6 Tips for Negotiating Better Deals With Vendors

Start by knowing what you need and understanding how vendors operate.

Written by Nidhi Jain
Published on Dec. 01, 2023
6 Tips for Negotiating Better Deals With Vendors
Shutterstock / Built In

Vendors of all types continually change up their pricing models, service offerings and licensing structures to stay competitive. Given this landscape, finance leaders must use innovative strategies to negotiate the very best terms, pricing and service levels.

6 Ways to Get Better Deals

  1. Know what you need.
  2. Understand that vendors often change pricing.
  3. Use benchmarks and competitive bids.
  4. Don’t disclose your budget 
  5. Pay Attention to the agreements.
  6. Try bartering.

Here are six cutting-edge strategies that will help you negotiate better deals with software vendors, optimize your software investments and increase your bottom line. 

Negotiation Know-How The Key to a Successful Negotiation? Know Your BATNA.


Know What You Need

Not knowing what your team needs, why they need a particular application when they need it, and how it contributes to revenue can lead to unfavorable outcomes. 

This lack of knowledge can also give vendors an advantage at the negotiation table. Vendors may take advantage of this lack of clarity by proposing higher prices or upselling, resulting in unnecessary expenses. Understand the requirements by asking the right questions: 

  • How will the organization benefit from the application’s use?
  • When does the team need it, and what will be the ROI?
  • How many licenses or seats will be necessary?
  • What if any critical features hold higher priority?
  • Does it need periodic updates or extra expenses?

Having answers to these questions equips you with the knowledge needed to enter negotiations confidently, ensuring that you purchase the right product at the right price. You’ll only negotiate for what you need and avoid overspending on applications and features. 


Understand Vendor Pricing Changes

Vendors typically revise their pricing on an annual basis. Therefore, it is crucial to secure a commitment that, as an existing customer, you will be billed at the previous pricing when acquiring additional licenses in the future.

Some buyers may not be aware of this practice and end up paying extra for product updates or new licenses. However, you can incorporate clauses in your agreement to safeguard against price increases during product updates or the purchase of additional licenses.

However, specific practices can vary among vendors, so having this conversation and establishing clear terms during your negotiations is essential.


Use Benchmarks and Competitive Bids

The best way to negotiate better deals with vendors is by knowing what others are paying. Conduct a thorough market analysis to find the latest benchmarks. Knowing what your peers are paying will help you negotiate the right price with the vendors. 

Additionally, conduct competitive analysis, requesting quotes from different vendors. Armed with pricing benchmarks and competitive offers, you can confidently negotiate, justifying your pricing requests. 

This strategy encourages transparency, fosters trust with vendors, and minimizes the risk of overpaying for licenses, ultimately ensuring favorable deals with vendors.


Never Disclose Your Budget

Refrain from revealing your allocated budget to vendors, which can hamper your negotiation flexibility. Disclosing your budget gives vendors an unfair advantage and may reduce their willingness to negotiate. Additionally, avoid sharing sensitive information that could be used against you.

Based on our experience with vendors, rejecting the initial offer is advisable, as accepting it may lead to hidden charges or additional expenses. Remember, there's always room for negotiation.


Pay Attention to the Agreements

Finance leaders can often underestimate how negotiable contracts can be and many miss out on the potential benefits. Within these agreements, critical components can significantly affect your organization’s revenue. 

Termination clauses allow you to exit a contract without penalties, safeguarding you from unexpected changes. Media-rights clauses can be negotiated to get discounts or extra benefits when your organization’s name is used for PR, making your partnership more valuable.

Finally, auto-renewal clauses may seem insignificant but can lead to hidden costs if not addressed. Failing to negotiate these clauses can result in missed savings, so negotiate them before signing the agreement. 

More Negotiation Know-HowHow to Counter Offer in a Salary Negotiation


Try Bartering

Sometimes, vendors may be unwilling to offer deals that align with your needs. Instead of seeking an alternative, explore their pain points. Offering your product as a solution to their challenges can lead to mutually beneficial arrangements.

Remember that negotiation isn’t a complex process; it’s about insights and market understanding. Understanding your needs and pricing benchmarks provide ample leverage for negotiations. 

Maintain a friendly relationship with vendors, highlighting the potential value of your partnership, and follow these negotiation strategies to secure the right deals.

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