Anchor Alone or Anchor Because?

Posted By Leah White, Nov 12, 2012

In being provided with a basic negotiation exercise, people are fairly split on whether it’s best to make the first offer yourself or to wait and allow the other side to make the first move. However, upon receiving some basic skills training in negotiation, it becomes apparent that making the first offer and establishing a strong anchor is the best approach in the majority of negotiations. 

Attorneys educated in the art of negotiation know that anchoring first can be invaluable and positively influence the outcome of a negotiation. A high initial offer anchors the negotiation and tends to ultimately lead to a more favorable outcome because the subsequent counteroffers are typically more similar to the original offer. Although an attorney can combat the effects of failing to successfully anchor first, it remains an important goal for any trained negotiator to set the first offer in a negotiation. 

Another important consideration for negotiators is whether to provide a justification with their offer. Previous conceptions have supported the view that justifying offers, whether by using fact-or opinion-based reasons, can help to strengthen a bargaining position. However, recent research has found that not all justifications lead to the same good result. In actuality, the effects of fact-based justifications can be dramatically different compared to opinion-based justifications. An opinion justification, which the opposing party can easily craft counterarguments for, will have a negative effect on the negotiation because the opposing party will regard it merely as an attempt at persuasion. However, if a counterargument is difficult to develop, which is more likely to be the case when a factual justification is used, then providing the justification may be an effective means of favorably influencing the negotiation. 

To illustrate, if a buyer offers to purchase a car for $4000 with no justification of why he feels that price is appropriate, the seller is likely to merely counter with a higher price. But if the buyer had offered $4000 because of the decreased value based on the color and ugly upholstery, the seller would immediately respond to those arguments. This response would likely be adversarial in tone and involve an argument in return as to why those are insufficient reasons for a $4000 price. Changing the justification to ‘the car has been in numerous accidents according to the accident report’ would shift the seller from dealing with an easy counter argument situation to dealing with a difficult one because the seller cannot spin the fact that the car had been in an accident into a positive light. This shift in justification would have no negative affect; in fact the opposite might happen with the seller conceding to the creditability of the buyer’s argument, ultimately resulting in a higher agreed price. The difference between these two scenarios is that the first justification was based on opinion, while the second was based on fact. A factually based justification is harder to counter than one merely based on opinion.

In addition to considering the ease of finding counterarguments, thought should also be given to how the opposing party will interpret the justification. If a party views the justification as something that is purely informative, that perception will generally not promote counter argumentation and will therefore not negatively influence the negotiation. It is only when a justification is perceived as an attempt at persuasion that the opposing party is encouraged to seek counterarguments. Since it is the opposing party’s perception that is crucial, it is important for negotiators to choose their words carefully when providing justifications. If a negotiator doesn’t want to encourage the creation of counter arguments, he or she should ensure that any justification that is provided will be perceived as purely informative.

Ultimately, making the first offer is still the best general practice for any negotiator. In addition to making that first offer, negotiators must determine whether justifying the first offer will push the negotiation outcome closer to the original anchor. And even if a negotiator doesn’t end up making the first offer, being prepared with factual counterarguments will make it easier to minimize any negative effects that the other person’s anchor may have on the negotiation.

For more information on the studies conducted to produce these conclusions see Yossi Maaravi, Yoav Ganzach & Asya Pazy, Negotiation as a Form of Persuasion: Arguments in First Offers, 101 J. Personality & Soc. Psychol. 245 (2011).