Q & A Table of Contents
The 7% Hold-up
From: Sharon, Surbiton, UK
Question: I have a supplier who is the only available source of supply for a specific product. He has presented me with a 7% increase which I know to be out of line. I cannot obtain this product elsewhere and do need him, however, I cannot justify accepting this increase.
Response: If the supplier thinks he has you over a barrel, he might be right . . today. However, your supplier/purchaser relationship sounds like there's more to it than this particular deal. If you remember that virtually all negotiations need to be thought of as episodes in ongoing relationships, that can give you a context in which to analyze the situation and develop a strategy.
One approach is to tell your supplier, "I find your expectation that we'll pay a 7% increase troublesome to justify. While I could tell my (boss/colleagues/customers) that I agreed to pay the increase because I was caving in to pressure, that will damage (my/my company's) credibility. How would you suggest I sell them the idea of paying the increased price?"
Another tactic might be to remind the supplier of the existing relationship, suggesting that this short-term behavior means you are going to have to re-examine a) the relationship, b) the supplier's credibility and fairness, c) future alternatives for other sources of supply, d) a change in your product so you don't have to use his product in the future. Whichever of these approaches you use, you should offer each possibility as an open-ended question: "How would you feel if, as a consequence of this price rise, we were to re-examine our product design to find alternative ways to deliver it without your part?"
You might tell the supplier that as a consequence of his price increase you'll have to raise your prices and will most likely experience a drop in volume of sales of your product which means you'll probably be buying less from him in the future. So the short-term 7% revenue increase may yield a 7% (or worse) drop in your future purchases from him. Again, phrase this as an open-ended question, not a threat.
If your supplier offers his product to others (even your competitors) it might be worth contacting them to create a united front of customers who manifest their dismay at the price rise. If, in your conversations, you discover that the supplier is charging different prices to different customers, that may give you the opportunity to ask, "Why me?" -- or perhaps to gloat that at least you are not being hit with a 9% rise, for example.
The important thing to do is to avoid taking it lying down. Make it clear that you are troubled. But make certain that you do not approach the negotiation as a victim. If you go into a negotiation thinking of yourself as a victim, you will surely emerge as such. Expressing your feelings can be quite effective.
Remember that what goes around, comes around. You may need the supplier now; one never knows how or why he'll need you later.
Good luck,
Steve
| 
