You're listening to Business English Pod, the Business English podcast for professionals on the move.
Hello and welcome back to Business English Pod.
My name's Edwin and I'll be your host for today's lesson on English for Purchasing and Negotiating Price and Terms.
We've talked a lot about how important it is to find the right vendor.
They can make or break your business.
That's why we put so much work into meeting interviewing, screening and qualifying potential vendors.
But once you've found the right vendor, you still need to actually make a deal.
Specifically, you need to agree on price and terms.
To set yourself up for success, it's a good idea to do some research and preparation.
If you know what things should cost and you know what you need from a deal and you can anticipate what the vendor needs, then you'll be in a good position to negotiate.
In your discussion you'll likely make price comparisons.
In your efforts to get a deal, you'll have to propose terms to the vendor and show consideration for their position in the negotiation.
Because things like delivery and quality are so important, you'll also want to discuss penalties.
And like any negotiation, at some point you'll probably suggest a compromise.
With these skills, you should be able to get a price and terms that work for you.
In today's dialogue we'll hear Adam, a purchasing manager who works for a company that makes fitness equipment called XFit.
He's been talking with Jenny, a sales rep for a manufacturer that can make pulleys for XFit's equipment.
XFit has chosen Jenny's company as a vendor, so Adam now has to negotiate the price and terms.
As you listen to the dialogue, try to answer the following questions.
1.
What is the first issue that Adam brings up in the negotiation?
2.
What does Adam first propose for delivery terms?
3.
What is Adam willing to agree to if Jenny agrees to his suggestion about penalties?
That's good to hear.
But I know you're pressed for time, so perhaps we can just jump right in.
Big one first, price.
As in, I'd really like to see if we can bring it down a bit.
We've looked around and $11.50 seems a tad high.
Well, these aren't your run-of-the-mill pulleys, right?
And this is a pretty small initial run.
All the tooling and casts… that's a fair bit of upfront costs on our end.
Yeah, I get that.
But, like you said, it's an initial run.
We'll be upping this to five, six times that on a regular basis.
Right.
Happy to talk about a volume discount on future work, but base price on this high carbon steel work is obviously going to be higher.
It's about quality, right?
Yeah, of course.
So then, if and this is a big if if we stuck with 1150, I'd like to see us agree on DAP terms here.
Delivery to Guadalajara, fully insured.
We take care of duties.
Uh, not sure about that.
Thought we talked about freight on board.
I'm pretty sure I brought that up way back.
Yeah, appreciate you've got costs to control.
Just looking for a fair compromise here.
Sure, we're both looking for a win-win.
But my understanding was that quality was number one to you guys.
Yes, it is about quality.
So, maybe we can work on the defects issue?
What do you have in mind there?
I'd like to see colour and finish issues as major defects and bump any size or weight discrepancies to critical.
We really can't have any problems there.
Full replacement on both major and critical.
I see.
Then you would agree to FOB?
Well, not exactly.
It's important to us that insurance is in your court, so maybe we could go with delivery at terminal.
Hmm, that's a tough one for us.
DAT?
Uh-huh, DAT.
Okay, well, I'm going to have to look at that a bit before I can give you an answer.
Would it be all right if I called you back on Monday?
We'll need to check a few things with our agents first.
Thanks.
Just hope you can come our way a bit more on these terms.
In any case, Monday sounds good.
Now let's go through the dialogue again and look at the language and techniques Adam used to negotiate the price and terms.
We join the conversation after a bit of chit-chat, as Adam wants to jump right in or start their discussion.
Yeah, that's good to hear.
But I know you're pressed for time, so perhaps we can just jump right in.
Big one first, price.
As in, I'd really like to see if we can bring it down a bit.
We've looked around and $11.50 seems a tad high.
As you can hear, Adam doesn't shy away from discussing price.
He immediately tells Jenny that he'd like a lower price, or to bring it down.
And when you negotiate the price, it's a good idea to compare with other companies' prices.
What Adam says we've looked around, he means they've looked at the price of the same piece of equipment from other companies.
As he says, Jenny's price is a tad high, or a bit more than other suppliers.
Talking about price comparisons can support your requests for a lower price.
