Task 1: Quick vocabulary matching exercise. Drag and drop the definitions on the right to the appropriate vocabulary item on the left to better understand the video below.
Listen to the audio fileThe comedy clip above demonstrates that negotiating price (also known as ‘haggling’) is expected and appropriate in street markets and similar places. (Haggling is also commonly practised when buying cars, furniture and second-hand goods.)
Negotiating the price of goods and services is also expected and frequently practised in formal business settings, although a more polite and calm manner is required to avoid angering the other party and to prevent negotiations from breaking down. Being calm and courteous but firm is a challenging skill because each party needs to use careful language with delicate words and phrases. The tone used in the video of the street market would not be appropriate in most formal or semi-formal business negotiations.
This lesson will focus on how to negotiate price tactfully and will introduce some common phrases for negotiating firmly yet politely.
Listen to the audio fileIn the polite, semi-formal business interaction below, Mr. Li and Mr. Johnson negotiate the price of a two-year supply of computer motherboards. Mr. Li works for a company that manufactures computer motherboards and Mr. Johnson represents a computer company wanting to purchase a large number of motherboards at the cheapest possible price.
Listen to the audio file| Mr. Johnson: | Could you please (1) quote me your (2) best possible price if we purchased 25,000 motherboards per month for two years? |
| Mr. Li: | Well, 25,000 units per month for two years would be $100 per unit. |
| Mr. Johnson: | Oh…$100 per unit seems quite high considering we plan to purchase close to one million units over the next several years. (3) I don’t think that price would work for us. |
| Mr. Li: | Well, (4) what kind of price did you have in mind – keeping in mind that I have considered the size of your order and already reduced our price substantially from what we normally charge? |
| Mr. Johnson: | (5) We were hoping for something closer to $70.00 per unit. |
| Mr. Li: | $70.00 per unit? Wow. If we sold at that price, (6) we would be taking a substantial loss. (7) I’m afraid that price just wouldn’t be possible. |
| Mr. Johnson: | Well, your competitor quoted us $80.00 per unit for one year. |
| Mr. Li: | Well, that’s because the quality of our product is much higher than theirs, so our materials and manufacturing costs are higher. The low price they offer reflects the low quality of their product. I’m afraid (8) we would not be able to match that. …However, we really would like to do business with you, so if you could (9) guarantee purchase of 35,000 units per month over two years, we could offer you $90.00 per unit. |
| Mr. Johnson: | Hmmm, 35,000 boards per month at $90.00 per unit is still (10) beyond our reach. We think $85.00 per unit would be a very fair price considering the size of our order. |
| Mr. Li: | Unfortunately, it just wouldn’t be profitable enough for us to go as low as $85.00. As I mentioned, and I am sure you are aware, the quality of our boards is (11) second-to-none. |
| Mr. Johnson: | Yes, we do like the quality of your boards. Well, what if we (12) split the difference – and pay $87.50 per unit? |
| Mr. Li: | $87.50? I think $87.50 per unit at 35,000 units per month for 2 years would be an acceptable price for us. |
| Mr. Johnson: | Well then. It seems (13) - in principle at least - that we have reached an agreement. |
| Mr. Li: | That’s wonderful. I’ll have my secretary (14) draw up the contract this afternoon and email it to you later today. |
| Mr. Johnson: | (Shaking hands) Thank you Mr. Li. (15) It’s a pleasure doing business with you. |
Task 2: Look carefully at the phrases in bold in the negotiation above then write the appropriate phrase number next to each sentence or question below.
| 1. | This phrase means ‘the highest quality’; ‘no product is better’. | 11 |
| 2. | This is a common phrase used when the negotiation is complete but the contracts still needs to be written and signed. | 13 |
| 3. | Negotiators ask this to find out the price the other party hopes to pay. | 4 |
| 4. | Negotiators say this when they cannot offer the same as their competitors. | 8 |
| 5. | Negotiators say this to explain why they cannot accept a lower price. | 6 |
| 6. | These 3 common phrases are used by negotiators to reject a proposed price. | 3710 3710 3710 |
| 7. | This phrase means ‘to put the agreement into writing for both parties to sign’. | 14 |
| 8. | This is a word used when businesses give a price of one of their products or services. | 1 |
| 9. | This is a common expression that means ‘to share the burden of the cost’. | 12 |
| 10. | This is a common expression used when negotiations end satisfactorily to both parties. | 15 |
| 11. | This phrase is used to make a counter-offer of a lower price when one party asks ‘what price/kind of price were you hoping for’? | 5 |
| 12. | This means ‘definite buying’. | 9 |
Task 3: Study the negotiation above very carefully for about 5 minutes then fill in the gaps below with appropriate words. (Try not to look at the above negotiation while completing the task.)
