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Home  | How we help clients |  Executive Education  | Learning Centre 
September 22 2019.
Make the first offer for a successful sales negotiation.

There is a common (mis)understanding that for sales negotiations, it's better to wait for the other party to make the first offer. However, I have experienced number of times, you may win by making the first offer yourself.

In this article I share; how the 'first offers' have influenced the negotiation & final outcomes.

First offer 'the Anchor'.
I have observed; in a condition of great ambiguity and uncertainty, first offers have a strong anchoring effect. This offer exerts a strong gravity during the rest process of negotiation. The discussions & posturing during the negotiation process revolves around this offer.

You might say the experienced negotiators are immune to the 'anchor'. I have a observation & its NO, they are not immune!

Why? Its' because every item under negotiation, (whether product &(or) services), has both positive and negative qualities. The qualities that suggest a higher price and qualities that suggest a lower price. High anchors invite our attention toward an item's positive attributes; low anchors direct our attention to its flaws.

So when should the first offer be made?
If you are confident & have good sense of control, probably you are the first one to make an offer. Those with less power by virtue of lack of power (perceived or real) & knowledge are afraid to make an offer. By making the first offer, you will lead the negotiation in your favour.

The final outcome of a negotiation is affected by whether the buyer or the seller makes the first offer. Specifically, when a seller makes the first offer, the final outcome price tends to be higher than, when the buyer makes the first offer.

Be aggressive in submitting the first offer.
The first offer should be aggressive but not absurdly so. Many times we fear aggressive first offer may scare or annoy the buyer. However, I feel this fear is bit exaggerated.

An aggressive first offer can work in your favour for two reasons.
- More extreme first offers lead to higher final settlements.
- Extreme first offer allows you to offer concessions and still reach an agreement that's much better than your alternatives.

What is your target aggressive price?
While developing an aggressive first offer, have two values to focus on.
-
First, consider the alternatives to an agreement and create a reservation price-a specific value at which you'd prefer to walk away. Now you'll be prepared to accept any agreement that exceeds your reservation price and reject any value that falls below it.
- Second, determine your ideal outcome, or target price-the agreements or values that would fulfil all of your negotiation hopes and desires. Knowledge of your reservation price is crucial, but it's your target price that you should pay attention to, when developing a first offer.

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