That is, if you've been quoted a price that's higher than other companies.
What are some other ways we can make such comparisons?
Let's run through some more examples.
Seems that you guys are quite a bit more expensive than others.
Is that your best price?
Because I know I can get it for lower down the road.
Just so you know, the same thing is going for about $200 at the competition.
Let's listen to their exchange.
Well, these aren't your run-of-the-mill pulleys, right?
And this is a pretty small initial run.
All the tooling and casts, that's a fair bit of upfront costs on our end.
Yeah, I get that.
But, like you said, it's an initial run.
We'll be upping this to five, six times that on a regular basis.
Right.
Happy to talk about a volume discount on future work, but base price on this high-carbon steel work is obviously going to be higher.
It's about quality, right?
In responding to the issue of price, Jenny emphasizes quality.
She says they aren't making run-of-the-mill pulleys, meaning average or medium-quality ones, and she's willing to talk about a volume discount or a cheaper price per unit for larger orders in the future.
But for now they need to take care of their equipment and material costs to meet Adam's quality expectations.
This is a good way of turning Adam's priorities back at him when he talks about price.
But Adam brought up price at the start not only because he wanted a lower price.
In a way it was to set up other demands.
Let's listen.
Yeah, of course.
So then, if and this is a big if if we stuck with 1150, I'd like to see us agree on DAP terms here.
Delivery to Guadalajara, fully insured.
We take care of duties. so Adam is using the money issue to set up his proposal for terms.
If he agrees to Jenny's price, then he would like more favorable delivery terms in return.
Specifically, Adam mentions DAP, which means delivery at place.
DAP is one of several INCO terms, or international commerce terms.
The different INCO terms determine who will pay for different parts of the transaction, such as shipping, insurance and duties, and where the buyer will take possession of the goods.
Proposing terms is a fundamental aspect of negotiations, so let's try some more ways of doing this.
So, how about you handle the shipping costs and we cover duties?
We're willing to provide payment in full once we've inspected the delivery.
We don't mind paying 25% up front if you can guarantee delivery in two weeks.
What about this?
You'll take care of the shipment just to the nearest port of entry?
So, is Jenny willing to agree to DAP?
Uh, not sure about that.
Thought we talked about freight on board.
I'm pretty sure I brought that up way back.
Yeah, appreciate you've got costs to control.
Just looking for a fair compromise here.
Jenny certainly doesn't agree right away, especially since she remembers discussing a different arrangement previously.
But you'll notice that Adam isn't taking an aggressive approach to the discussion.
On the contrary, he's showing consideration for Jenny's position, acknowledging they have costs to control.
As he says, Adam is looking for a compromise or a fair agreement where both sides get what they want.
This makes him sound reasonable, especially because Jenny has already been pretty firm on price.
Let's try some more ways of showing consideration or appealing to fairness when negotiating terms.
I completely understand your concerns about trading quality for speed.
Your worries about costs are reasonable, so maybe there's something we can work out.
I see how that might be a tight schedule for such a large order.
Maybe I can help ease your concerns about the risks here.
Now let's get back to the dialogue and see what Adam and Jenny discuss next.
Sure, we're both looking for a win-win.
But my understanding was that quality was number one to you guys.
Yes, it is about quality.
So maybe we can work on the defects issue?
What do you have in mind there?
I'd like to see color and finish issues as major defects and bump any size or weight discrepancies to critical.
We really can't have any problems there.
Full replacement on both major and critical.
When Jenny brings up quality again, Adam uses it as an opportunity to talk about defects, which are products with mistakes or problems.
Most vendor agreements, at least in manufacturing, will have terms that explain what happens when there are defects.
This is Adam's chance to negotiate penalties.
There are different categories of defects, with different penalties for each one.
Adam is suggesting moving some problems from the less serious to the more serious categories.
This will mean better protection for Exfit against quality problems, as any product with colour finish, size or weight problems will be replaced by Jenny's company.
There are many other ways of discussing penalties.
Let's try some more examples.
We'd really like to see a 5% discount on late deliveries.
We're going to need immediate replacement on any major defects.
