Do you want to be more successful in your next negotiation? Do you want to know some strategies on how to offer a counteroffer in a negotiation? Some approaches are better than others depending on the situation. This article explores some options for your consideration.
Have an anchor
It has been shown that the party that offers the first offer, is able to present an anchor to help initiate the process.
This is called an anchor because it us the first offerand it anchors a counteroffer position as a starting point.
Say you are at zero and the other party is a 100. You both have an idea of the other party’s position is before you offer your counteroffer. If you offer 10 you may be demonstrating that you do not plan to move much and you expect the other party to move quite a bit. If you offer 40 you could be signaling to the other party that you may be expecting a similar concession on their part. There is a lot to be said for anchoring your counteroffer. However, think it through on your part and how the other party may perceive it as well.
If given a counteroffer by the other side without a rationale as to why, parties tend to respond more negatively. However, when presented with a sound rationale as to why with the counteroffer parties were more willing to consider concessions. For that reason, always have a rationale for any offers that you make based on objective or subjective criteria.
On the other hand, you may find yourself where you are not able to make the first counteroffer for various reasons. Perhaps you are still discussing what it is you want to do with team members. For whatever reason they went first. What should you do? You will be presented with some ideas further along in this article.
Critiquing their offer
What about critiquing their offer? Think about this. This is called disparagement. Why does it often fall flat? Do you like someone telling you why what you are offering does not make sense to them? So how do you think they feel when you are critiquing their offer?
Do not provide negative feedback on their offer.
If you don’t what should you do?
If possible, try to develop an authentic, connecting relationship, and listening actively to understand the facts, issues, emotions tied to the issues, and their interests. This can lead to dialogue. Listening actively by paraphrasing, asking open ended questions, summarizing, suspending judgment, and empathizing. Be careful when listening actively not to critique or offer advice. Be there to understand when you are consciously listening actively. Once someone has been listened to, they are more apt to listen to you.
If you have a strong rationale this can be very persuasive.
If someone else does not have a strong rationale and you do, once they have been listened to, this adds additional possibilities that they are far more likely to listen to what is you have to say.
You need to be honest, straightforward, open, accepting, and responsible with what it is you have to say. Stay focused and have a strong rationale for your counteroffer.
Understanding your and their financial constraints can result in bringing up elements of quality, timing, area of coverage, and other concerns that can address elements other than pure finances. Coupling your financial constraint financial offer with a logical rationale while bring up these types of concerns can be very persuasive. This brings you to three effective strategies to positively influence a negotiation with a counteroffer.
Losses versus gains
It turns out that in general people are more oriented to avoid losses than to appreciate gains.
Are you more motivated by greater pay or avoiding the pain of less pay. Yes, you would like to have more pay, but when you consider the implications of receiving less pay you may be more highly motivated to look for another job. Losses impact our minds more negatively according to neuroscience. However, this becomes a mixed bag based on your aversion to risk or depending on our attentional scope and goal you are pursuing.
So how can this be used. Focus on affirmation and gains related to interests. However, if there are significant downside losses, pointing these out can significantly impact the results. If you work with us on this deal, you gain X. However, if you don’t you could lose out not only X, but X, Y and Z on potential future deals. You are introducing this at the beginning. Knowing that there are likely to be future deals, you wouldn’t want to lose out on those would you?
There are also differences in terms related to how you look at a series of payments versus long term implications
Installments versus lump sums
Studies by Tversky and Kahneman demonstrate that people prefer to lose money once, but be paid money in installments. Think about this in terms of you losing money. You prefer to lose $50 once, but how cool is it to find $25 twice. Think about this in a negotiation.
Regarding price reductions break these up into installments. However, when asking about a price concession it is better to make one demand.
The aversion to loss is about twice as strong as the pleasure of gaining. Keep this in mind for future negotiations.
Asking for something without any justification runs weak. For example, the simple statement “may I make copies on the copying machine” may not generate much empathy while you are copying. However, asking “may I make copies on the copying machine, because I need them right away” may be far more compelling. Having some justification even if weak can be very helpful.
However, avoid over justifying an offer that can be easily counteroffered. This can inspire the other side negatively to become entrenched.
If you already have a host of good reasons for your initial position, do not find yourself looking for more. Rather, let it stand on its own.
Here are twelve key points
- Make the first counteroffer is possible and provide an anchor
- Don’t critique their offer.
- Build an authentic, connecting relationship
- Listen actively
- Once they have been listened to provide a sound logical rationale
- Understand your and their financial constraints
- Work on other areas of interest
- Avoiding losses can be twice as persuasive as gains
- Give price reductions in installments
- When asking for price concessions ask for one lump sum
- When asking for something have even a weak justification
- Don’t over justify your counteroffer
The ideas presented here are to give you food for thought with your next negotiation where you may be in the position to receive or to provide a counteroffer. Think about these elements ahead of time.
Prepare ahead of time with these concepts in mind.
Besides knowing your and their positions, take the time to determine your Best Alternative to a Negotiated Agreement (BATNA). That is if you do not at least make it to this point you are prepared to walk away. Then develop three alternatives between your starting position and BATNA. This will provide you five preconceived perspectives with a rationale for each to use in your negotiation. Good luck.
Did you find this useful? What has been your experience? I would love to hear from you.
About the author
Mike Gregory is a professional speaker, an author, and a mediator. You may contact Mike directly at email@example.com and at (651) 633-5311. Mike has written 12 books (and co-authored two others) including his latest book, The Collaboration Effect: Overcoming Your Conflicts, and The Servant Manager, Business Valuations and the IRS, and Peaceful Resolutions that you may find helpful. [Michael Gregory, ASA, CVA, NSA, MBA, Qualified Mediator with the Minnesota Supreme Court]