of several pages. Every business contract is legally binding and attracts relevant stamp duties. The general practice is to compose such business agreements in the presence of lawyers of all the parties involved.

The first page of a business contract usually contains the names and addresses of the signatories. A brief description of their jobs can be mentioned along with their names. The date of signing the contract is put up on the first page.

The next part of the contract is called the recitals. This is a very short description of the type of transaction the parties are going to enter into. It is usually no longer than a paragraph. After recitals follow the specifications, in which there is a detailed description of the job the parties are to undertake. This part may run into several pages and it contains a very succinct description of the exact job portfolio. It sometimes contains formulas, diagrams, sketches and graphs in order to better explain the nature of the job.

Payment comes in the next section. A very clear mention is made of the remuneration that one of the parties is to give to the other. Either the exact figure is mentioned, or at least the determining factors are outlined. If time is extremely relevant in the completion of the job, then the sentence "Time is of the essence" is included. Whatever the conditions regarding the payment may be, they are to be put down in the contract.

Apart from all this, there are several legal points covered. It is written in the contract which state jurisdiction will apply in case of a legal suit. Also, the tenure of validity of the contract is mentioned.

A business contract is a very delicate matter. It takes several deliberations between the associated parties along with the involvement of their lawyers to reach a final draft. There are sometimes several negotiations and amendments in the agreement, until it becomes satisfactory to all concerned. Only after mutual agreement are the signatures put down on the document. All concerned parties have to preserve a copy of the contract as long as it is valid.

Make up special question to cover the content of the text.

Study the structure of the Contract:

КОНТРАКТ. CONTRACT

Контракт № Транс № Г. Москва « »		Contract № Trans No. Moscow “ ”
Экспортно-импортное предприятие «000 » г. Москва, именуемое в дальнейшем «Покупатель», с одной стороны, и фирма «ZZZ» именуемая в дальнейшем «Продавец» с другой стороны, заключили настоящий контракт о нижеследующем:		Export – Import enterprise “000” Moscow hereinafter referred to as the “Buyer” on the other part, and the firm “ZZZ” hereinafter referred to as the “Seller” have concluded the present Contract for the following:
1. Предмет контракта 1.1 Продавец продал, а Покупатель купил на условиях поставки ФОБ___________ франко-вагон, __________ следующее оборудование: _______________________ Спецификация и техническая характеристика оборудования и принадлежностей предусмотрены в приложении №		1. Subject of the Contract 1.1 The Seller have sold and the Buyers have bought: f.o.b. __________ f. v. ________________ the following equipment: __________ The specification, technical characteristics of the equipment and accessories are stipulated in Appendix/ces Nо.
2. Цены и общая сумма контракта		2. Prices and Total Value of the Contract
2.1 Цены по позициям указаны в приложении №		2.1 Prices under separate items are specified in appendix/ces No
2.2 Цены твердые и не подлежат изменению.		2.2 The prices are firm and are not subject to any alteration.
2.3 Цены понимаются ФОБ______  и включают стоимость морской упаковки, маркировки на борт судна, укладки и крепления оборудования, как в трюме, так и на палубе, в том числе стоимости необходимых для этого материалов, стоимости лихтировки, перемещения груза на причале, а также доковые, портовые, крановые сборы, таможенные пошлины на товары и плату за выполнение таможенных формальностей и включают стоимость экспортной упаковки и маркировки.		The prices are understood to be f.o.b. ______ and include cost of sea packing, marking, loading on board the ship, stowing and fastening the equipment both in the hold and on deck including cost of materials used for this purpose, lighter age, placing the cargo along moorage, stevedoring, as well as dock, port dues, carnage, custom duties and attendance to custom formalities and including cost of export packing and marking.
2.4 Общая сумма контракта составляет_________(прописью)		2.4 The total value of the Contract amounts to__________________(say)
3. Сроки поставки		3.Delivery Dates
3.1. Указанное в контракте оборудование должно поставляться комплектно по каждому трансу в следующие сроки:______ в сроки, указанные в приложении №		3.1. The equipment Indicated in the Contract is to be delivered in complete sets under each Trans No. by the following dates: __________ by the dates indicated in Appendix No.
К указанным срокам оборудование должно быть изготовлено, испытано, упаковано и поставлено ФОБ ___________ франко-вагон ______________		Ву the date stipulated the equipment shall be manufac­tured, tested, packed and delivered on conditions: f. o. b._______________ f.v. _________________
3.3 Датой поставки считается дата чистого бортового коносамента, выписанного на имя Покупателя _____________ на которой передается железной дороге, принимающей товар.		3.3 The date of delivery is considered to be the date of the “clean-on-board" Bill of Lading made out in the name of the Buyers ________ the where the goods are passed over by rail of the Sellers' country to rail which receives the goods.

