The first move. The implications that surround who makes it, how it’s done, and how it may or may not lead to a favorable conclusion are well-documented. We see it happen in romantic relationships (who approaches whom, who calls first, etc.), in games (chess, checkers, etc.), in courts of law and most importantly for the subject at hand, in conflict and negotiation.
The opening move establishes expectations regarding the substance and dynamics of any negotiation, in addition to providing a tremendous opportunity to influence the other side. Understanding what’s at stake, what to offer, how to deliver, and respond are all critical to negotiation success, as well as fostering a relationship of mutual respect with your fellow negotiator.
The Who/What/Where/When & How of Opening First
Who Should Open First?
The important advantage of opening first is that you have the first opportunity to affect your opponent’s expectations about the negotiation. In fact, it’s science. According to the anchoring principle, the first offer made in a negotiation sets up a powerful, unconscious psychological anchor that acts as a gravitational force.
Simply, we’re wired to more heavily consider the first offer we receive. Why would you give your opponent that kind of advantage? Allowing the opposition to open first gives them the power to put the negotiation boundaries closer to your reservation point than you might have expected.
Where Should One Open?
Think about negotiation like a sound wave, or a story arc with a beginning, middle, and end. How you get to these milestones can be complicated and uncomfortable, thus the typical jagged crests and troughs of a heavy metal track, but it always hits all three points. Theoretically, you can start anywhere, but opening offers generally fall within one of three zones:
- Agreement – An offer in the zone of agreement is acceptable to both parties. The parties may continue to negotiate to improve their positions, however, further negotiation should not be necessary if the goal is merely to reach an agreement.
Many car brokers enter offer agreements where there is no major negotiation. They call it “no-haggle” pricing, and if you’re the type of person who dislikes financial negotiations, this could be a great route if you’re satisfied with the proposed public offer. You may still need to negotiate financing options, but it’s all in service to the original offer.
- Credible – An opening offer may also fall in the credible zone, in which case an opposing party may perceive the offer as outside his or her zone of agreement, but reasonable enough that the ultimate agreement can probably be reached.
Both sides of a negotiation ultimately want to know two things: what their opponent’s alternatives to agreement are, as well as their reservation price. A credible offer might not meet that reservation price but isn’t so aggressive as to put either side off from continuing to negotiate, it shows the other side you’re will to make concessions that work toward a mutually beneficial end result.
- Insult – An offer in the insult zone is so unreasonable it not only fails to set a bargaining parameter it may cause an opponent to refuse to continue bargaining.
When house-hunting, you may find a house you love, and you want to buy it for a price you love as well. Because real estate negotiations are not only about dollar signs, but also relationships, many people entrust real estate agents to take on the complicated negotiation process, especially if, as laypeople, we don’t understand the parameters. A low-ball offer too far off the mark and aggressive can have quick and unfavorable results.
How Should One Open?
You may not always have the opportunity to go first and in that case, it’s important to consider how you want to present your offer or counteroffer. Whether first or second, the integrity of the open will set the tone for the rest of the negotiations. Offers on either side of the spectrum risk
An Extreme Open is when a negotiator opens at the extreme edge of what is credible. There must be some rationale that supports the offer, even if somewhat far-fetched.
Maybe they have insider knowledge or experience – we typically employ real estate agents due to their extensive knowledge not only about homes and what to look for, but also the socioeconomics, convenience and character of a variety of neighborhoods, as well as what is pertinent to ask for from sellers, buyers, and other parties.
An agent should also know, perhaps with more accuracy than a rookie, how close they can get to the desired goal without being beyond the edge of reasonableness. After all, after the sale is complete the buyers and sellers don’t necessarily have to work with each other again, but the agents might. Go too far and the offer might be considered offensive or so extreme that it is not an offer.
A “Soft” Extreme Offer is when the negotiator makes an offer merely to affect the opponent’s expectations and will probably concede quicker than would a more reasonable offer. This softness may or may not be communicated to the other side.
It’s not necessarily negative in nature, it can be used simply to test the waters and/or make sure both parties are on the same page before additional negotiation points are laid out.
In our real estate example, a soft extreme offer might involve the buyer’s agent telling the seller – look, I’ve got clients who really love the house. We’ve been looking at potential properties for the past several weeks, and this is one of their top three. They’re ready to pull the trigger, but what’s keeping them from jumping in now is the steep price for a property that lacks a fenced-in backyard, a security system, and the fact that they’ll likely have the expense, and burden of time, of installing blinds or shutters on all of these new windows.
We didn’t talk numbers, we just let the seller know what potential concession points might be.
