Negotiators Need To Learn How To Deal With The First Offer Dilemma

by drjim on September 14, 2018

In a negotiation, should you be the one who makes the first offer?

In a negotiation, should you be the one who makes the first offer?
Image Credit: Niels Sienaert

Just imagine the next negotiation that you are going to be involved in. You sit down at the table, you have your notes easily available to you, you’ve done your homework and you know who’s going to be negotiating with you today, you know what negotiation styles and negotiating techniques you want to use, and then the negotiations start. Generally these things start by having everyone agree as to why they are there and what the goals for the negotiations are. The big question is what then? Is this the time that you should make the first offer to see if you can wrap things up immediately?

The Danger Of A First Offer

As we all know, in any negotiation there is always the question of who has the most power. We’d always like to be the ones with the power, but power is a fluid thing and it can flow from one side to the other quite easily. When it comes to making a first offer, the party that makes the offer is demonstrating power – for a period of time they are controlling how the negotiations go. However, it’s not quite clear if you should be making a first offer.

This is a topic that the people who study negotiations have been debating for years. Guess what – there is not a single agreed upon answer to this question. Right now the majority of people who have spent time looking at what it means to make a first offer have come to an agreement. What they are saying is that you don’t want to be the person who makes a first offer. The thinking is that if you make a first offer, then you will be risking “showing your cards” to the other side. If this happens, then your power in the negotiations will decrease.

There is a flip side to this argument. Other researchers think that if there is a price that you want the other side to accept it might be worthwhile for you to make the first offer. If you do, then you will have the ability to “anchor” the price – establish a starting point for the final price. This approach seems to work best if you have a good feel for the range that the price of what is being negotiated should be in. Likewise, it can work well if the other side of the table does not have a good feel for a range that the item being negotiated should be at.

How To Handle Making A First Offer

So all of this discussion about how to go about making a first offer leads to the big question: just exactly how do we handle this? It turns out that some studies have been made regarding making first offers in a negotiation. In a study that was done, MBA students were asked to participate in the negotiation of a single-issue price deal. The researchers recorded who made the first offer, how much was offered, and the final outcome of the negotiations.

After the negotiations were over, the researchers asked the participants questions about their emotional state during the negotiations. They were asked if they felt anxious during the negotiations and how they felt about the outcome of the negotiations. What’s interesting is that the negotiators who made a first offer during the negotiations were the ones who felt the most anxious. The result of this is that these were the negotiators who were less satisfied with the results of the negotiation. However, it turns out that the negotiators who made the first offer ending up getting the best deal.

So what does all of this mean? In a nutshell if you are negotiating to get the best price, then go ahead and make the first offer. This will allow you to anchor the price in the negotiation. However, if what you want to get out of the negotiation is a feeling of satisfaction, then you are not going to want to make a first offer. This will remove all of the stress and anxiety of making a first offer from you.

What All Of This Means For You

When a principled negotiation is starting, you are going to be faced with making a very important decision right off the bat. Should you be the one to make the first offer in the negotiation? This might allow you to wrap the negotiations up very quickly – or would doing this be a big mistake?

Every negotiation is about power. When we make a first offer we are showing the other side that we have power. This is an issue that has been studied for a long time. Some researchers believe that you should not make a first offer because by doing so you’ll be revealing too much to the other side. Other researchers think that you should make an initial offer because by doing so you will anchor the price for the negotiation. A study has been done on making the first offer in a negotiation. What the researchers found was that making the first offer makes the negotiator more anxious and less satisfied with the outcome even though they get a better deal.

Making the first offer in a negotiation really is a big deal. This can end up setting the tone for the rest of the negotiation. You are going to have to decide if you want to drive the price to be a value that you want it to be or if you want to feel good about the negotiation when it’s all over. The power is in your hands – you get to decide if you want to make the first offer!

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™

Question For You: Do you think that there is anything that you could do before a negotiation starts to feel less anxious about making a first offer?

Click here to get automatic updates when The Accidental Negotiator Blog is updated.

P.S.: Free subscriptions to The Accidental Negotiator Newsletter are now available. Learn what you need to know to do the job. Subscribe now: Click Here!

What We’ll Be Talking About Next Time

So what do you really want to get out of your next negotiation? If you are like most of us, the answer is “the best deal possible”. This all sounds fine and good, but just exactly how does one go about getting the best deal possible during a negotiation? The answer is that if you come to a negotiation with more power than the other side has, your chances of using your negotiation styles and negotiating techniques to get what you want out of the negotiation increases. If it’s more power that we want to get, then we had better spend some time studying where power comes from in a negotiation.

Be Sociable, Share!

{ 0 comments… add one now }

Leave a Comment

Previous post:

Next post: