Target pricing: Will your target hit the Target?

Recently I have found myself falling in the trap of giving target pricing up front, and not surprisingly, my supplier loves it. That may not be true, but I feel that way. I was in a  meeting recently negotiatiog the cost of a product, when the supplier said, “just give me your target price” and well I did. About two seconds later he said “ Ok, well hit it” and we where done.

Now in any negotiation class they say the best negotiation is the one where both win, but I always ask myself, “how much did I just leave on the table?” I always picture the supplier walking away smiling and giving each other high fives, and I am scratching my head. My buddy always says “if you feel like you got a good deal, then you did. Don’t worry how much they make as long as you’re happy with it.” You know I have to agree.

This brings my to my point, I have three targets I set when negotiating:  

1. What cost do I need?
2. What cost do I want? (and the one I give my supplier)
3. What cost am I willing to settle for?

Clearly, you need to keep in mind market conditions and your own strategy and attitude for the deal (as that will sometimes make you tougher than you normally wood be). With any target price or move of a product you should always know what it costs you today, what it will take to move it and never forget the logistics costs. I have seen more great deals go down in flames, because the shipping and transition costs were not included. There may be other things your industry needs to consider, but those two are the big ones to me.

Just keep in mind that target costs are like tools—if you have one you either over-use it or never use it, but when you need it you rarely have it. So like any good Boy Scout always be prepared!