I want you to imagine that you have been preparing for a negotiation and you have got to the point where you have to declare your financial proposal to paper. The bit that is going to be critical, maybe even the most important (maybe), is the price.
We could drift tangentially off point here and talk about things that may be much more important than price, like availability, quality, terms, etc., etc., we won’t. But you should.
What kind of figure should you be quoting to give your proposal the maximum chance of being accepted? Turns out that when it comes to negotiation precision is critical.
A study published in the Journal of Experimental Psychology found that you could improve the outcome of your negotiations by ensuring that the first offer is a precise one. In one of the studies, buyers were given one of three prices when looking to purchase a second hand car. The three prices were £2,000, £1,865 and £2,135. The first was a rounded number the other two very precise.
After receiving the first offer the buyer was asked to respond with a counter proposal. Again we could drift tangentially here and look at what additional value could be asked for to make that first offer a possibility, but that would be another whole story, and blog.
Those given a very precise number received a much better (for the seller) counter offer than those with the rounded number. Typically the counter offer when the number was rounded was 23% below the opening offer. Whilst it was 10 – 15% when the figure was precise.
Freakily that was the same for the figure above £2,000 as well as the one below. It was the specificity that drove the response, not the number.
This precise number strategy works in business transactions too. Negotiators who made opening offers precise and specific received counters that were 24% closer to their original proposal than those who started with rounded numbers. For some reason the precise numbers seem to anchor a better result all the way through to the final settlement.
Take this into account when buying, selling, negotiating your salary or agreeing when tasks will be complete.
You just might get a better deal.