404 / CONDUCTING NEGOTIATIONS
Making offers and
counteroffers
Knowing when to go first
Some experts suggest that you should
not make the first offer and should
always allow your counterpart to go first.
Skilled negotiators, however, question
the conventional “never open” rule. They
choose to tailor their approach to each
negotiation. How should you decide
whether to go first or second? You should
present your offer first when you are
confident in the thoroughness of your
due diligence and also when you suspect
that your counterpart is ill-informed.
By going first, you will “anchor,” or set
a benchmark, that will be used as a
reference point for the counteroffer.
If you are not fully informed, do not go
first. Consider the other party’s first
offer, do not respond to it, and do your
due diligence. In some cases, two
negotiators are equally skilled and
well informed and neither wishes to
go first. Such cases often require the
involvement of a trusted third party to
act as a neutral go-between and get
the negotiations started.
Before you go into a negotiation, it is vital to plan your
opening move. Do you open negotiations and make the first
offer or do you wait and allow the other party to go first?
Make sure that you have an opening offer in mind, and plan
how you will respond to your counterpart’s offers.
POSSIBLE RESPONSES TO TOUGH OPENING OFFERS
It is easy to be thrown if the other party’s opening offer is extremely low.
Effective negotiators make sure that they are not startled by a tough first
offer, and avoid making a quick, emotional reaction. It is vital that a low
opening offer does not become a benchmark for the negotiation. Possible
responses to low offers include rejecting the offer as unreasonable;
asking the other party to revise the offer; or asking questions and probing
the other party for justifications for the toughness of the offer.
In focus
You should present your offer
first when you are confident
in the thoroughness of your
due diligence
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MAKING OFFERS AND COUNTEROFFERS / 405
Setting your offer
Whether you present your offer first or
second, how high should your offer be?
Former US Secretary of State Dr. Henry
Kissinger believes that a negotiator is
better off starting with a high offer. Most
negotiators, however, tend to negotiate
first with themselves and thus restrain
themselves from making bold offers.
They tend to justify their modest offers
by thinking that their counterparts would
not go for a higher offer. Experts today
suggest that a seller who puts forward a
high offer may risk his or her credibility
and offend the buyer, who may very well
walk away without even providing a
counteroffer. Instead of coming up with
offers that are either too high or too
modest, it is often better to make offers
that are bold and daring. Bold and daring
offers are reasonably high, tend not to be
acceptable, but are still negotiable.
CONSIDER THE
LONGER TERM
If you are hoping to form a
long-term relationship with
the other party, do not take
advantage if they make you
a very low first offer. You will
generate goodwill and
nurture the relationship if
you instead respond with a
counteroffer that is higher,
but still reasonable to you.
Tip
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