Negotiation Tips: Who’s on first?

Typical scenario: a businessperson is preparing for high-stakes negotiation. I ask them what their plan is for the first few minutes of the negotiation. They tell me that they are not going to say anything and, instead, make the other person go first.

I then ask them, "What if the other person has this exact plan?" That leads to a comical scenario in which two people are engaged in a stare-down—neither of them willing to say anything and both coyly trying to get the other person to spill the beans.

In research by Kellogg faculty, we've dug deep into the question of, "Should you make the first offer, or let the other person do it?" There is a widespread, almost unquestionable, assumption that it is wise and strategic to let the other person talk first—and that it is suicidal to make the first offer.

However, there is virtually no research that supports the claim that letting the other party open first is advantageous. In fact, it can backfire—and lead to a worse outcome than you imagined.

Here is why:

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. Stated simply, there is a strong correlation between first offers and final outcomes.

Opening offers also influence the offers that the other party (the opponent) makes. Meaning, if you open first, the other party's counteroffer is influenced by your offer—not good for them.

Conversely, several research investigations show a strong and powerful positive effect of making the first offer. The negotiator who puts the first offer on the table has an advantage, other factors remaining constant. That means that if you and I have done equal preparation and have similar leverage points, you will have an advantage if you make the first offer.

When you do make a first offer, which we strongly advise you do, keep these three points in mind:

1. Hardly anyone accepts the first offer, so be sure you have room for maneuvering after you make it. If your first offer is too generous, you will not get credit for it.
2. Don't make an outrageous opening offer. Sometimes, negotiators think that they can establish dominance by making an extreme offer. However, this backfires and creates a chilling effect. A chilling effect occurs when offers are so outrageous that the other party loses all motivation to continue negotiating.
3. Ideally, your offer should be at or near what you think is the other party's BATNA (best alternative to a negotiated offer), close to the most that your buyer will pay or the least your seller will accept. Such offers are, by definition, within the realm of what the other party could actually pay (or sell for), but are not giving up unnecessary ground.

Related Resources & Features

• Video: Strategies for negotiating employment packages

For more insight on first offers, read Leigh Thompson's Truth 15: "The power of making the first offer" in The Truth about Negotiations (Second Edition).

Photo credit: *Light Painting* under a Creative Commons license