In the world of negotiating there are number of classic questions that we all deal with each time we start a negotiation. One of the biggest is whether or not we should be the ones who make the first offer. The answer to this question is generally “yes” – lots of research has gone into what is called “anchoring bias” and it tells us that no matter what negotiation styles and negotiating techniques are being used, we should be the ones who move first. What is anchoring in negotiation you ask? In a negotiation centered on either price or another issue, the party who moves first typically benefits by “anchoring” the discussion that follows on their offer—even if the anchor is arbitrary.
The reason that the anchoring bias is considered a “bias” is because it distorts our judgment, especially in a negotiation when the bargaining zone is unclear. This knowledge of the anchoring bias in negotiation can help us make and respond to first offers more effectively.
Compatible Issues And How they Impact The Anchoring Bias
When two parties are negotiating multiple issues, the negotiator who identifies a so-called compatible issue when making the first offer loses the advantage of moving first. A compatible issue is one on which parties have the same preference. However, when negotiators mention a compatible issue the first-offer advantage turns into a disadvantage. Why? Because those who learned that their preferences were compatible on this key issue sometimes pretended they were actually at odds on the issue and use it to extract concessions.
So what is the lesson here? To anchor effectively, before negotiating, try to identify high-priority issues on which you and the other party share the same preferences and then exclude these issues from your first offer.
Justifications And How They Impact The Anchoring Bias
When you are presenting the first offer in a negotiation, you might assume that the other side will find the offer more persuasive if you make the effort to back it up with a justification. A carefully reasoned argument is bound to be more compelling than just a cold, stark number, right? You would be wrong. Researchers have found that when it was easy for negotiators to generate counterarguments, they were less receptive to the other side’s initial offer, or anchor. The seller’s persuasion efforts were more successful when buyers had to work harder to remember the seller’s arguments. Thus, easy-to-counter arguments trigger a backlash in the form of simple counterarguments.
How To Use The Anchoring Bias to Improve Negotiating Outcomes
So how can we use the anchoring bias to get what we want in a negotiation? The first thing that we need to learn how to do is to pause before we start persuading. When the other side can easily come up with counterarguments, your justification for an anchor may backfire on you. Negotiators may be more receptive to novel information you might provide, such as a newly lowered price or confidential company data.
During a negotiation you will need to be ambitious and even though it generally pays to aim high to take advantage of the anchoring bias, try to avoid making an opening offer that could offend or stress out the other side.
I understand that it can be hard to do, but during your next negotiation you are going to have to think beyond the price. More often than not the anchoring bias typically refers to price anchoring, but you can think more broadly about how to anchor discussions in your favor. Asking the other side to agree to put a contentious issue on the table, for instance, should dramatically increase your chances of reaching your goals on that issue and may allow you to create value for both sides through tradeoffs.
You need to remember to not avoid the challenge. Making the initial offer poses clear risks for you during your negotiation, yet research suggests that in many contexts, those who drop the first anchor do better than those who must try to overcome it. Use this information to your advantage and become a first mover in your next negotiation.
What All Of This Means For You
There are many things about negotiating that are fixed long before we show up at the table. One of those things is called the anchoring bias. What this bias is talking about is the simple fact that the first party to make a concrete offer sets the tone for the rest of the principled negotiation. Although doing this may sound like a simple thing to accomplish, there is actually a lot involved in doing it correctly.
One of the things that we need to be careful of are what are called “compatible issues” . These are negotiating issues that both sides pretty much agree on. If we make a first offer on one of these issues, it can turn on us. We also have to be careful and not provide the other side with too much justification for the offers that we make to them. If it becomes easy for them to make a counter offer to us based on what we’ve told them, then they will. When we are using the anchoring bias, we want to make sure that we’re making novel offers to the other side. Try not to offend the other side with your opening offer and if at all possible, try to make it not about price.
As negotiators we need to find a way to get over our fear of going first and make the first offer in the negotiation. By doing this we can cause the anchoring bias to start to work in our favor. If we’ve done our research and we’ve avoided any situations in which the anchoring bias could work against us, then we’ll be well on our way to getting the deal that we want.
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™
Question For You: If you make an initial offer and the other side rejects it, what do you think that your next step should be?
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What We’ll Be Talking About Next Time
As negotiators, there are a few books that I’m guessing that we have all pretty much read. One of the classic negotiating books that everyone should have on their shelves is “Getting to Yes: Negotiating Agreement Without Giving In”. In this book, the authors explained that negotiators don’t have to choose between either waging a strictly competitive, win-lose negotiation battle or caving in to avoid conflict. What they said was that negotiators can and should look for negotiation strategies that can help both sides get more of what they want. If we take the time to listen closely to each other, treat each other fairly, and explore options to increase value, we can find ways of getting to yes that reduce the need to rely on hard-bargaining tactics and unnecessary concessions. Great idea. Now exactly how can we go about making this happen?