Monitor the Response. The negotiator making a more extreme offer should monitor the response from the other side and be ready to move from the offer or solidify the position depending on that response.
Now that we’ve presented a few pain points to the seller, their reaction tells us how soft or extreme they perceive the offer to be and if it’s worth continuing to negotiate. If the seller is baffled by the concerns and not willing to come down in price or offer any other concessions, the ball is back in the buyer’s court as to whether or not these points are deal-breakers.
It’s important to remember when you’re negotiating, that again, you’re negotiating with people. The seller might be intrigued by the interest in their property and appreciate people who can see themselves in their home. Fenced-in yards, security systems and window coverings are not outright outlandish requests, so it aids in making the soft offer seem more approachable.
Anticipate Concessions. Finally, the negotiator making the soft extreme offer should anticipate the possibility of making substantial concessions and must plan a way to do so without losing credibility.
We don’t expect the seller to concede to every point. In fact, we anticipate having to make concessions ourselves and may throw in something, like the installation of blinds or window coverings, that would be nice to have but certainly not a dealbreaker.
When you’re setting up a soft extreme offer, it’s important to plan ahead and have these points ready to move back on if necessary.
The Reasonable Open – A reasonable offer is one that is perceived to be within or close enough to the zone of agreement that if combined with a reasonable counteroffer will likely establish where the final agreement will result.
You may experience this when dealing with salary increase requests. There are other avenues in which an employee might be given more benefits like vacation days, more flexible scheduling, stock options, and the like – but typically, as employees, we want that cash flow because it’s something we can see the benefits of immediately.
A Reasonable Offer Should Be Firm. The negotiator making a reasonable offer by definition has less room for concessions, so the offer should be presented with a sense of firmness. The firmness must be communicated before the offer is communicated.
In the salary increase example, part of making the offer firm is not only knowing what you want but also being able to express that want succinctly.
Must Demonstrate Commitment. A reasonable opening offer must be accompanied by commitment in order to reduce the possibility it will be dismissed as an extreme offer. Commitment to an opening offer can be demonstrated by the offeror’s describing the large cost that will be imposed on the offeror for moving significantly from the offer. An expression of commitment seeks to limit the bargaining range in favor of the offeror.
This is where one might recommit to the job. Don’t spend too much time patting yourself on the back with what you’ve accomplished and why but consider it a proposal and promise to rededicate yourself to the job. If they’re going to give you a raise, tell them why you’re worth the investment.
May Require Hard Bargaining. The negotiator making a reasonable opening offer must be prepared to solidify the negotiator’s position through argument, communicating limited flexibility.
Everyone deserves to be compensated fairly, so be ready with measurable ways to illustrate your position and don’t be afraid of going back and forth. It’s a part of the process.
Reduces Concessions. Concessions should be modest and should be made only after an appropriate amount of time.
Some companies may not be able to afford giving their employees a raise, or maybe that’s their hard line. Planning is critical at this juncture, because you should be able consider concessions, or, if you’re getting nowhere, a pathway to the goal. Be careful not to let nerves get to you and concede too quickly. Take time to consider the response to your offer, and any negotiating points brought up during the negotiation.
Conflict is an inherent part of life. Left unchecked, however, it can bring even the biggest and well-intentioned organizations to heel. What makes companies and individuals truly successful is the ability to ably manage conflict. We created ConflictStop as the only resource you need to identify, resolve and manage conflict. From CEOs, to small business owners, and to anyone managing a team – developing the skills to navigate conflict is not just important, it’s imperative.
A strategic opening into a negotiation is just one of many tools that can take your skills to the next level by opening up a healthy dialogue, finding that sweet spot of agreement, and preventing planting seeds of conflict that can arise from misinterpretation.
Learn How to Negotiate with the Pros
The Lowry Group, LLC (TLG) is the outgrowth of almost three decades of experience helping organizations achieve their next level of success throughout the United States and around the world, including conflict resolution. TLG’s work began as an external consulting, systems design, and training resource composed of faculty from the Straus Institute for Dispute Resolution at Pepperdine University School of Law.
But TLG has moved beyond its academic roots to respond to repeated requests from corporate and government organizations for “real world” assistance. The TLG team has been chosen by scores of major organizations that must become more effective in negotiating sales, business transactions, client relationships and disputes.
What makes companies and individuals truly successful is the ability to ably manage negotiation. We created resources you need to identify, resolve and manage negotiation. From CEOs, to small business owners, and to anyone managing a team – developing the skills to navigate negotiations is not just important, it’s imperative. Managing negotiations is a cornerstone not only in conflict resolution but also in understanding the psychology of business relationships. Learn how to up your negotiation skills with the Negotiation Navigator Online Course!
