How To Write a Price Negotiation Letter to a Supplier
Updated July 18, 2023
Professionals in various industries manage relationships and interact with suppliers in order to purchase quality products for business use. An important process in these interactions is price negotiation, which allows both parties in a deal to stay within their budget. If you're responsible for building vendor relationships, it's helpful to learn about price negotiation letters.
In this article, we explore price negotiation letters with a supplier and share steps, tips, a template and an example to teach you how to write an effective price negotiation letter.
What is a price negotiation with a supplier letter?
Professionals send price negotiation letters to suppliers in order to receive a product at a discounted rate. Companies may do this to stay within their budget or just to get a better deal on a certain supply. In some cases, professionals may send one of these letters to suppliers to inform them if their prices are above the market value for a product. Price negotiation letters often include the following:
Review of the quoted price: While you may not list the exact quoted price in your letter, it's usually a good idea to mention the quoted price in relation to the price your company is willing to pay.
Percentage of discount: When requesting a lower rate, include the percentage value of the discount.
Budget: In addition to the discount percentage, include your exact budget for the product. Some may prefer to include the highest amount they might pay, while others may specify the exact amount they want to pay.
Offer deadline: Near the end of the letter, include a date by which you hope the supplier responds. This means the offer you make is on a specific timeline and ensures the company has time to find another product if the supplier doesn't agree to the deal.
How to write a price negotiation letter
Sending a price negotiation letter to your supplier can help you agree on a fair price for each of you, allowing you to stay within your company's budget. To write a price negotiation letter, try to follow these steps:
1. Use a positive tone
It's important you keep a positive tone throughout your negotiation letter. This allows you to be respectful to the supplier. Other professionals are more likely to respond positively if you keep a respectful and understanding tone. Even if the supplier can't accept your request, it's still beneficial for you to preserve that relationship for future business and networking purposes.
2. Compliment the supplier
Try to compliment the supplier on their efforts in drafting a business proposal and arranging a quote for your company. It may also help to mention your company's history with the supplier. For example, thanking the supplier for all the orders they fulfilled for your company in the past may encourage the vendor to consider your business relationship when reviewing your offer.
3. Explain your perspective
After you establish a rapport with the supplier, try to explain your position in clear terms. For example, your company may only be willing to spend $1,000 dollars per week for a contract writer, but the professional you want to hire has a weekly rate of $2,000. In this scenario, you might explain to the writer that the budget is firm and though your supervisors want to quote another writer's rates, you would love to work out an arrangement.
4. Request a discount
When requesting a discount, be sure to include both the percentage of the discount and the total price you would end up paying. Professionals often ask for discounts with an odd percentage number, such as 3.5% or 7%. This shows the supplier that you have carefully examined their proposal and have a unique counteroffer.
5. Set clear terms
It's important to maintain a professional tone when explaining the terms of your counteroffer to the supplier. This allows the supplier to be well-informed of your position without feeling threatened. For example, try explaining that you wouldn't be able to purchase their product or service without a discount. It's often beneficial to use an apologetic tone when explaining your terms. This helps you express your interest in the product.
Related: 7 Reasons Why Budgeting Is Important
6. Hint at an incentive
To make your letter more appealing, try to hint at an incentive for the supplier if they accept your counteroffer. Try to be non-committal so you can negotiate any additional aspects of the deal later. Incentives you may want to hint at include mentioning how you would like to continue your business in the future or implying that your order would be a large quantity.
Related: Guide To Writing a Business Email
7. Choose a date for a response
It's important to have time to be able to find another supplier or expand your budget in the event that the supplier doesn't accept your request for a discount. For this reason, consider including a specific date on which you would like to hear back from the supplier. When choosing this date, be sure to consider your own company's capabilities as well as the supplier's. Consider choosing a day that is at minimum two business days away, and no more than one business week from the date you're sending the letter.
