Making the Right First Offer

Notes on Negotiations
Written by Marty Latz, Latz Negotiation Institute

New research from Professor Shirli Kopelman finds “first movers paradoxically feel less satisfied” with their results despite empirical evidence that, in price negotiations, making the first offer often leads to better results. To temper this unhappiness, Kopelman recognizes the importance of, among other things, “doing your homework.”

Here are some thoughts and suggestions to help you determine where to start.

The challenge with going first is that you are trying to walk the line between being either too generous initially (and then not having sufficient room to move later on) or poisoning the atmosphere by appearing unrealistic.

To make the right first offer and to minimize your anxiety, consider these factors:

1. What are the first-offer expectations in your industry or context? For example, in the personal injury field, plaintiffs’ lawyers almost always make the first offer and it’s almost always extremely high. Insurance companies usually then respond with a low-ball counter.

2. What was your original goal (and is it still realistic given your current situation)? Where to start and how far to move should be evaluated relative to this.

3. What is your most aggressive, yet reasonable, independent standard?

4. How much “room to move” do you need to build into your starting point so your counterpart will feel that he or she achieved success?

The bottom line: your starting point should be your highest realistic expectation based on legitimate independent standards and justifications.

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Marty Latz is the founder of Latz Negotiation Institute, a national negotiation training and consulting company, and ExpertNegotiator, a Web-based software company that helps managers and negotiators more effectively negotiate and implement best practices based on the experts’ proven research.  He is also the author of Gain the Edge! Negotiating to Get What You Want (St. Martin’s Press 2004). He can be reached at 480-951-3222 or Latz@ExpertNegotiator.com

ICLEF • Indiana Continuing Legal Education Forum, Indianapolis, IN

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