Foresight essential in getting best price

Purchasing managers set acceptable range, jockey for leverage

Spending Smart

Your Money

June 26, 2005|By Gregory Karp

Negotiating the best price on goods and services can be an art form. And unless you're in a bartering business, you may feel inept at haggling.

For tips, we turned to two professional negotiators. Both are certified purchasing managers and members of the Institute for Supply Management: Jim Haining, director of procurement at Insituform Technologies, a sewer-repair company near St. Louis, and Carol Marks, director of purchasing for an Industrial Distribution Group facility in Belmont, N.C.

Have a plan. Entering negotiations without a plan can quickly lead to overpaying.

"Whether you're buying as a consumer or buying as a professional, planning is a big part of it," Marks said. "A well-thought- out strategy says, `Here's what I really want. Here's what I'm willing to live with.'"

Consumers entering a negotiation should identify what Marks calls "your currencies": "What's important to me? Is it important that I get this done quickly? Is it important that I get the best price? Is it a long-term or short-term deal?"

Consumers should have a target price in mind and need to be willing to walk away if the deal is not right.

Assess leverage. Evaluate how desperate you are to buy, compared with how badly the vendor wants to sell. If you have more leverage, be aggressive. For example, you might be able to play hardball for a better deal at the end of the month if a salesman needs to reach a quota.

On the other hand, if you want to buy a car with a six-month waiting list for delivery, the seller has more leverage. In that case, try to negotiate fringe issues that might not matter much to the seller, perhaps better financing or floor mats.

"I think a lot of people leave things on the table because they're just looking in terms of the price of the buy, rather than looking at some of the negotiables," Marks said.

In buying a newly constructed house, it might mean negotiating closing costs or fees with a builder or asking for something to be changed in the house that doesn't cost the builder much but would be valuable to you.

You also have leverage on large, multiple purchases. Marks recently helped her son shop for a bedroom suite to furnish the new home he bought. Knowing he needed more than just bedroom furnishings, her smart-purchasing instincts kicked in.

"I asked the salesperson, `What happens if I buy this bedroom suite, this den suite and these two mattresses? Then what can we do on price?'" she said. "I had the leverage of a potentially bigger spend."

Seeking win-win. If you will have a continuing relationship with the seller, it's often better to seek a deal that works well for both of you.

For example, Haining takes his car for servicing to a particular auto mechanic he trusts. The mechanic is not the cheapest, but Haining knows he'll get a true assessment of what needs to be done and will only be charged for repairs he absolutely needs. "That's worth a lot because what you're getting is not the lowest hourly cost but the lowest total cost," Haining said.

Gregory Karp is a personal finance writer for The Morning Call, a Tribune Publishing newspaper in Allentown, Pa. E-mail him at yourmoney @tribune.com.

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