One Studied Tactic to Negotiate a Better Price: How you frame your initial offer affects how high a buyer is willing to go.
Whether you’re negotiating the price of a big client order or selling your company, is it better to offer a single initial figure or a range? According to a recent study, the latter is the better option.
Researchers from Columbia Business School ran a series of five negotiation-simulation experiments involving Amazon’s Mechanical Turk workers and business school students. Participants were asked to not only guess what their partner’s reservation price (the lowest price they would accept), but were also asked questions designed to show how they perceived their partner—the study’s authors were curious as to whether certain negotiation tactics might lead to a likability cost, even if they resulted in a few more dollars for the partner.
In the paper, which was published in the Journal of Personality and Social Psychology, the researchers said that those who asked for a range were more likely to get their reservation price than negotiators who gave a single offer. There was also little evidence that a range offer would cause the negotiator to be seen in worse light.
In other words, open with a price of $7,000 for your car, and you’ll get counter-offered $6,500. But open the bidding with a range of $7,000 to $7,500, and the bidding starts at $7,000.
So the next time you’re posed with the salary expectation question, looking to sell your business, or trying to get a profitable price for your product, remember to always give people a range—you’ll reap the benefits in the end.
reprinted from Profit Report – Kristene Quan and David Fielding || April 15, 2015