How to Negotiate in a Power Imbalance

Negotiating with larger suppliers when you're a smaller business can sometimes feel like going into a battle with a toothpick against a tank. The good news is there are some practical strategies you can use to tip the scales in your favor.

There are countless stories about the underdog overcoming a much more powerful enemy: think David vs Goliath, Frodo vs Sauron, or Erin Brockovich vs PG&E. But perhaps these analogies are too combative – our aim, as negotiators, isn’t to “defeat” or “overcome” larger suppliers, but to find ways to level the playing field, get a fairer deal, and discover win-win outcomes.

Reasons for an imbalance

You’re a small business owner or head of procurement for a small company. For reasons beyond your control, you need to deal with a gigantic supplier. Perhaps they have a monopoly on the product or service you require, or maybe it’s impractical to look elsewhere.

This supplier has resources on steroids. It has a bigger production capacity, wider distribution networks, and massive market influence. In other words, they control the game.  In practice, this means they don’t particularly need your business. If you ask for a discount or other benefits, there’s really no incentive for them to accept. You find yourself rebuffed, and forced to pay the highest price for a product.

Strategies to negotiate in a power imbalance

Let's talk strategy. How do you negotiate when the odds seem stacked against you? Here are some tricks to keep up your sleeve:

Emphasize your unique value proposition

Sure, the big guys have all the shiny toys, but what makes you special? Highlight what makes your business unique – perhaps you have access to a customer segment that the large supplier craves, or maybe a partnership with your new and funky brand would be great for their image. Play up these strengths; they can be your secret weapons.

Build strong relationships

Relationships matter! Forge connections with the people who matter at the supplier (LinkedIn is a great tool for this). Personal connections can sometimes open doors that formal business negotiations can't.

Flexibility and creativity

Don't just stick to conventional negotiating tactics. Be flexible. Be creative! Maybe propose a different pricing structure, bundling your orders, or suggesting a longer-term contract in exchange for better rates. Being adaptable can often tip the scales in your favor.

Focus on data and performance metrics

Numbers speak volumes! Instead of relying solely on the charm offensive, gather and present hard data that showcases your performance. Highlight your growth rates, efficiency improvements, or market expansion plans. This data not only validates your credibility but also demonstrates your potential as a valuable partner. When armed with concrete figures, you move from being the underdog to a strategic player in the supplier's eyes.

Offer value beyond price

Yes, price negotiations are essential, but they're not the only card in the deck. Consider offering value beyond just the cost. Maybe you can assist in marketing their products to a new demographic, provide valuable feedback on product development, or even collaborate on exclusive product lines. Proposing additional value demonstrates that the relationship is not just about a transaction but a mutually beneficial partnership.

Strengthen your BATNA (Best Alternative to a Negotiated Agreement)

What's your Plan B if the negotiation doesn’t work out? Understanding and having a solid backup plan (your BATNA) increases your leverage. If the terms offered by the supplier don't meet your minimum requirements, you can confidently walk away, knowing you have alternative options.

Having a strong BATNA gives you the confidence to negotiate from a position of strength.

Unlock the GPO advantage

Join a group purchasing organization (GPO) like Una. By pooling your purchasing power with other businesses, you instantly become a part of a larger force. This strength-in-numbers strategy gives you better bargaining power, unlocking discounts and terms you'd struggle to get on your own.

By consolidating your purchasing needs, GPOs negotiate on behalf of all their members. You're suddenly part of a force that demands attention, better pricing, and better contract terms. Individually, your purchase might not get much attention, but collectively, you're an undeniable force that can't be ignored.

Level the playing field

Negotiating with larger suppliers might seem like stepping into the ring with a heavyweight champion, but don't throw in the towel just yet. Highlight your uniqueness, build relationships, and get creative. And, of course, never underestimate the awesome power of GPO-enabled purchasing.

Remember, it's not just about playing the game; it's about playing it smart. Use a combination of these strategies to navigate negotiations with larger suppliers. It's all about finding that sweet spot where both parties walk away feeling like winners.

Explore other benefits of working with a GPO and learn how group purchasing fits into your overall procurement strategy: