Quotation Strategy in Business Negotiations

Liu Hong Meng Ran

【Abstract】As a major content of business negotiations， price has a direct impact on the outcome of negotiations and serves as one of the key issues for the success of negotiations. This paper try to explore the principles， influencing factors， and pricing strategies of business price negotiations， with an aim to offer the most reasonable price by employing quotation strategies， so as to gain an advantageous position and grasp the initiative in business negotiations.

【Key words】business negotiations； influence factors； quotation strategies

【作者簡介】刘鸿，孟然，大连财经学院。

I. Introduction

Business negotiation is a negotiating activity between the negotiating parties for their own economic interests. As one of the key elements in business negotiation， quotation is a general term including price， conditions， quantity， quality and so on. In these contexts， price is the most critical issue related to the success of negotiations. Since both parties to the negotiation have their own settlement ranges for prices or conditions， how to submit the prices and conditions that have been determined to each other and strive to achieve the desired price is the issue of quoting strategies. The use of quoting strategies directly influences the opening， bargaining and outcome of business negotiation. Therefore， all parties in business negotiations are very cautious about quoting， trying to work out the best price plan by using various quoting strategies， in order to obtain the greatest possible economic benefits.

II. Factors Affecting Quotation in Business Negotiations

In business negotiations， prices are commonly used to measure the extent to which they need to be satisfied and whether progress is made in negotiations. Analyzing the factors that affect prices will help us to accurately judge the status of negotiations and make the negotiating situation more favorable. In trade negotiations， the factors affecting prices are normally as follows：

1.Market conditions. The ever-changing market conditions will be reflected by fluctuations in the price of this sensitive signal.

2.The subject matter of negotiations. The subject matter of negotiations， such as products， is more complicated. The process and technical requirements for the production of the product are relatively high， and the price of the product is also relatively high. Therefore， the price standard of the subject matter at the time of negotiation is higher.

3.The services attached to the subject matter of negotiations. In business negotiations， both industrial services and business services have become an important part of product value itself. It can slow down the resistance in business negotiations.

4.The subjective and objective evaluation of participants in negotiators. The utility of the negotiating goal is directly proportional to the price standard. Normally， the larger the utility is， the higher the price is， and vice versa.

5.Negotiation timing. If the negotiation opportunity is during the booming period of the product， that is， the best-selling period， the price will be higher； on the contrary， during the recession period of the product， that is， the slow-moving period， the price will be low.

6.Reputation of companies. In corporate trade negotiations， the reputation of negotiators products are crucial factors affecting their prices. Branded products often take the initiative in price negotiations.

III. Quoting Strategies in Business Negotiations

1.Quotation Timing Strategy

A full preparation are supposed to be made first to understand the customers situation in many aspects and collect as much as business information in advance. If a customer asks us for a quotation， we must first understand the degree of development of the country and city in which the customer is located， whether it is a target market for our products， what the main product range and sales methods are， whether it is a big， small or middle customer. The information should also include the other partys purchasing ability and sincerity， familiarity with our products， and the number of orders that are trustworthy. The best timing to quote is when the other party asks for the price first and then quote， because this shows that the other party has had a keen interest in the product， and the quotation is usually a matter of course.

2.Differential Quotation Strategy

Before the quotation， one party must first make a full understanding of its products and prices， major target markets， similar products and prices. In general， regular products are available at medium price points. If the product quality is better than that of competitors， quotation may be higher. If the products are in short supply in the market， one party can offer relatively higher prices. If our product is a new product with unique features for marketing， the quotation is usually higher than the ordinary product. Even if for the same product at different times and due to market factors and the maturity of production technology， quotation may also be different， and it should follow the market changes.

3.Price Expression Strategy

Quotation should be fully reasonable. If the product is offered with a higher price， one party must think of ways to enable its customers to fully recognize the advantages of the products， which serves as a good reason for the high price. The product can be compared with similar products， highlighting its features and advantages， so that its price should not appear to be higher. This kind of quotation is easy to accept.

4.Quotation Binding Strategy

Quotation should not be limited to price issues. When quoting， the main trading conditions such as delivery date， payment method and order quantity shall also be considered together， and make other conditions play an interactive and complementary role. At the time of quotation， one party can offer alternatives， that is， different products with different grades are available for customers to choose， allowing customers to make choices in weighing their needs and purchasing ability. This will result in a win-win outcome.

5.Comparison Quotation Strategy

By setting up a price reference table that is beneficial to one party and comparing the relevant advantages and disadvantages， it can provide strong evidence for its quotation. Or one party can use the record with the highest turnover of the trader， such as an order or delivery note， to let the customer know that the same product we offer is much lower than other buyers. This is a relatively simple approach. It is also a common method for general customers， but it is not feasible for stubborn customers.

6.Decomposition Quotation Strategy

For negotiations involving many different types of transactions， one party should make a decomposed offer for the price， instead of reporting to the other party an overall higher price， which can reduce the price sensitivity of the other party and facilitate the transaction. For example， when software sales are engaged， quotations usually include prices for products， upgrades， services， etc. The offers appear to be relatively low， but if the price is quoted as a whole， customers may feel it is much higher or even desperately lower your prices， resulting in shrinking profits.

7.Odd-Even Quotation Strategy

The use of odd-even quotation method gives the buyer a cheaper feeling because when one party adopts the integer quotation method， it is often difficult to convince the other party， and the price with odd-even is considered to be the price after careful costing. The quotation is easy to produce the psychology of “tailoring and calculating” and is conducive to the next stage of bargaining. In addition， by taking advantage of some ethnic or local customs and habits， the use of peoples preferred numbers in quotations or avoiding peoples taboo numbers， are also conducive to business negotiations.

IV. Conclusion

In summary， price is the main content of business negotiations between buyers and sellers， and it is also a major clause in the sales contract. The level of price concerns the immediate interests of all parties involved in business negotiations. Therefore， we must fully understand the factors affecting prices in business negotiations， make preparations for quotations， and strive to grasp and properly use quoting strategies. At the same time it is also essential to combine other price strategies to take the initiative， analyze specific issues， seek effective preventive measures， maximize interests， and mitigate losses caused by risks in order to achieve the ultimate goal of business negotiations.

References：

[1]Zhou Haitao，The Skills of Successful Business Negotiation，China Textile Press，2006.

[2]Qiao Shuying，Business negotiation，Beijing Normal University Press，2011.

[3]Nie Yuankun，Business negotiation，Higher Education Press，2010.

[4]Yu Liping，Price Strategy in Business Negotiations，Journal of Heilongjiang University of Foreign Trade and Economics，2002（10）.