Sunday 11 August 2013

Make the first move


When it comes to negotiating, many people believe that it's usually best not to make the first offer. They wait for the other guy to say how much he is willing to give or ask for. A lot of people assume that by encouraging the other person to make the first offer, they gain an information advantage.

This assumption however isn't quite right. Adam Galinsky, at Northwestern University's Kellogg Graduate School of Management has looked at the research and found that: “more often than not, negotiators who make first offers come out ahead.”

One explanation for this is ‘anchoring’, which we have discussed in previous posts. The first offer act as an 'anchor'.  Once the first offer is made, that becomes the focal point and it gets more difficult to get it off the table and discuss a completely new number. We end up spending the negotiation trying to adjust the opening offer.

This was well demonstrated in an experiment by Greg Northcraft and Maggie Neale at the University of Arizona.  They got experienced real estate agents to inspect and estimate the independent value of a house. In what appeared to be accidental, the estate agents saw one of two different price lists for the house in question. The price list was done up by someone else. Half of the agents saw a listing price of $119,900. These agents then estimated that the house would sell for just over $114,000. The other half of the agents saw a listing price of $149,900, and they came in at a figure of $128,000. The list price should have been irrelevant but it anchored their appraisal and valuation.

So when it comes to negotiation, don't be afraid to ‘play your card first’ and put a number on the table. You don't want to spend the negotiation process counteracting the other sides opening offer and not get the chance to explain your number and its worth.





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