May 20, 2024

Obligate Law

Professional Law Makers

First or Second Offer – Choosing the Best for You

3 min read
First or Second Offer – Choosing the Best for You

The opening move in negotiation is putting your offer. Getting your tactics right in this all-important step can determine the success of your negotiation.

Generally First

Research over recent years has confirmed that the party going first generally gets the best deal. This is because of the power of anchoring and the impact the initial (anchor) figure has on the final agreement.

Human nature, however, pushes us in the other direction. At the start of a romantic relationship, we would always prefer the other person to be first to say, “I love you.” In a negotiation, there is always that fear at the back of your mind that when you make your first offer they will:

1. Be so insulted they will stand up and walk out (which is bad)

2. Accept you offer immediately (which is worse – because it means you offered too much)

This is why you need to do your research so you can create an offer with confidence. You are able to persuasively describe the benefits to the other side, you support your figures with valid comparisons, you articulate your value using mutually-agreed authorities. Before you put your offer on the table, you have used the preamble discussion to subtly check the assumptions on which it was based. Then, you are able to make your offer with the assertiveness and confidence it deserves.

Sometimes Second

While every recent study has shown that first offers do best – the majority is narrow. The actual percentages are over 50%, are never more than 60%. So, over 40% of the time second offers do better. So, when is it best to go second?

Ask a competitive cyclist which is the best position and they will answer, “Of course I want to be first across the line, but up until then, second is best – especially if I am unfamiliar with the course.” This way, the other rider does all the hard work, copping the wind resistance and setting the best line.

Similarly, in a negotiation, it’s best to use this tactic when you feel that you are not sufficiently confident of the assumptions on which your offer is based. Sometimes the best preparatory research and the initial discussions with them are insufficient to allow you to determine the zone of possible agreement. This may limit your ability to promote your opening offer with the necessary confidence. In this case, it might be best to let them go first.

Avoid the Anchor

Accept that if you are inviting them to go first, you are giving them the opportunity to establish an anchor, so you must do all you can to stop this.

If you respond immediately with a counter-offer, you are just helping them ‘dig it in’. Rather respond by questioning their offer:

• “How did you think that would be attractive to us?”

• “You must have based that offer on what you thought were important criteria. What were they?”

Don’t Be Tricked into Leading

Making your first offer depends on timing. You make the offer when you determine the time is right: your assumptions have been validated, the relationship is established and appropriate information has been shared.

Beware the leading question: “What figure were you thinking of?” Only answer this question if you think the time is right for you. You could try setting an ‘ambit anchor’ with a statement like, “I could be wrong, but I’ve heard of prices as high as (outrageously high figure)”.

Confident negotiators control the process making each step work to their advantage; and the opening offer is a crucially important step.

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