Focusing on the small things

Sometimes the first few minutes at the negotiating table can seem a little like the first few minutes in the boxing ring: both opponents dancing around, reluctant to put themselves out there and make the first move. Just as some boxers are reluctant to throw the first punch, negotiators are often reluctant to put the first offer on the table. From a certain viewpoint this is understandable. They may be worried that being the first to make an offer will telegraph their strategy, or that doing so will perhaps reveal some sort of vulnerability.

But are they right to think in this way? When it comes to negotiation, or pretty much any other situation where you wish to influence someone, is it better to make the first strategic move or should you instead let your opponent do so?

According to research conducted by social psychologists Adam Galinsky and Thomas Mussweiler, you’re far better off making the first offer in a negotiation than letting your counterpart strike first.

In a series of experiments, the researchers found that regardless of whether the person’s role in the negotiation was the buyer or the seller, negotiators who were given instructions to make the first offer typically obtained a superior outcome compared to those who were instructed to wait for their opponent to make the first offer. For example, in one of the experiments, when parties looking to buy a factory made the first offer, the sellers ultimately agreed to an average selling price of $19.7 million. On the other hand, when parties looking to sell the same factory made the first offer, the buyers ultimately agreed to an average price of $24.8 million. The researchers found similar results in the domain of salary negotiations as well.

So what is causing these big differences in negotiations to occur? The primary reason is that when negotiators present their first offer they also “anchor” the other party, perceptually, onto the initial numerical terms. As a result, even though the recipients should ideally determine the value of the negotiated items independent of the numbers provided by the initial offer, they very often don’t. They instead use the opening number provided by their counterpart as an anchor, and then they subsequently insufficiently adjust away from those numbers as the negotiation continues.

Why does this happen? Consider the case of someone selling a used car to a potential buyer. When the seller first suggests a relatively high starting price, potential buyers automatically start to think about all of the information that’s consistent with that high-priced anchor point. Recall how throughout the book we have discussed how individuals are motivated to make accurate decisions efficiently. With a very high initial price, the buyer might ask himself, “Why so high?” and wonder if he needs to correct a potentially inaccurate perception of the value of whatever is being negotiated.

In trying to answer that question, the buyer is likely to spontaneously focus on the features that are all in line with the initial high price – for example, the luxurious aspects of the car, its reliability, and great gas mileage. Now consider what would happen if the buyer had made the initial (and far lower) offer. The seller might answer his own “Why so low?” question by spontaneously focusing on features of the car that are consistent with the buyer’s low anchor-for example, that the car has several noticeable dents and scratches, the overall mileage is high, and there’s an “old car smell” that now makes him wish he had showered immediately after a hard workout at the gym instead of waiting until he drove home each morning to get clean.

Because it’s the counterpart of the person who makes the initial offer who automatically starts thinking about the features of the initial offer, that person is likely to start thinking that the true value of whatever is being negotiated is actually closer to the initial offer than originally thought. Accordingly, regardless of whether your role is that of the buyer or the seller, or employer or employee negotiating over this year’s raise, or manager or subordinate trying to come to an agreement on resource allocation, you should consider carefully what would constitute an appropriate anchor in your negotiations and then be the first to make theirs. As Galinsky and Mussweiler demonstrated in their studies, this small act of going first could lead to some big differences in the results you get.

While small, it’s a change that could pay big dividends. Of course, you need to ensure that your initial offer is within the realm of reality, even if it is geared toward the limits of what is realistic. For example, it’s probably unrealistic to set the initial price for your Honda Civic at $100,000, claiming that it has a one-of-a-kind scent that the buyer can’t find elsewhere! But as long as your initial offer is within the bounds of reason, it’s important to throw that first punch instead of allowing your opponent to do so. Failure to take advantage of such an opportunity may lead you to finding yourself down and out within a few minutes of the opening bell.