CheertheSecond
The second coming of CheertheDead
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- Nov 15, 2022
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I do not see this very much but some novels do misunderstand this.
You don't try to make a hard bargain unless the transaction is a one-time thing. You still try to get benefits for the services or goods you provides but you would want to create a friendly business relationship with your trading partner so that they will not screw you over because you attempted hard deals one too many times. It is better to strike a price that you feel do not insult the effort that was put into the services or goods you provided instead of getting every possible penny from a negotiation.
Do note that getting a slightly better deal than what you feel comfortable is not the same as getting every possible penny.
If the market price is 100 but you feel a lot of care had gone into your products and they should fetch a higher price than the market (let's say 105), then 105 is what you feel comfortable with.
Getting every possible penny is striking a hard bargain to achieve the maximum amount your trading partner can afford to pay you. This is usually where the supply and the demand curves meet. Needless to say, at this price when your partner resells your goods to the end-user they are less likely to have room for a promotion or profit margin. This means if they can find a different reliable supplier, you can bet that they will cut down their request for your stuff quite considerably. Why? Because you did not leave anything for them.
For example, if the demand and supply curves meet at 140, then 138 or above is the every possible penny they can afford to pay you.
Then slightly better deal than normal would be somewhere between 105 and 138 but I will say it is 110 (around 5%) with 115 to 125 be considered very generous offer from your partner.
If your novel is about a character with good negotiation skill, they will aim to be friendly and not callous with their bargain depending on how they foresee the future relationship with this partner will unfold. You should understand that a trading partner is not just about taking your goods and giving you money. Sometimes, they can know people in other dealings that would be very beneficial to you. This is what most business wants, the connection.
So how do you do it, to make a good negotiation?
First of all, you two are engaging in a business relationship and as I said above, there are non-monetary benefits you can get from your trading partner such as connections. Hence, you two will engage in a negotiation of good faith. What does that mean? That means you both want benefits but would rather achieving a win-win scenario than anything else. That is what it means to be in good faith. You get the benefits and your partner gets the benefits.
Then how do you begin naming your price?
As usual, you start with the cost of production and anything related to it so that you can get a general idea of how much you can get in return for a specific price. If your products have a cost of production and all the related cost to about 100 for the entire batch, you can name 110 for a 9.1% profit margin. However, it's to be expected that there will be back and forth so people will always name a higher price like 115. So you tell your trading partner 115 with your little lie and semi-legit reasoning to prove your sincerity of engaging in good faith.
Your partner will also start with a price that you can consider fair so they may accept the price if it is ok but usual they will shift the weight a bit in their favor and ask for a lower price like 108 and they will give you a plausible reason to push their agenda.
You can either agree but add a statement like "It's a loss but since it is our first cooperation, I hope this can prove our sincerity" or you can argue for a better deal. Sometimes, you can state that you agree but want some more benefits that is not monetary in nature.
If the price is too low and they tried to drive a hard bargain, you can end it with "Mr/Mrs. you put me in a pickle. The entire production costs as much as 100. I am only asking a 9.1% to cover for other bonuses and for further investment. With you driving such bargain, our company may not be in the business in the future" and follow with if you are in a weaker position of negotiation "110 is the best I can do. I can assure you that you will not be disappointed by the quality."
Or if you have a stronger position. "110. The selling price of our rivals by your company is 210 and you import them at 120. You net 50 after paying for all the bonuses and benefits even if you smash all your employees with a monthly reward 50% higher than what you did last year. Even with all the promotion, you still pocket 20 in your coffer. We may be new but our products are highly sought after in the foreign market you should have absolutely no issue trying to sell them. Our official page also has a large crowd of followers that an announcement would suffice in providing with all the publicity that is necessary."
The general way of engaging in good faith is stating your price, stating your reason for the price, stating your reason why you can not accept their price as well as the reason why they would want to be in a good relationship with you.
EDIT 1: The manga Drifters also give you another good example of a negotiation but in a different vein.
"Why should we sell our stuff to you in credit when your country is likely to go up in smoke?"
"Because I know you, merchants. When you have 30 coins in your coffer, you do not think you have 30 coins. You think these 30 coins could give you 300 coins, and there are only two buyers you can sell to. One of them is us while the other does not need you nor are they friendly to you. In fact, there is a high chance you are the next to be on the torch. You can gamble with us winning or not but any investment is a gamble itself."
