” What is your target price” is a very common question from sellers when you want to get quotes or negotiate prices with your supplier. Don’t take this problem lightly. If you don’t handle it well, you may lose your profits. In this article, I will tell you why and how you can answer this question wisely.
What Is the Target Price?
If we search the target price online, it’s a very complicated concept. So how to simply determine their target price? The first question you need to consider is, at what price will I lose money? We all know that profit comes after cost, so you need to do a solid landed cost analysis. Ideally, the worst scenario in your landed cost analysis should still make money. If that’s the case, it will be an important reference point for your target price because the cost in the worst scenario should be your target price to beat and then every dollar improved upon that cost can be additional profits.
Why Does the Supplier Want to Know Your Target Price?
Suppliers like to ask this question because they can use this question to determine which quote can maximize their profits and obtain your order as well. If you just say “I don’t know” or answer the question roughly, then the supplier can assume you are a new buyer and may offer you a higher price.
Tips for Answering the Question Wisely
If your supplier keeps asking your target price and you can’t avoid it, keep the following tips in mind to handle this question properly.
Don’t Reveal Your Target Price Easily
Never be the first one to tell the price number, even though you’ve already known that the cost in the worst scenario still can make money. The cost in the worst scenario is a reference to your target price, and you can change it according to the actual situation. More importantly, you don’t konw your supplier’s true cost, and they may give you a much cheaper quote than your target price. If you tell them first, how could you get that good price.
Don’t Offer An Unrealistic Target Price
Everyone wants to pursue maximum profit , remember not to test the supplier’s bottom price by deliberately giving an unrealistic price since it may be an offensive number to your supplier. Your suppliers will also have cost expenses, such as having to pay for materials, labor, electricity, overhead, etc., all of which are included in their quote. You need to have a clear concept of cost. And it may make your supplier doubt your sincerity and give up the willingness to cooperate with you. They may ignore your emails or respond negatively.
Answer In A Tactful Way
Sometimes, suppliers may give you a flexible quote because their revenue is more important than profit in certain situations! That means you might get a better offer through negotiation. You can answer the question in a more indirect way. Following are examples for reference.
It is stipulated that we cannot provide target price to suppliers by our company. I wish I could tell you, but I cannot violate this rule. If you are unsure of your target price, you can dodge the question by answering in this way.
We have received some quotes that are better than our original target price, so now this question can no longer be answered with our original target price. It can indicate to your supplier that you have alternative suppliers, so they may be able to offer you a better price in order to be more competitive.
Please note that product quality is also very important. In order to obtain orders, some suppliers attract customers with low prices, but they use inferior materials in the production process in order to reduce costs and the quality is not up to standard. In most cases, the buyer ends up paying more money for poor quality products.
“What is your target price”, if you encounter the question next time, I hope the mentioned tips can help you answer the question properly and get a better price from your supplier.