Do you have experience in B2B sales between companies? It is very different from negotiating between individuals. Let me look back on my own experience. Sometimes I took part as a junior, assisting a senior sales team leader. Sometimes I went with a production executive. And sometimes, as the senior, I brought a team member or a distributor’s salesperson along to the negotiation. Before a negotiation, I would carefully calculate the selling cost of the product: materials and manufacturing expenses, plus selling and administrative costs such as logistics, advertising & marketing, commissions, client entertainment and sales team pay. I would also estimate the prices of competitors already supplying the customer, using information gathered through various channels. When you have little sales experience, this is about all you prepare before setting off on an overseas business trip. After clearing immigration at the airport, you grab your big suitcase and samples and take a taxi to the customer’s office. At the visitor building you show your passport, get an access card, and have security stickers put on your phone and laptop. Then you call the customer’s contact and the waiting begins. Unlike what the negotiation books describe, few customers deliberately kept me waiting. But because of busy schedules, it was typical for them to come down to the reception room about 30 minutes later.
While you wait in the meeting room, you open your laptop and review the key points in the relevant materials. Then the client's manager walks in. He opens with small talk about business: How have you been? Good to see you. How is the mood at your company these days? How are your competitors doing? Then he connects his laptop to the projector and shows the test results. Some managers are frank and say the results were fine, while others blow small issues out of proportion to seize the initiative in the negotiation. When that happens, you think, 'Here it comes,' and start to tense up. After reconfirming the product's basic specs, you move on to the price negotiation in earnest. Let's start the conversation assuming the supplier's cost for Product A is KRW 1.5 (≈ US$1) million, and the client currently buys from competitor B at KRW 2 million (≈ US$1,500).
◆ Customer: Shall we move on to today’s main topic? Please tell us at what price you can supply.
◇ Supplier: What price are you looking for?
(Neither side wants to be the first to name a price.)
◆ Customer: (KRW 1.6 (≈ US$1) million, 20% off the current price, would be enough for us. But to leave room to negotiate, we aim high and open with a lower number. Even so, the number can’t be completely out of line.) Around KRW 1.4 million (≈ US$1,050) is something we could discuss internally.
◇ Supplier: (relieved by the KRW 1.4 million (≈ US$1,050) price paid by major Korean corporations, but hiding it and acting shocked instead) KRW 1.4 million (≈ US$1,050) doesn’t even cover our cost. It’s out of the question. The price we supply to our Korean customers is far higher than this.
◆ Customer: (Here, it matters whether we know that the supplier sells to Korean customers at about KRW 1.4 million (≈ US$1,050). ) Really? Then what price do you charge your domestic (Korean) customers?
◇ Supplier: (Smiling) You know I’m not supposed to share other customers’ information. I’ll tell only you, Manager Wang. We’re delivering at around KRW 1.6 million (≈ US$1,200). Please don’t pass this on.
◆ Client: Really? At that price, it’s higher than what we’re currently getting from Supplier B.
◇ Supplier: We can’t supply to your company at KRW 1.6 million (≈ US$1,200). As an overseas customer, you come with logistics costs, tariffs and the local distributor’s margin, so the price needs to be at least around KRW 1.8 million (≈ US$1,350).
◆ Client: (Thinking KRW 1.8 million (≈ US$1,350) would actually be acceptable, but putting on a slight frown) The KRW 1.4 million (≈ US$1,050) I’m asking for and the KRW 1.8 million (≈ US$1,350) you’re asking for are too far apart.
◇ Supplier: Then what is the maximum price you could accept?
◆ Client: (looking pensive, pretending to review the Excel sheet on the laptop) KRW 1.5 million (≈ US$1,120) is my maximum. I can't accept any price above that. (burning the bridges behind him)
◇ Supplier: (Part of me considers pretending to flip the table and walk away, but) I’ll be honest with you. KRW 1.5 million (≈ US$1,120) is our cost price for your company. At that price, we can’t guarantee stable supply over the long term. Please work with us on this.
◆ Client: What monthly volume to us is that supply price based on?
◇ Supplier: Going by what you told us earlier, total monthly demand is 100 units. This price assumes we hold a 20% share, or 20 units per month.
◆ Customer: Really? Wouldn’t the cost come down a bit if we calculate it at 50%?
◇ Supplier: (secretly a little pleased) There isn’t much difference in our supply cost.
◆ Customer: (Splitting the difference between KRW 1.5 million (≈ US$1,120) and KRW 1.8 million (≈ US$1,350) would be KRW 1.65 (≈ US$1) million, but...) In that case, we’ll make a big concession and go with KRW 1.55 million (≈ US$1,160).
◇ Supplier: How about setting the price at KRW 1.6 million (≈ US$1,200) and meeting you on other terms?
◆ Client: Which part are you referring to?
◇ Supplier: We will guarantee a steady supply of units.
◆ Client: Supply volume isn’t a major issue for us right now. And we can’t guarantee a high share from the start, either.
◇ Supplier: In that case, we’ll shorten the delivery lead time from the current 1.5 months to 1 month.