You don't try to make a hard bargain unless the transaction is a one-time thing. You still try to get benefits for the services or goods you provides but you would want to create a friendly business relationship with your trading partner so that they will not screw you over because you attempted hard deals one too many times. It is better to strike a price that you feel do not insult the effort that was put into the services or goods you provided instead of getting every possible penny from a negotiation.
Do note that getting a slightly better deal than what you feel comfortable is not the same as getting every possible penny.
If the market price is 100 but you feel a lot of care had gone into your products and they should fetch a higher price than the market (let's say 105), then 105 is what you feel comfortable with.
Getting every possible penny is striking a hard bargain to achieve the maximum amount your trading partner can afford to pay you. This is usually where the supply and the demand curves meet. Needless to say, at this price when your partner resells your goods to the end-user they are less likely to have room for a promotion or profit margin. This means if they can find a different reliable supplier, you can bet that they will cut down their request for your stuff quite considerably. Why? Because you did not leave anything for them.
For example, if the demand and supply curves meet at 140, then 138 or above is the every possible penny they can afford to pay you.
Then slightly better deal than normal would be somewhere between 105 and 138 but I will say it is 110 (around 5%) with 115 to 125 be considered very generous offer from your partner.
If your novel is about a character with good negotiation skill, they will aim to be friendly and not callous with their bargain depending on how they foresee the future relationship with this partner will unfold. You should understand that a trading partner is not just about taking your goods and giving you money. Sometimes, they can know people in other dealings that would be very beneficial to you. This is what most business wants, the connection.
So how do you do it, to make a good negotiation?
First of all, you two are engaging in a business relationship and as I said above, there are non-monetary benefits you can get from your trading partner such as connections. Hence, you two will engage in a negotiation of good faith. What does that mean? That means you both want benefits but would rather achieving a win-win scenario than anything else. That is what it means to be in good faith. You get the benefits and your partner gets the benefits.
Then how do you begin naming your price?
As usual, you start with the cost of production and anything related to it so that you can get a general idea of how much you can get in return for a specific price. If your products have a cost of production and all the related cost to about 100 for the entire batch, you can name 110 for a 9.1% profit margin. However, it's to be expected that there will be back and forth so people will always name a higher price like 115. So you tell your trading partner 115 with your little lie and semi-legit reasoning to prove your sincerity of engaging in good faith.
Your partner will also start with a price that you can consider fair so they may accept the price if it is ok but usual they will shift the weight a bit in their favor and ask for a lower price like 108 and they will give you a plausible reason to push their agenda.
You can either agree but add a statement like "It's a loss but since it is our first cooperation, I hope this can prove our sincerity" or you can argue for a better deal. Sometimes, you can state that you agree but want some more benefits that is not monetary in nature.
If the price is too low and they tried to drive a hard bargain, you can end it with "Mr/Mrs. you put me in a pickle. The entire production costs as much as 100. I am only asking a 9.1% to cover for other bonuses and for further investment. With you driving such bargain, our company may not be in the business in the future" and follow with if you are in a weaker position of negotiation "110 is the best I can do. I can assure you that you will not be disappointed by the quality."
Or if you have a stronger position. "110. The selling price of our rivals by your company is 210 and you import them at 120. You net 50 after paying for all the bonuses and benefits even if you smash all your employees with a monthly reward 50% higher than what you did last year. Even with all the promotion, you still pocket 20 in your coffer. We may be new but our products are highly sought after in the foreign market you should have absolutely no issue trying to sell them. Our official page also has a large crowd of followers that an announcement would suffice in providing with all the publicity that is necessary."
The general way of engaging in good faith is stating your price, stating your reason for the price, stating your reason why you can not accept their price as well as the reason why they would want to be in a good relationship with you.
EDIT 1: The manga Drifters also give you another good example of a negotiation but in a different vein.
"Why should we sell our stuff to you in credit when your country is likely to go up in smoke?"
"Because I know you, merchants. When you have 30 coins in your coffer, you do not think you have 30 coins. You think these 30 coins could give you 300 coins, and there are only two buyers you can sell to. One of them is us while the other does not need you nor are they friendly to you. In fact, there is a high chance you are the next to be on the torch. You can gamble with us winning or not but any investment is a gamble itself."
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