How to Set the Right Opening Offer in Business Negotiations

Negotiation success relies heavily on effective communication. This is particularly crucial during the initial bargaining phase when parties openly express their positions and objectives.

Setting out with an impressive offer at the start is key to any negotiation, and here are some tactics to ensure a strong start in business negotiations:.

Make a Sense of Urgency

An urgency factor can be an invaluable asset in business negotiations. It can motivate a negotiator to push harder for their desired deal or renew her dedication to an important project; and can rally an entire team together toward meeting deadlines or creating innovative solutions to problems.

Within the initial moments of any negotiation, both parties are making judgments on your credibility, honesty and willingness to compromise. Your behavior in these early minutes could determine its entire outcome.

One effective strategy to create urgency in negotiations is known as anchoring principle: people often place more significance on information that first arrives than on later pieces of knowledge.

But this strategy can backfire if you make an unreasonable offer that’s obviously unobtainable, leading the other person to dismiss your entire negotiation as unreasonable. A reasonable opening offer establishes your willingness to compromise while also signaling your willingness to walk away if negotiations don’t reach an agreement.

Don’t Let the Other Party Make the First Offer

Experts often suggest allowing the other party to make the first offer to gain an understanding of their position; however, this strategy could backfire. Refusing to name an initial number might leave you looking foolish in negotiations as well as unprepared. Furthermore, not providing an initial number might encourage your opposition to make an offer they believe is unreasonable (Galinsky 2004).

If the other party presents you with a low offer, you must work to discredit it by creating a counteroffer that makes sense. For example, if they propose to double their salary instead, you must demonstrate why this unreasonable and not what’s best for your company.

Be confident and know the number you’re targeting when setting out negotiations, doing your research to understand how much others make for similar jobs and then going beyond this figure. According to business expert Bozoma Saint John, negotiators should “go high as hell” to avoid being low-balled during negotiations – this strategy also gives you more control of negotiations, making sure both parties benefit.

Deflect the Anchor

Research into whether or not making the first offer during negotiations has drawn substantial consideration and research. While some experts advocate never making an initial offer, others have conducted experiments and provided real-life examples showing how making one can help anchor negotiations favorably. It’s key that your opening demand be grounded in ways that other parties find credible – this can be achieved by including references or precedents to back your demands up.

If your prospects exhibit negotiation anchoring behavior, it’s crucial that you deflect their initial price anchor before offering up your ideal price point. Otherwise, they’ll use that initial figure as the basis of all future discussions in the negotiation, leaving you without control of the negotiation process.

To deflect an anchor, quickly counter with a figure lower than your original offer but high enough to keep you in the game. This allows you to tailor your price point more palatable for your prospect while preventing them from using their initial offer as justification for rejecting your proposals. By showing that you are willing to meet them halfway and negotiate in good faith, this gives an impression that you are an equitable negotiator willing to reach a compromise solution.

Counter-Anchor

When an opening offer is too high, the best way to counter it is to quickly disqualify it as unreasonable and make a counteroffer that is tailored specifically to the value of your product or service and where you wish to land in negotiations. Re-anchor with this new anchor.

Social scientists have observed that people tend to give weight to the first number they come across, no matter its reasonableness or not. Anchoring is a tactic utilized during business negotiations that capitalizes on this human tendency for comparison; choosing an anchor that falls within your zone of potential agreement (ZOPA) allows for successful negotiations.

When setting an anchor that is too high, the other party could mistake your overstated offer as overstating its true worth and walk away from negotiations altogether. Conversely, selecting an anchor too low could cause them to think your number as being “unrealistic”, leading them to reject further negotiations altogether.

Wakely Mediation can offer neutral support during negotiations to assist with handling an anchor, including using defensive range and backdown offers to address it. We look forward to helping you strike an optimal deal! Reach out now.