◆ Client: Wasn’t it originally 1 month? Delivery lead time should be 1 month. We normally include a 'late delivery penalty' clause in contracts with other suppliers, and leaving it out for you was already a considerable courtesy to your company.
◇ Supplier: In that case, how about changing the payment terms from '60 days after the date of arrival at buyer's warehouse' (payment two months after arrival at your warehouse) to '90 days after the date of arrival at buyer's warehouse' (payment three months after arrival)?
◆ Customer: (thinking that works, since the company has recently been pushing for new payment terms) Hmm... Is there anything else you can adjust?
◇ Supplier: (sensing a good mood) You have three warehouses, correct? We will run a safety-stock warehouse at our distributor here and keep those three warehouses reliably stocked. How does that sound?
◆ Client: Fine. How is the AS period specified in our contract?
◇ Supplier: In general, the after-sales service period is one year across the board.
◆ Client: Then if you change the payment terms, keep safety stock in 3 warehouses, and make the AS period 2 years, we’ll accept the KRW 1.6 million (≈ US$1,200) supply price.
◇ Supplier: That’s possible if you extend the Sales Contract term from the current 1 year to 2 years.
◆ Client: Changing the Sales Contract term is difficult. Please understand.
◇ Supplier: In that case, along with the payment term change, we’ll maintain safety stock in your 3 warehouses, set the AS period at 1.5 years, and provide training and upgrades free of charge. How does that sound?
◆ Client: Sounds good. Please send me today’s meeting minutes by the end of the day.
◇ Supplier: Thank you. We will put it together at the hotel and send it over right away.
◆ Client: Yes, okay. Oh, one thing I almost forgot: you'll send two of the final test units free of charge, right?
◇ Supplier: Of course. I have one last question as well. What is Supplier B’s price?
◆ Client: It’s KRW 1.7 million (≈ US$1,270).
◇ Supplier: (Shaking hands) Understood, thank you. Let’s stay in close touch.
I wrote the imaginary dialogue above over a cup of coffee, playing both roles myself. Does it feel realistic? In business negotiations, neither side usually wants to bring up price first. The buyer wants to know the seller’s opening price, and the seller wants to know what the buyer is willing to pay; that is only human nature. The most common technique for setting the first anchor is the Aim-High strategy: if you want to buy cheap, you quote even lower; if you want to sell high, you quote even higher. Then you hit the first gap in positions: KRW 1.4 (≈ US$1) million, which the client wants, versus KRW 1.8 (≈ US$1) million, which the supplier wants. A tactic often used at this point is the hypothetical question. What discount would you give if I bought several units? What discount for paying in cash? Could I pay a higher price if you deliver quickly? These are basic examples. If the other side lacks experience and knowledge, a few rounds of this back-and-forth reveal their hand, and they end up on the losing side of the negotiation.
The two people in the imaginary dialogue above are office workers in their 40s with similar experience (sales vs. purchasing), and each has gathered rough information about the other through various channels before the negotiation. A clumsy tactic can backfire, so moves like flipping the table, pressuring or playing on emotion are hard to pull off. After a few rounds of back-and-forth, both sides come to respect each other’s experience and knowledge. As the price discussion naturally heats up, they start trying to shift the viewpoint. The supplier’s salesperson first tries shifting to 'volume': we’ll supply a larger volume reliably at KRW 1.6 million (≈ US$1,200). The client’s buyer shuts that down as unnecessary. The second attempt is 'delivery lead time', which the seasoned buyer also deflects by watering it down: 'Wasn’t it originally 1 month?' The third attempt is 'payment terms', and this is where it starts to work. The client had already been told to renegotiate payment terms in its favor with all suppliers, so the buyer is privately pleased. The proposal is to move payment from two months after arrival at the client’s warehouse to three months. If the supplier has no serious cash-flow problems, this is a good way to shift the negotiation viewpoint. The back-and-forth continues. The buyer bets on 'payment term change plus extended after-sales service period', and the salesperson counters with 'if we give that, extend the contract term'. Then comes the fine-tuning. The negotiation closes at KRW 1.6 (≈ US$1) million, with payment terms extended from 60 to 90 days, revised delivery terms, an extended after-sales service period, and free training and upgrades.
The supplier got the KRW 1.6 million (≈ US$1,200) price it secretly wanted, and with the reference value of 'supplying a major client' in mind, payment terms, delivery terms, AS terms, and free training and upgrades were not matters it needed to worry much about. The client, meanwhile, was likely satisfied: it signed with a new overseas supplier at a price 20% lower than what it pays competitor B (KRW 2 million (≈ US$1,500)), which also gives it leverage to press B for better terms. In business negotiations, you first need to analyze the other side’s needs from their position: internal pressure within their company, personal motivations, alternatives, and more. And when talks stall, you need to rise vertically like a bird or a drone and change your viewpoint on the negotiation. You can shift from the 'delivery' issue to 'price', or from 'quality' to 'delivery'. I believe the real key in business negotiation is how thoroughly you prepare and how well you simulate different viewpoints in advance.
To be continued