The way you negotiate can make a huge difference to the margins you retain in a deal.
A study by Simon-Kucher and Partners of 56 automotive suppliers showed these companies faced price reduction demands from the manufacturers of between 4.7% and 5.1%.
The successful negotiators were able to limit price reductions to just 1.4%. The less successful suppliers had to accept price cuts of 3.8%. The difference of 2.4 percentage points was higher than the margins of most suppliers.
According to Hermann Simon, Chairman of Simon-Kucher and Partners, the successful negotiators paid much more attention to price setting and implementation. By contrast, the less successful attached much more importance to cost-cutting.
To quote Simon, “the successful suppliers put 50% more energy into improving margins that their less successful counterparts”.
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