Some are born with negotiating skills while some have to learn how to negotiate. Sometimes we listen to certain people negotiating, and we are surprised how they can get what they want or convince the other side that they are right. If negotiation is not your strongest side, here is the first golden rule – always make the first offer.
There is no point in going around and not being determined to make a move when you know what you want. If you are talking about the price of a new car or the salary at a new job, you should always make the first offer. It might seem even counterproductive and strange to be the one who is going to set the first offer but it’s the right approach.
What if your offer is far from what the other side would be willing to accept, and they just give up and walk away? This is often the main concern for those who are not really good at negotiating. You should keep in your mind that when you are the first person to assign a value, you are setting the tone of the negotiation. This is applicable even when the other person is aware of the first offer effect and even if they are actively trying not to let the first offer sway their offer.
In a study from Greg Northcraft and Margaret Neale, real estate agents were given a set of houses that had random values. The real estate agents were given the values ahead of time but were also informed that their own appraisal had a strong influence on house value. However, the first offer – meaning the initial value had a great impact on their judgment even though it was random. Even more, the agents ended up citing a variety of factors to explain their decision even when the true value of a house was substantially more or less than the actual worth of the house. They were actively defending the random value since they convinced themselves that the first offer is the valid offer.
The fear is real when it comes to negotiating and stating your first offer. You are afraid that you are maybe overestimating or underestimating your offer. You might even feel that you don’t know the true value or realistic offer. When you don’t know what the other person thinks and what their offer may be, you might have greater fear and feel intimidated about giving your first offer.
Professor Adam Galinsky from Columbia Business School wrote for Harvard Business School’s Working Knowledge and said:
“By making an aggressive first offer and giving your opponent the opportunity to ‘extract’ concessions from you, you’ll not only get a better outcome, but you’ll also increase the other side’s satisfaction.”
If somebody would take your first offer right from the start you would feel disappointed, right? You would feel like you could have gotten more if you only offered more. They might have agreed on more if you only offered it. If you feel like you have to fight for the offer, you might end up feeling like you are getting the best deal possible.
Professor Adam Galinsky believes there is one situation where you should never make the first offer and that’s when the first offer comes from ignorance. If your opponent is way more knowledgeable about the value and the topic of negotiation in general, then they will always have an advantage when it comes to agreeing on the price. You shouldn’t let them set the tone and terms of negotiation. You should learn more before you put yourself in a negotiating situation and have a good overview of the opponent’s knowledge.