In a negotiation, those who offer first win

In a negotiation, those who offer first win

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This is a guest post from Levesque Negotiation
(Member since 2020)

Contributors:

Georges Levesque
President

Albeit a source of significant debate amongst negotiation experts, we strongly believe that that in most negotiating circumstances, you should make the first offer. This is because of a well-known cognitive bias in negotiation called ‘anchoring’.

The anchoring bias describes the common tendency to give too much weight to the first number put forth in a discussion and then inadequately adjusting from that starting point, or the anchor.

We are regularly anchored and barely notice. The price tag on an item in a retailer is an anchor. The store is telling you what it is worth and, generally, the transactional price becomes the listed price (or close to it). Even when discounting is applied, it is done so from the original anchoring point.

Here is an excerpt from an article from the program on Negotiation at Harvard Law School explaining the concept:

‘Research on the anchoring effect suggests that the party who makes the first offer in a negotiation can gain a powerful advantage by steering talks in her favour. But that doesn’t mean that it’s always wise to make the first offer, as the anchoring effect could work against you if you choose the wrong anchor. Instead, the decision of whether to “drop an anchor” should be based primarily on two factors: your knowledge of the zone of possible agreement, or ZOPA—the range of possible outcomes that each side will find acceptable—and your assessment of the other side’s knowledge of the ZOPA.’

In other words, try and offer first unless you are not prepared or know little about the issue (or item) being negotiated. Then you should wait until the other side makes the initial offer.

Substantial psychological research shows great biases for numbers that are introduced earlier which show increased value. The brain immediately locks in that number and correlates it with a higher innate value, promoting greater credibility to the initial offer.

This is particularly effective when selling a company or making a salary offer. As per a detailed paper from the Kellogg School of Management in 2010, most deals that actualize occur within proximity of the anchor point. Those who offer first and offer aggressively generally come out the winners.

This is more so when multiple equivalent simultaneous offers (or MESO) are made. Presenting more than one offer at a time increases the alliance's satisfaction as well as the odds that an agreement will be implemented.

The idea is to qualify the value of every portion of your objectives and make multiple (ideally three) offers that have the same value to you but look different to your counterpart.

There are competing objectives in all negotiations, and offering a choice allows for an increased chance at acceptance.

MESOs are an effective strategy at the beginning, middle and end of the negotiation, allowing us to constantly anchor, learn, detect, persist and reframe.

Negotiation is not an exact science but, as a rule of thumb, you should always attempt to make the first offer.

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