Tips for writing a price negotiation letter
When writing a price negotiation letter to a supplier, consider these tips to improve your experience:
Get to know your supplier
Getting to know your supplier allows you to build a professional relationship with them. Establishing a relationship often helps to persuade the vendor to accept your discount request. If you are negotiating with a supplier with whom you do not have a relationship, try to research the company they work for. It's beneficial to understand their client base and business operations in order to make an offer they will consider.
Address the supplier by name
In your letter, be sure to address the person you are sending it to by name. It's often appropriate to greet them in your letter using only their first name, however, if you feel more comfortable adding a title to their name you can. If you choose to add a title, be sure to research which title they prefer. Try rereading past correspondence you've kept with them to find out which title they've used in the past.
Research the market values
When buying a product or hiring a professional for a service, it's important to know how much your purchase is actually worth. Consider researching what other companies charge for the same product to determine the market value of the supply. This practice helps you understand if the price quote the supplier sent you is reasonable and also helps you create a counteroffer.
Ask for a meeting
In some cases, your negotiation may be more successful if you ask for the discount in person or over the phone. Consider sending out an email requesting a meeting about a possible discount for your purchase. When requesting a meeting, include all the usual information in your price negotiation letter but add a sentence or two near the end to request a meeting time. This allows both you and the vendor to prepare for the meeting.
Try negotiating other factors of the order
If the supplier is unwilling to grant your request for a discounted price of an item, consider other factors of the order you may be able to negotiate, such as the shipping times and fees, the quantity of the order and payment terms. Negotiating these factors may help lower the total cost of the order, allowing your company to still purchase the supply without the vendor lowering the price of the item.
Match the supplier's credentials
Part of understanding the vendor you are working with includes knowing their experience level. Unless you have already established a relationship with this vendor, it's important to match or exceed their credentials. For example, if you are speaking with a new vendor who is a manager and you are an entry-level employee, you might want to consider asking your manager to sign off on your letter.
Be prepared for a counteroffer
It's beneficial to be prepared for the supplier to counteroffer. While a supplier may not be able to accept the exact monetary value of your request for a discount, they may be willing to offer you a price lower than the quote they first gave you. This offer may only be valid for a limited time, so it is important to consider any possible counteroffers the vendor may have in relation to your budget.
Create a contract
After you reach an agreement with the supplier, be sure you have a record of the price you have agreed on. While it is helpful to keep the correspondence between you and the vendor, consider drafting a contract to ensure you have an official record of the deal. This may also help you in the future if you want to purchase from the vendor again.
Template letter for price negotiation with a supplier
To write your own letter for price negotiation with a supplier, try using this template:
Dear [Name of supplier contact],
[Start with a thank you note and a compliment on their service.] [Use a second sentence as needed.]
[Start a new paragraph to explain your situation.] [Use three to four sentences to explain.] [Mention any other relevant parties, such as your supervisor or competing vendors.]
[State your counteroffer.] [First, present your discount request in the form of a percentage.] [Then explain the monetary value of your budget for the particular supply.] [Politely explain what happens if the supplier doesn't accept your request.]
[Hint at an incentive, such as a long partnership.] [Offer hopes of reaching an agreement.] [Set response date.]
To upload the template into Google Docs, go to File > Open > and select the correct downloaded file.
Example letter for price negotiation with a supplier
When writing your own price negotiation with a supplier letter, it's helpful to consider different scenarios and phrases professionals use. Here is an example of what a price negotiation letter may look like:
Thank you so much for your hard work on the proposal you sent. I appreciate the time and expertise it takes to create such a proposal.
My team and I reviewed the documents you sent and were very happy with what we read. We're excited at the prospect of using your product. However, unfortunately, we noticed that the price you quoted for us exceeds our budget.
In order for us to be able to accept your proposal, we request a rate that is 3% lower than your original quote to reach a final price of $16,000 USD. If you cannot offer this price we, unfortunately, will need to go to another supplier.
We hope that you can accept this offer so we can continue our business relationship. Please understand that your flexibility in this matter may encourage more work for you and your company. I hope we can come to an agreement. Please inform us of your decision by June 13th.
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