hereinafter referred to as ... - именуемый в дальнейшем...

to conclude a Contract - заключать договор

total value of the Contract - общая сумма контракта

the prices are not subject to any alterations - цены не подлежат изменению

the prices include cost of ... - цены включают стоимость...

a sea packing - морская упаковка

a marking - маркировка

a loading on board the ship - погрузка на борт судна

a hold - трюм

customs duties - таможенные пошлины

customs formalities - таможенные формальности

delivery dates - сроки поставки

Bill of Landing – коносамент

Task 1. Read the texts. Translate them into Russian, and render them.

Task 2. Memorize the key terms, concepts, expressions and their meaning.

1. daunt	запугивать обескураживать
2. to the hilt	до конца, полностью
3. solicit	просить
4. vendor	продавец
5. pass the buck	передать ответсвенность
6 sneak	переходить
7. pitch	место, площадка
8. trial version	образец
9.to get a word in edgeways	имет шанс вставить слово
10. flush out	стереть
11.leverage	сила воздействия
12. evaluate	оценивать
13.latch	зацикливаться
14. pick	выбирать
15.be picky	быть разборчивым
16. include	включать
17. gravy	подливка
18. incur	подвергаться
19. druther (world rather)	свободный выбор
20. premature	преждевременный
21. flip-side	обратная сторона
22. substantially	прочно, надежно, основательно
23. prod	подстрекать
24. outright	открыто, прямо
25. perceive	понимать, различать
26.assume	предполагать
27. nibble	клевать, шипать
28. blunt	непонятливый
29. fib	выдуманно, неправда
30. joint venture	акционерное предприятие
31. dossier	досье
32. recital	декламация
33. undertake	предпринимать
34. remuneration	вознаграждение
35. relevant	уместный, относящийся к делу
36. tenure	владение, срок владения

Task 3. Answer the questions. Solve the problems. Do the tasks.

1. What should you know to negotiate successfully? Comment on.

2. To do business, you should know how to conclude a contract? Is it right?

3. Find the English equivalents for the following:

1. именуемая в дальнейшем	the prices are understood f.o.b.
2. с одной стороны/с другой стороны	including cost of materials
3.заключили настоящий контракт о нижеследующем	as well as any other expenses which may arise
4.покупатель купил на условиях	specified in Appendix
5. франко-вагон граница	the equipment is to conform to the Technical Conditions
6. в полном соответствии с технической характеристикой	the Sellers are to bear all the expenses connected with
7. оборудование должно соответствовать техническим условиям	the total value of the contract amounts to …
8. согласно приложению	connected with the execution of the present contract
9. цена поднимается ФОБ	the prices per item are specified in Appendix N
10.продавец несет все расходы по …	hereinafter referred to as
11.включая стоимость материала	the Buyers have bought (purchased) on conditions
12.также все другие расходы, которые могут возникнуть	on the one/other part

13.в связи с выполнением настоящего контракта	franco-railway car border
14.общая сумма контракта составляет	the prices are firm and are not subject to any alterations
15.цены по позициям указаны в приложении	have concluded the present agreement for the following
16.цены твердые и не подлежат изменению	in full conformity with the technical characteristics

Task 4. With some business problems, you have to negotiate a solution and make compromises. Practice by negotiating any problem you wish.

Task 5. Do the test. Find the Russian equivalents in the right-hand column for the following

money	a) товар, товары
agreement	b) экономика (страны)
business	c) компания, фирма
bank	d) сельское хозяйство
industry	e) страна в Европе
export	f) ден. единица в США
franc	g) импорт, импортирование
lira	h) сокровище
Russia	i) счет, отчет
pound	j) финансы. финансирование
credit	k) страна в Европе
discount	l) ден. единица России
bargain	m) деньги
rouble	n) соглашение, согласие
Austria	o) дело, бизнес, коммерция, торговля
finance	p) банк
account	q) промышленность
treasure	r) экспорт, экспортирование
import	s) ден. единица во Франции
dollar	t) ден. единица в Италии
Switzerland	u) наша страна
agriculture	v) ден. единица в Англии
company	w) кредит, доверие
economy	x) скидка
goods	y) сделка

Answer key: 1 m; 2 n, 3 o; 4 p; 5 q; 6 r; 7 s; 8 t; 9 u; 10 v; 11 w; 12 x; 13 y; 14 l; 15 k; 16 j; 17 i; 18 h; 19 g; 20 f; 21 e; 22 d; 23 c; 24 b; 25 a.