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Supplier Negotiation Strategies, Pt 1: Nibbling

Purchasing Negotiation Secrets
Purchasing Negotiation Secrets

You’ve heard me say it many times before: I’ve virtually stopped reading books on purchasing negotiation strategies, mostly because there’s very few good ones.

It’s why I wrote my own, and it’s also why I almost exclusively read sales books on negotiation strategies – to get counter intelligence.

Counter intelligence. What a concept. It’s of so much value in our profession.

So I’ve decided to start a series of blogs on Supplier Negotiation Strategies. This is the first one, and it’s going to focus on “Nibbling”.

What is Nibbling? Picture a mouse eating away at cheese. Or better yet, picture the person who eats unnoticeably thin pieces from a cake, in the hopes that nobody will notice.

And sometimes nobody does notice. That’s the whole idea behind Nibbling.

Nibbling happens in areas where you are not paying attention. I once had a car dealership sales manager tell me that’s how they make all their money.

People focus so much on certain things such as base price or monthly payment that the dealership can sneak in costs elsewhere that nobody catches.

Nibbling sounds cute and insignificant, but reality is that it can be like a Las Vegas feast for suppliers if you let it.

Purchasing professionals tend to focus most of their attention on price. Nibbling therefore happens everywhere BUT price. The whole point is to do it without anyone finding out (see the cake ex above).

So suppliers will divert the pack. They will agree to a price that makes you happy. Your guard is down and you’ve already started claiming victory deep inside. Meanwhile, they are just getting started.

The supplier will try and slip in costs for everything. Warranty deductibles, late payment penalties, adders for various product features, change order costs, spares and replacement parts, overtime costs, and on and on.

And then there are costs that they don’t include anywhere that they know your customer will need to incur later. Those are the worst.

A good example is buying software (and getting a killer deal on it) only to later find out that your customer has incurred a huge consulting and training bill with the supplier – something that never even came up in negotiations.

I know, because this exact situation happened to me early in my career! Let me tell you, I came down like a roller coaster. It was my first real experience with nibbling.

If you use a supplier contract template, then you can forget about it (and I don’t mean in a good way!), because a supplier contract is not looking after your best interests…. It’s going to have all these “supplier goodies” already baked in.

One good way to counter all of this is to have an Entire Agreement clause in your contract, basically stipulating that this is the entirety of the agreement between the parties and any other changes need to be done by amendment or addendum.

Point them to this clause and tell them you don’t want bills for anything outside of the contract down the line.

Another good way is to catch a supplier in the act of trying to nibble and tell them the following:

“Look, it’s in my best interest for you to be successful. I want you to make money, believe me. However, you aren’t going to make money on every aspect of this deal. You need to make money overall, and that’s where we need to keep the focus. The kind of thing you are trying to charge me for here is not something I pay for with other suppliers. This is just part of the cost of doing business with our company. I don’t want to get a bill from you every time I need something from you. So let’s focus on making sure the price we negotiate is all encompassing, ok?”

Both of these strategies are preventative in nature and get in front of supplier nibbling. One is used as an insurance strategy after the contract is signed (the Entire Agreement contract clause) and the other is used when you catch suppliers in the act.

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Don’t fall victim to Nibbling and use these strategies to avoid it. When you catch suppliers trying to do it, call them on it and tell them you want all cost components on the table and negotiated.

All the heartache and headache that comes with negotiating contracts is preventable.

Want to know one secret clause that isn’t in your contracts now that will save you 75% time in your negotiations, and how to include it?

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These are YOUR negotiations, be in charge!

Next week we are going to talk about a supplier negotiation strategy called “Puppy in the Window”.

Be your best!

Omid G