Price negotiation during inflationary times

Image by mohamed Hassan from Pixabay

By Michelle van Schouwen

Inflation is running at a heated annual rate of 7.9%, which means that, as you negotiate new projects, your prices – if you plan to make a profit – are likely noticeably higher than they were last year. In addition, assuming you’ve kept your rates in line with your business’ needs, you may be charging more than competitors that weren’t as mindful of rising costs. Likewise, your vendors are hiking their rates. It’s a perfect storm of risk to your future profits.

Here’s where having superior negotiation skills literally pays off. Getting the price you need for the service or product you offer is always important, and when inflation is a factor, doing so becomes a critical dance of expertise. Paying suppliers fair but not inflated prices is equally key. Here are a few tactics that will help:

With customers:

-First, clearly define the value you are providing and the rationale for your pricing. Offering customers a peek into the realities of your business can enhance their understanding of the reasonableness of your rates.

-Name your price but keep a little margin in it. You may want, right at the start, to combine this price offer with a benefit: Examples include a one-time discount, comfortable payment terms, or a discount for doing more business or making a longer-term commitment. This strategy tends to silence most objections.

-Start strong. Use statements such as, “We’ve sharpened our pencil in making this offer” to preclude being pushed for price concessions.

-If countered with a competitor’s lower price, be prepared to enumerate the ways that your offerings differ from theirs, and if appropriate, make clear that yours is the premier option (backing that up with specific points of difference).

-If you must make a price concession, do so in a way that protects your interests; for example, giving the customer the rate they want for the first six months of a contract, or adding fees for standalone services that the customer may or may not want to add on. Also be sure to let the customer know that you are providing the advantageous pricing in the interest of something specific – be it the desire to build a larger, long-term relationship, or the specific experience this project will provide.

-Walk away if you must.

With suppliers:

-With suppliers, the quantity of business you offer should impact the rate you pay. Promising all or most of your business to one supplier should yield a somewhat better price than doing one-off jobs.

-Alternately, bid each and every vendor job with multiple suppliers, and let them know you are doing so. This too should provide you with advantageous pricing.

-The one tactic never to use? Sending a sizable job to a vendor without getting an estimate up front. The vendor may believe you can’t be all that price-sensitive if you didn’t ask.

-Similarly, ask for change-order pricing if your specifications shift. This is another way to avoid non-negotiated “gotcha” invoices.

As you can see, the tactics that you use to negotiate with a customer are the ones you may see in the inverse with a vendor. Remember, though, it’s always best practice not to hit your own customers with “gotchas” or other surprises, or you’ll end up looking for new customers – or bidding on every single project. Negotiating shrewdly but in good faith is always the way to go, no matter how other companies may behave in similar circumstances.


Michelle van Schouwen is principal of Q5 Analytics, providing advocacy and communications for climate change mitigation and adaptation. For 32 years, Michelle was president of van Schouwen Associates, LLC (vSA), a B2B marketing company. In 2017, van Schouwen Associates was acquired by Six-Point Creative Works, Inc. of Springfield, MA. Michelle is available for speaking engagements on topics including her work on climate crisis mitigation and Florida coastal water issues. She speaks to business and student groups about marketing launches and entrepreneurship and works with start-ups to support their development.

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