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When was the last time you saw someone selling a used car for a price like $8,013? Can you ever remember any of your friends asking their boss for a 5.3% raise? Have you ever negotiated a starting salary in which you asked for $6,511 dollars more than your prospective employer’s initial offer?
If you’re like us, the answers to these questions are no, no, no. We as a society have a love for round numbers. We might sell our car for $8,000, ask for a 5% raise, or negotiate a starting salary in which we ask for $6500 more than the other side’s initial offer. But is society’s intuition misguided?
Behavioral scientists Malia Mason and her colleagues Alice Lee, Elizabeth Riley, and Daniel Ames think so. They believe that people can improve the result of their negotiations by ensuring their first offer is a precise one rather than one ending in round numbers. In one of their studies participants were asked to read an account of a fictional negotiation concerning the sale of a used car. In each case the participants assumed the role of a seller and received one of three offers made to them by potential buyers. One offer was a round number offer of $2000 and the other two offers had precise-ending numbers and were either $1865 or $2135. After participants received their opening offer, they were then asked to respond with a counteroffer of their own.
Sellers who received the initial offer of a round number—$2000 in this case—made counteroffers that were on average 25% higher than the buyers’ initial offer. However, those sellers given an initial offer that was a more precise number—either $2,135 or $1,865—were much more conciliatory with their counteroffer, typically countering with an offer only 10% - 15% higher than the opening offer. Given these results it seems that the small extra act of providing a precise opening offer in a negotiation can be a potent strategy that potentially reduces the gap between the two parties as the negotiation progresses. Why?
The researchers thought that recipients of precise offers are much more likely to believe that the person making that precise offer has invested time and effort preparing for the negotiation and therefore has very good reasons to support the precise offer they are making. This was consistent with a subsequent test conducted by the researchers where they measured participants' perceptions following the negotiations and found them likely to agree with statements such as “The young man put considerable energy into researching the value of the car” and “He must have had good reasons for the price he suggested.”
It is also interesting to note that the researchers found that this effect was consistent regardless of whether the precise offer was higher or lower than the $2000 round-ended opening offer. This insight suggests that when the time comes to sell that Honda Civic that’s taking up space on your driveway, you could end up financially better off by opening with a reduced but more precise offer of, say, $3935 than a larger less precise one of $4000. Of course should you be in the market for such a car you might be advised to pay special attention to the seller whose opening demand is unusually specific.
This precise number approach shouldn’t just be reserved for one-off transactional negotiations such as selling that secondhand car. The researchers found similar results across a range of other negotiation contexts. For example, in a second experiment, experienced managers and executive MBAs were split into 130 pairs for a series of live negotiations. Consistent with the previous study, those executives who made an opening offer in the form of a precise number received counteroffers that were on average 24% closer to their opening offer than those who made a round number offer. In every case this anchoring to the initial offer carried right through the final settlement.
Accordingly, having already researched all the information, equipment, materials and resources required to prepare that highly detailed proposal for a prospective client, don’t serve to make your subsequent negotiations harder by making the mistake of rounding up your quotation in the mistaken belief that doing so might make it easier for that prospective customer to process. Instead, present that precise number early on in your negotiations.
A similar approach should be taken when negotiating a review in your salary and benefits package. Although it may be easier and simpler to ask your boss for a raise of 10%, asking instead for a raise of 9.8% or 10.2% should result in less resistance due to the precision of the number. Of course, you should be prepared to justify why you are asking for that number—perhaps that is the exact average raise of everyone in your position at work or of individuals in your position at comparable organizations. Similarly, a babysitter hoping to net an average hourly rate of $15 would be advised to open with an offer of $15.85 (or even $16.15) rather than $16 when negotiating with parents.
This kind of approach could also be useful when it comes to managing projects and persuading people to complete tasks by a certain time and date. This and other research in social psychology suggests that rather than asking people to get back to you in two weeks, you might get more timely responses if you actually stipulate 13 days. In a similar vein, rather than requesting that a job be completed by the close of the business day or by the end of the week you might be more effective signaling a precise time (e.g. “Could you please get this back to me by 3:45pm on Thursday?)
Speaking of that, if you’re interested in learning more about the science of persuasion, I’d recommend you purchase our new book entitled, “The Small Big: Small Changes that Spark Big Influence,” co-authored with Steve J. Martin and Robert B. Cialdini, by 11:37pm tonight!
For more on our new book, go to: www.thesmallbig.com
You can purchase it from Amazon here (currently sold out and on back order) or Barnes & Noble here (currently available).
For the studies on precise offers, see: Mason, M. F., Lee, A. J., Wiley, E. A., & Ames, D. R. (2013). Precise offers are potent anchors: Conciliatory counteroffers and attributions of knowledge in negotiations. Journal of Experimental Social Psychology, 49(4), 759–763.