| Mr. Johnson: | Could you please 1)quote me your best 2)possible price if we purchased 25,000 motherboards per month for two years? |
| Mr. Li: | Well, 25,000 units per month for two years would be $100 per unit. |
| Mr. Johnson: | Oh…$100 per unit seems quite high considering we plan to purchase close to one million units over the next several years. I don’t think that price would 3)work for us. |
| Mr. Li: | Well, what kind of price did you have in 4)mind – keeping in mind that I have considered the size of your order and already reduced our price substantially from what we normally charge? |
| Mr. Johnson: | We were 5)hoping for something closer to $70.00 per unit. |
| Mr. Li: | $70.00 per unit? Wow. If we sold at that price, we would be taking a 6)substantial loss. I’m 7)afraid that price just wouldn’t be possible. |
| Mr. Johnson: | Well, your competitor quoted us $80.00 per unit for one year. |
| Mr. Li: | Well, that’s because the quality of our product is much higher than theirs, so our materials and manufacturing costs are higher. The low price they offer reflects the low quality of their product. I’m afraid we would not be able to 8)match that. …However, we really would like to do business with you, so if you could 9)guarantee purchase of 35,000 units per month over two years, we could offer you $90.00 per unit. |
| Mr. Johnson: | Hmmm, 35,000 boards per month at $90.00 per unit is still beyond our 10)reach . We think $85.00 per unit would be a very fair price considering the size of our order. |
| Mr. Li: | Unfortunately, it just wouldn’t be profitable enough for us to go as low as $85.00. As I mentioned, and I am sure you are aware, the quality of our boards is second-to- 11)none. |
| Mr. Johnson: | Yes, we do like the quality of your boards. Well, what if we 12)split the difference – and pay $87.50 per unit? |
| Mr. Li: | $87.50? I think $87.50 per unit at 35,000 units per month for 2 years would be an acceptable price for us. |
| Mr. Johnson: | Well then. It seems - in 13)principle at least - that we have reached an agreement. |
| Mr. Li: | That’s wonderful. I’ll have my secretary 14)draw up the contract this afternoon and email it to you later today. |
| Mr. Johnson: | (Shaking hands) Thank you Mr. Li. It’s a 15)pleasure doing business with you. |
Task 4: Unscramble the words below to form a sentence or question that is commonly used in price negotiations.
Listen to the audio fileThere is a great deal of variety in the language that can be used in different stages of formal negotiations. Complete Task 5 to learn a wider variety of language and expressions.
Task 5: Complete the chart below by writing (or copying and pasting) the appropriate heading that best describes the language in each column. Choose headings from the following box.
