Dec 7, 2018
How do I deal with price negotiation for overseas customers without hitting our lowest limit?
Currently, I am facing an issue with overseas customers regarding price. I have reduced the price to the best of our ability but they still want us to offer a lower price. I request you to please help me with this.
Thank you.
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Dec 7, 2018
You should try to find out what is your best profit margin in general, is it 30%, 80%, 200%? Each business has their own type of profit margins and all depend on the operating cost + product manufacturing cost and other costs to get the product ready. You have to calculate all the costs. You are in business to profit if you are after all of this negotiation back and forth with these overseas customers and they are still asking for a lower price in which you may be unable to do, then just tell them that you have given them the best prices you can sell at and after that you will operate at loss in which you, unfortunately, can not do. Tell them you will not only offer them great products but also great service and some customers will appreciate this fact, others will keep asking for lower prices no matter what you give them. There are certain countries that have to learn how to negotiate business in a different way, no matter how low is the price you give them, they will come back asking for a better offer because it is in their culture and they are not used to accepting or saying yes for the first or second offer.
If you are getting this a lot I may suggest next time you create a plan, offer your best prices for a very high quantity which can be 100,000 units or 300,000 units in which you know upfront these customers will not order this quantity and then go up and up to the lower quantities until you get to the quantity they are asking about, lets say 5,000 units. Now they will see really good prices for the 100,000 units but somehow high prices on the 5,000 units, they know their limits at this stage and when they come back to ask for better deals on the 5,000 units. Tell them if they order within a certain period of time, you will offer them the 10,000 units. Never even go to the 100,000 units prices and wait and see hows that work... you will learn a lot through this process. I would not even offer them the 100,000 units prices for 5,000 units as it is pointless. However, you can offer them really good prices on some contract negotiation like you tell them I can give you the prices of 10,000 units now but if you order 30,000 units within the first 12 months... (or whatever works with your business type) I will offer you at the end of the year some units for free like 1,000 or 3,000 units. In the end, they will end up getting the 30,000 units prices but only after they order by the end of the year a total of 30,000 units. This way you guarantee few things: you will have them get stuck with you, you will also have them order more to get the freebies at the end of the year, and you did not have to give up so much and operate with no or less profit.
After all, they are in business to make a profit and YOU ARE TOO :).