If this doesn't pass our quality inspection, we'll need a free replacement.
If the failure rate goes beyond 0.2%, you'll need to replace the casts.
How does Jenny respond to Adam's suggestion about penalties?
I see.
Then you would agree to FOB?
Well, not exactly.
It's important to us that insurance is in your court, so maybe we could go with delivery at terminal.
What we heard there is fundamentally how negotiations work.
Someone suggests something.
You suggest something else.
They ask you to give something up, and you say you will if they give something up too.
That's the nature of compromise.
You can't start off accepting their terms or you won't be in a position to suggest a quid pro quo, as we call it.
That is, you agree to one thing if they agree to another thing.
In this case Adam says he's willing to accept delivery at terminal.
Another INCO term if Jenny accepts the penalties he's proposed.
Let's run through some more ways of suggesting a quid pro quo or compromise.
Notice that we often use the word if.
If you can lower that cost a bit, maybe we could be more flexible on delivery.
Well, maybe we can cover the duties if you take care of insurance.
With a 10% discount on orders over $500, we'd be happy to split shipping costs.
How about delivery guaranteed in 30 days if we agree to $10 a unit?
Of course, Jenny's a pretty good negotiator herself, so she won't agree too quickly, as we can hear.
Hmm, that's a tough one for us.
D-A-T?
Uh-huh, D-A-T.
Okay, well...
I'm going to have to look at that a bit before I can give you an answer.
Would it be alright if I called you back on Monday?
We'll need to check a few things with our agents first.
Thanks.
Just hope you can come our way a bit more on these terms.
In any case, Monday sounds good.
They haven't reached a deal, but they're pretty close.
Adam has done an excellent job of setting up his demands.
He started showing disappointment with the price which helped him when it came to getting compromise on delivery terms and penalties.
Now let's practice some of the language we learned in today's lesson.
Imagine you work as a purchasing manager for a manufacturing company.
You're talking with a vendor about price and terms for a part that you need.
You'll hear a cue from a vendor, then I'll give you a suggestion for what you can say in response.
We'll guide you through each step in the practice and provide an example answer for each response.
Ready?
Let's give it a go.
So, like I said, we think $15 per unit on orders under $1,000 is fair.
Start by saying that another company you spoke with can do it for $12.
Answer.
Well, I talked with another company who said they can do it for $12.
Wow, I really don't think we can go that low on this.
Now suggest talking about terms instead and propose a 21-day delivery.
Answer.
So how about looking at terms instead?
We'd like to see 21-day delivery.
21 days is not much time, especially as this is an initial order.
Next, say you understand their concerns, but the delivery is very important to you.
Answer.
Okay, I understand your concerns, but delivery is very important to us.
Well, I suppose we could agree to 28 days, but it's still pretty tight.
Answer Okay.
We could think about 28 days if there's a 10% discount on late deliveries.
10%?
That's quite high.
I mean, we don't plan to be late, but that's tough.
Finally, suggest $13 per unit if they accept 28 days and a 10% penalty.
Well, how about $13 per unit with 28-day delivery and 10% penalty?
Now let's practice some of the vocabulary we've covered in this lesson.
In a moment, you'll hear a series of sentences with a word replaced with a beep.
Repeat each sentence, including the missing word.
For example, if you hear...
If you want extra features, we'll have to add that to the base price.
After each response, we'll provide the correct answer.
Let's begin.
We'll need to sell these for at least $30 to cover our upfront...
Answer.
We'll need to sell these for at least $30 to cover our upfront costs.
We'd be happy to offer a volume of 5% on orders over 10,000.
Answer.
We'd be happy to offer a volume discount of 5% on orders over $10,000.
Come on, Pete.
$5,000 seems a tad... for a machine this old.
Come on, Pete.
$5,000 seems a tad high for a machine this old.
I can't help you today because I'm pressed for... on another project.
Answer I can't help you today because I'm pressed for time on another project.
We've reached the end of this lesson, the fourth in our series on purchasing.
We've learned how to make price comparisons, propose terms and show consideration for the other party's concerns.
We've also looked at how to discuss penalties and suggest a compromise.
Thanks for listening, and see you again soon.