| HEADINGS |
|
| (1) BUYER |
(2) BUYER |
(3) SELLER |
(4) SELLER |
(5) BUYER |
(6) SELLER |
(7) SELLER |
| ASKING ABOUT THE COST OF GOODS / SERVICES | STATING THAT A PRICE IS HIGH | ASKING FOR A PARTY'S PREFERRED PRICE | STATING THAT A PRICE WOULD NOT BE PROFITABLE | MENTIONING A COMPETITOR'S PRICE/QUOTE | MENTIONING THE QUALITY OF GOODS / SERVICES | STATING DIFFICULTY MATCHING COMPETITORS' PRICE |
| Could you please quote me your best price? | That price seems high considering the size of our purchase. | Well then, what kind of price did you have in mind? | If we sold at that price, we would be taking a loss. | Well, your competitor quoted us $80.00 per unit for one year. | The quality of our product is much higher than our competitors’. | I’m afraid we would not be able to match that price. |
| Could you please quote your best possible price? | The unit price seems high considering the purchase size. | What figure did you have in mind? | Unfortunately, it wouldn’t be cost-effective for us to sell for $85.00. | I received a quote from your competitor for $80.00. | The quality of our boards is second-to-none. | Unfortunately, we cannot offer you that price for such a high quality product. |
| I’d like to receive a quote for the best price you can sell for. | The price seems rather high consid-ering our purchase size. | Well, what price were you thinking of? | Unfortunately, we would be operating at a loss if we accepted that price. | Could you match or beat your competitor’s price of $80.00 per unit? | The quality of our products is superior to our competitors’ products. | As the value of our product is high, we are unable to sell for less than $90.00. |
| What is your best selling price for…? | That seems a rather steep price considering the size of our purchase. | What price would be acceptable to you? | I’m afraid that price would not be profitable enough for us. | One of your competitors quoted us a unit price of 80.00. | The materials we use in our products are of the highest quality and are made to last. | Due to the low quality of our competitors’ products, we can’t offer you their price. |
Task 6: Study the chart above for 5 minutes then complete the gap fill exercise. Try not to look at the chart while completing the exercise.
Listen to the audio fileNotice the difference in formality between the present and past tense in negotiations:
Task 7: Use the past tense of the words in brackets to complete the sentences and questions commonly used when negotiating price formally.
| Michael: | I understand your 1)concern . If you 2)were to increase your order somewhat, we 3)could offer you a discount. Usually to get a 10% discount you have to order at least 1000 units. |
| Tonya: | I see. As I’ve already said though, we’re not sure 4)exactly how well our customers will 5)respond to Auto Experts’ products. |
| Michael: | Hmm. As a gesture of good will towards a new client, I suppose we 6)could give you a 10% 7)reduction on an order of 750. |
| Tonya: | Can you make the 8)deal a little better? I’m 9)willing to order 600 floor mats for 10% 10)off the regular price. |
| Michael: | Tonya, you really know how to 11)negotiate . I’ll need to check with my 12)manager on this. Can you give me a minute? |
| Tonya: | By all 13)means. |
Listen to the audio fileAs discussed in Lesson 2, the second conditional is often used in semi-formal and formal business negotiations. Notice how Michael makes his sentences more polite by using the second conditional. As Michael is the seller, it is important for him to be as polite as possible with Tonya to increase the likelihood of doing business with her.
Remember: the second conditional is less direct and more polite and is therefore used often in formal negotiations.
Task 9: What did you learn about negotiating price calmly, politely and firmly?
| Yes | No | ||
| 1. | ‘Haggling’ means to negotiate the price of something. | ||
| 2. | Haggling is commonly practiced when purchasing cars or second-hand goods. | ||
| 3. | Haggling is not appropriate in formal business negotiations. | ||
| 4. | Words such as ‘rather’ and ‘quite’ are used before words such as ‘high’ to keep the negotiation polite and unaggressive. | ||
| 5. | It is not important to be calm when negotiating price in formal business situations. | ||
| 6. | Being firm but polite is sometimes necessary when negotiating price. | ||
| 7. | A ‘quote’ is another way to say ‘price’. | ||
| 8. | ‘Second-to-none’ means ‘inferior’. | ||
| 9. | The past tense is often used in formal negotiations because it is polite. | ||
| 10. | The second conditional, such as ‘I’m afraid that price wouldn’t be possible’ or ‘we would not be able to match that’ is used because it is polite. | ||
| 11. | ‘Unfortunately…’ and ‘I’m afraid…’ are often used to introduce news that the other party wants to receive. | ||
| 12. | Mentioning the quality of the goods is a tactic commonly used by sellers to keep the selling price high. | ||
| 13. | Mentioning the low quality of a competitor’s goods is a tactic commonly used by sellers to keep their selling price high. | ||
| 14. | Cost-effective is similar in meaning to profitable. | ||
| 15. | The expression ‘I think you will find our prices are standard for the market’ is another way to say ‘our prices are not reasonable’. | ||
Listen to the audio fileNow complete the final lesson in this series entitled:
