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Pricing

Should I give my suppliers a target price?

In China in particular, I have found that sometimes having a target price stated can be to the buyer’s advantage as quality level is often tied to price. And if the supplier doesn’t have a target, sometimes the buyer ends up overpaying on poor quality. In other words, the supplier tries to get the highest price for the lowest quality they can negotiate. While I don’t suggest you tell your potential suppliers during the Request For Quotation (RFQ) process what is your target price, I do suggest that after you narrow down the top potential suppliers, you focus on using the best price from the RFQ research to work with your top supplier to achieve the best price to quality ratio. For me, it often unfolds like this “Dear Mr. Li, I really like the quality of your product, but Mr. Wang down the street offers a similar product for X USD per unit, I need you to maintain the agreed level of quality but meet this target price.” The key points are that you have done the research to know what is the reasonable target price AND you mention this target price AFTER the initial quotes come back rather than before.




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