Is It My Move? Making First Offers in Negotiations
Although negotiating is tough, being a skilled negotiator is critical in business and career development. Everyone at some point will be involved in a negotiation. From discussions over salaries to agreeing on multi-million dollar contracts, it is a skill worth perfecting. However, doing research may not prepare you for one key question – who should make the first move in a negotiation?
Making the first offer could be a powerful first step in a critical discussion. Many like to stick to the age-old mantra “never show your cards or make the first move.” Ultimately, you have to weigh your options. There are positives and negatives to making the first offer.
Three Pros of Making the First Move
Negotiating is an art that requires you to be both competitive and cooperative. To do both simultaneously and effectively, you need to take advantage of opportunities throughout a negotiation.
Here are three reasons why you should consider making the first offer:
1. Anchoring Down – Going Full Steam Ahead
As Stanford Professor Margaret Neale puts it, “you should make the first offer because of the power of anchoring.” Anchoring describes a human tendency to over rely on the first piece of information provided when making decisions. You can gain a strategic advantage by defining the starting point for the negotiation, to which the other side has to respond. Research on human judgment suggests that first offers can direct a negotiation towards your desired outcome.
High anchors could also direct attention towards good qualities in or “pluses” supporting what you are negotiating for and vice versa. For instance, we associate a more expensive vehicle with better quality features. This implies that the initial valuation can influence our perception. If your first offer is reasonable, you may want to highlight the thinking behind your offer to bolster your position. However, you should be mindful that you should be concise when advocating for your “asks.”
2. Taking Control of the Situation
By being the first to make a move, you could claim control of the situation. Once you make your offer, most likely your opponent will remain in a reactive mode. It is now up to them to come up with a counteroffer that takes into consideration what your offer signaled about your preferences and interests. You could be setting the bar and the range of possibilities for the negotiation. Hopefully, they will respond to your offer in a non-confrontational manner.
Also, by providing a well-presented and researched first offer, you could show the other party that you were thoughtful in making your proposal. It could send the message that you are confident in your position and it was based on objective, reasonable measures. This could minimize the chance of being outmaneuvered during the negotiation. In addition, the more reasonable your offer, the more you signal that you anticipated their interests and needs – which could move the final negotiation closer to your desired outcome.
3. Winning the Tug-of-War
A major part of any negotiation is compromise. It is rare that you will get everything that you want. You have to be prepared to accept something lower than what you proposed.
However, by making the first offer, you could set the bar higher as a starting point than if the other side made it first. This could enable you to increase your maximum value. While we do not recommend proposing an outrageous first offer, by proposing a reasonably higher offer than what you are willing to ultimately accept gives you wiggle room to reach a compromise.
Disadvantages of Breaking the Ice
Although you can gain from making the first move, there are still consequences to consider when developing your negotiation strategy. Poor execution can lead to three major drawbacks.
1. Leaking Information to the Enemy
Taking charge of the negotiation could be dangerous because it could reveal information about what you know or how little you are willing to accept relative to what they may offer. The first offer is a powerful signal of how much time and effort you put into preparing for the negotiation. If you poorly research and overestimate the range your opponent is willing to offer, you could “lose” the negotiation.
On the other hand, it also says a lot about your expectations and goals.
2. Over Before It Even Begins
Your first offer could be too demanding and derail the discussion – which could harm lasting relationships. It takes at least two parties to negotiate and both sides will have a bottom line. Miscalculating a reasonable offer could offend them, tempers could flare, and discussions could break down.
Asking for too much, pricing too high, or being unreasonable often offends others. When your offer is outside of the scope of what the other side can even consider, you could prematurely end negotiations and result in deadlock.
3. Emotions Running High
When you make an offer, you need to exude some degree of confidence. Part of preparing for any negotiation and making your offer should include getting a handle on your emotions. Failure to do so hurts the impression you give, how you are perceived, and the strength behind your offer.
If you do not have a handle on your own emotions or level of anxiety during a negotiation, you could immediately show signs of weakness or may not be taken seriously. If you are obviously nervous when making your opening offer, your opponent can easily benefit from this. The other side could retake control over the negotiation. Even worse, it could strengthen your opponent’s counteroffer and weaken your position.
Tips for Constructing a Good First Offer
Preparation is the cornerstone of all negotiations. You should never enter a negotiation without doing research, understanding the needs and interests of the other side, or having an understanding of what is reasonable in the market.
Your first offer should:
- Aim above your target, while not being too aggressive.
- Be well researched and within what you estimate being your opponent’s range.
- Contain a strategy with back up options.
- Be presented confidently.
The most valuable thing you can do before any negotiation is to prepare. You need a strategy and have to think through various scenarios. The more prepared you are, the easier you will be able to adapt to new information and changing circumstances. Also, preparing will help you control your emotions, limit any fears, and quiet your anxiety.
The more you practice your negotiation skills, the better you will become at negotiating. Just remember that you have options – a negotiation strategies firm could help guide you!
For more tips on maximizing your potential, read our article on negotiation tips!
The Azara Group (TAG) is a consulting firm that promotes the development of leaders in an increasingly competitive and diverse marketplace – providing strategy consulting services and leadership training services to advance professional and life success. TAG leverages expertise in career strategy, diversity, negotiation skills, and business acumen to provide strategic advice and consulting services to help people and organizations get what they want, achieve their goals, and advance their business and career objectives. TAG also helps companies better attract, retain, and promote diverse talent, and develop robust diversity platforms and strategies to create a more inclusive workplace.
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