When it comes to negotiations — whether it's for a used car or a salary at a new job — where you start has a profound effect upon where you end.
“Opening offers exert a strong anchoring effect, determining the range of possible outcomes to a negotiation,” explains Malia Mason, an assistant professor in the Management Division of Columbia Business School who has studied negotiations.
When opening a negotiation, however, many people begin not with a point, but a range — $60,000 to $70,000 in the case of a salary negotiation, for example. In a 2014 survey conducted by Mason’s colleague and co-author Daniel Ames, the Ting Tsung and Wei Fong Chao Professor of Business at Columbia Business School, more than half of respondents reported making a range offer during their most recent negotiation.
Conventional wisdom, however, has held that starting with a range is a terrible idea. Negotiation experts have assumed that, rather than considering both ends of the range, your counterpart would simply selectively focus on the end of the range most attractive to them — the low end, in the case of a buyer, or the high end in the case of a seller.
Through a series of studies, however, the researchers have demonstrated that range offers actually can work if constructed correctly.
To capture the benefits of a range offer, the researchers suggest you think of the single number you'd like, and then ask for a little bit more — what they call a “bolstering range offer.” “If you're selling a car, and you want $5,000 for it, instead of just asking for that number, try asking for $5,000 to $6,000,” Mason says. Doing so, the researchers find, nets negotiators a better final settlement than the point offer without damaging the relationship between the two parties. That's vital when the relationship between negotiators is likely to continue, as in the case of an employer and employee.
“Opening with a range shows your counterpart that you're open to negotiation and that you're considering their needs. It's perceived as polite and people want to be polite in return,” Ames says. It also impacts your counterpart's beliefs about your reservation price — the point at which you'd simply walk away from the negotiation. The perceived politeness of range offers could make them a particularly useful negotiating tool for women, who are more likely to be punished in a negotiation for any perceived aggression, Mason points out.
Not all ranges are created equal, though. While a range of 5 to 25 percent captures most of the benefits of a range offer, wider ranges offer little benefit, explain the researchers.
The direction of the range is equally important. “When constructing a range, many people make what we call ‘backdown range offers,’” Ames explains. A prospective employee looking to make $60,000, then, might ask for $50,000 to $60,000 rather than $60,000 to $70,000 — a strategy the researchers say is highly unlikely to net them a better payout.
While the finds may tempt negotiators to just ask for the more assertive end of the range — $70,000, in the scenario above — the researchers caution that strategy is unlikely to work. In their study, they found that the rate of impasse, in which negotiators walked away without a deal, skyrocketed when the opening party simply made an aggressive point offer.
Whether you opt to open a negotiation with a range or not, the researchers stress, it’s vital that you do your homework. “To make a good offer, you need to know what’s weak, what’s ambitious, and what’s completely unreasonable,” Mason says.
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ABOUT THE RESEARCHER
Malia Mason
Malia Mason studies negotiations and social judgment and decision making in one line of work. In a second, she studies how people regulate their...
ABOUT THE RESEARCHER
Daniel Ames
Professor Ames's research focuses on social judgment and behavior. He examines how people judge themselves as well as the individuals and groups around...