Archive for the ‘Negotiation’ Category

Anchoring in a Negotiation Sunday, July 11th, 2010

It is legend that he or she who speaks first in a negotiation loses. Sometimes that is true but not always. This first offer is called the “anchor.”

The first offer is often price, but can be terms, quality, etc. A common response might be to offer a price that is 10% above your desired target price; this price puts you in the ballpark and gives you room to negotiate later. The difference between what you offer and what the other party wants is called the “gap. ”

When the gap is large, you should wait as long as you can before you anchor. The gap is often a matter of understanding the proposed value from one party versus the perceived value from the other party. When pushed to anchor in this situation, I recommend that you respond with questions about the other party’s perception of value to help you understand the size of the gap.

For example, a  customer with $20,000 to spend on a car walks on a Chevrolet car lot with the intent to buy a car. When the customer asks how much the brand new Corvette costs (my guess is$50,000) , the car salesperson responds by asking how much the customer wants to spend per month. This helps the salesperson understand how big the financial gap is between the car dealership and the customer. It also allows the salesperson to direct the customer to the cars in the right price range. By delaying the anchor, the salesperson can match the customer with the best car for the money (more or less).

If you can delay anchoring or get the other party to anchor, do so. If not, know that by speaking first you can get things started and still get what you want.

John Bradley Jackson
Top Dog

The BirdDog Group
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