Negotiation tactics in downturns change as pressure mounts on buyers and suppliers. During recessions or crises (like the 2007–2009 Great Financial Crisis and COVID), certain negotiation demands become far more common. Procurement and sales professionals should be prepared for requests for extended payment terms, upfront prepayments, price renegotiations, and delayed delivery or volume adjustments.
Extended Payment Terms: Buyers Preserving Cash
One widespread tactic in downturns is customers pushing for longer payment terms (e.g. moving from 30 days to 60, 90, or even 120 days). This became common in the 2008–09 crisis when companies, desperate to preserve liquidity, began delaying supplier payments. Countless global manufacturers and retailers adopted 90- or 120-day terms during that period. In fact, practice that started as a survival strategy later became routine for some large firms. During the pandemic this pattern re-emerged. In a 2020 survey of UK businesses, 31% of respondents felt pressured to accept 120-day payment terms (or longer) to keep customer accounts. This shifts the financing burden onto suppliers and often signals the buyer is facing cash flow strain (their request for 90+ days is a red flag of liquidity issues).
How to respond: Suppliers should view a push for extended terms as a potential sign of financial stress or cautious cash management by the buyer. Rather than just refusing and risking a loss of the business, consider creative solutions. You might offer an early-payment discount to incentivize faster payment or use supply chain financing (e.g. factoring or buyer-led programs) to bridge the cash gap. Open dialogue is key. If a buyer is insisting on 90-day terms to preserve cash, probe their underlying concerns. Maybe they can agree to 60 days plus a small discount for prompt payment or involve third-party financing, so you get paid on time and the buyer pays later. The goal is to address the interest (needing short-term cash relief) without simply caving to the positional demand. Also, assess the risk: a customer stretching payments could be tipping into deeper trouble, so monitor their creditworthiness. Extended terms might help them survive (and keeping a valued customer afloat can be in your interest) but set clear terms (like late fees or put options to revisit if payments slip further). Buyers, on the other hand, should use this tactic very cautiously. Overusing it can damage supplier relationships and hurt supply continuity if smaller vendors can’t carry the financial load.
Prepayment Demands: Suppliers Seeking Security
On the flip side, one of the most common negotiation tactics in downturns is for suppliers requesting upfront payments or larger deposits before fulfilling orders. This can happen when a supplier is facing cash flow problems themselves or when they fear buyer default. Financial stress on the supplier side often manifests as requests for prepayment, which essentially shifts risk to the customer by getting cash in advance. For example, during the Great Recession, many suppliers were reluctant to start production without firm orders and upfront payments, having seen too many orders canceled at the last minute. This reluctance created supply shortages but was totally understandable. Suppliers didn’t want to buy raw materials or incur costs unless they were sure the customer could pay. We saw similar dynamics in early 2020: in highly disrupted markets (like personal protective equipment), suppliers often insisted on partial or full prepayment to secure scarce goods. These demands can also arise when input costs are volatile. If a supplier’s raw material prices are skyrocketing, they might ask for prepayment to lock in funds for purchasing those materials or to hedge against the risk that prices climb further by delivery time.
How to respond: Buyers confronted with a prepayment demand should recognize the signal: the supplier may be cash-strapped or worried about your ability to pay. This is a cue to evaluate the supplier’s financial health and the criticality of the supply. If the supplier’s concern is legitimate (e.g. they need cash to buy materials that have spiked in price), you can seek a middle ground. Options include partial upfront payment (for example, a 30-50% deposit and the remainder on delivery) or using instruments like letters of credit or escrow accounts that guarantee payment upon performance. These approaches address the supplier’s need for assurance while protecting the buyer from paying all funds without recourse. It’s also fair to ask for something in return for prepaying, like a slight discount, priority delivery, or a price freeze amid volatile costs. The key is to uncover the supplier’s true interest (do they need working capital? fear your ability to pay later? or trying to cash in on high demand?) and address it. If the request stems from the supplier’s financial instability, buyers should tread carefully: prepay only what you can afford to lose or consider alternative sources if the risk is too high. For suppliers, transparently communicating why you need prepayment can encourage empathy and a solution from the buyer. Explore if the buyer can assist with financing or agree to an escalation clause instead of full prepayment.
Price Renegotiations and Clauses: Reopening the Deal
When economic conditions swing dramatically, it’s common for one side to push for renegotiating prices or adding price-adjustment clauses to contracts. In downturns with falling demand, buyers often ask for price cuts or discounts to help them stay afloat or to reflect lower market prices. During COVID, for instance, many customers asked for discounts and contract renegotiations as their industries struggled, and competitors were dropping prices to win scarce business. On the other hand, in times of sharp cost inflation or supply shortages, suppliers may push for price increases or clauses that let them renegotiate if costs rise beyond a threshold. We saw scenarios in 2021 where commodity prices surged, prompting suppliers to insert escalation clauses or reopen pricing discussions mid-contract. A 2021 survey of print companies found 17% had clients demand retroactive discounts, essentially insisting that already-delivered and invoiced work be re-priced downwards before payment. These tactics, while extreme, highlight how financial stress can drive parties to revisit even settled deals.
How to respond: Whether you’re facing a buyer pushing for a price break or a supplier proposing a hike, start by understanding the motive. A buyer asking for a 10% price reduction might be signaling that they can’t continue buying at the current price (their own margins or sales have fallen). A supplier seeking a surcharge likely has evidence of cost increases eroding their margin. In either case, ask for transparency: data on cost drivers, market benchmarks, or financial impact. This turns a confrontation into a problem-solving discussion. If you’re a seller and the buyer asks for a lower price to survive a downturn, consider alternatives short of a permanent unit price cut: for example, a temporary discount or rebate program until demand recovers, or a smaller price cut coupled with a longer contract commitment from the buyer (so you gain future security). This preserves the relationship and might secure you as a preferred supplier when things improve. If you’re the buyer dealing with a supplier’s price-increase request, verify their claims (are their raw material costs truly up X%?). If justified, accept an increase but negotiate a price renegotiation clause that also allows downward adjustments if the market normalizes. Another approach is indexation: tie the price of the product to an objective index (for steel, fuel, etc.), so both parties share the risk of fluctuations. The overarching idea is to “separate positions from interests.” Rather than rejecting the demand, address the underlying financial pain. Often, you can invent options for mutual gain. By being flexible and fair, you not only solve the immediate issue but also build goodwill. Indeed, companies that supported their customers with flexible terms and one-time accommodations in 2020 were noted to be driving long-term value and loyalty over short-term advantage.
Negotiation Tactics in Downturns: Conclusion
Negotiation tactics in downturns often evolve, sometimes dramatically. Whether it’s buyers pushing for extended payment terms or suppliers insisting on prepayments or price hikes, these moves often signal deeper financial pressures. Procurement and sales professionals who can decode these signals and respond with empathy, creativity, and structure will not only protect their positions but also preserve, and even strengthen, critical relationships. The key is to move beyond rigid positions and uncover the true interests driving each request. That’s where the real negotiation begins.