Often in negotiating, a party may make a monetary demand without providing any reasoning behind it. I have often found that such a tactic does not work well because the other party will ask me “why”. She wants to know the reasoning behind the monetary demand. So- I return to the first party to learn the rationale behind the monetary demand and with permission, convey it to the requesting party.
In short, it seems that people cannot negotiate in a vacuum. They want supporting information. And the more precise the amount being demanded, the more back up or supporting information is requested.
Well, LiveScience recently reported on a study (“Study”) occurring in Germany which found that depending on the circumstances, too much precision may be detrimental to one’s negotiation position unless supporting data is provided. In an article entitled “Why It Pays to Be Vague When Negotiating Prices” by Stephanie Bucklin, posted on December 29, 2016, the author reports on a study conducted by David D. Loschelder, Malte Friese, Michael Schaere and Adam D. Galinsky finding that while it helps to be very precise when negotiating with amateurs, that precision can backfire when negotiating with experts (unless the supporting data is also provided).
According to this Study, prior research has shown that the more precise is the demand, the stronger will be its anchoring effect. It will set the field of expectations and be a “reality check” for the parties. Thus, previous research studies found that when buying a house, a more precise listing price (e.g. $799,800) will cause higher bids on the house while a more generalized listing price (e.g. $800,000) will result in lower bids. (See, Study at p. 1.)
What this Study found is that in negotiating with amateur negotiators, in response to a more precise price, the amateurs will offer higher monetary amounts. However, when negotiating with expert negotiators, the demand can be precise up to a point to evoke a positive response. However, if it is too precise (let us say, $129,363.00), the experts will question the competency of the person making the demand which questioning can only be allayed by providing supporting data. When data supporting the precise demand of $129,363.00 was provided, the fears of the experts that the asking party was not competent were overcome, and the expert negotiators provided appropriate or meaningful responses to the very precise demand.
For example, in one experiment, the researchers recruited 179 automotive professionals, some of whom were salesmen and some of whom were mechanics. They were provided with a detailed description of a black 2013 Peugeot 508SW and were told that the vehicle was one-year-old with approximately 22,000 km (about 13, 700 miles) on it. They were then asked to negotiate the sales price with the vehicle’s present owner. (Id. at 1580-1582.)
The researchers then provided the owner’s demand; first, a generalized demand, (e.g. €28,000), then a slightly more precise demand (e.g. € 27,830) and then finally a very precise demand (e.g. € 27, 837.63). (Id.)
The researchers found that with respect to the car mechanics who were amateurs at negotiating, they increased their responses linearly as the demands became more precise. However, the responses of the salesmen- who were experts at negotiation- followed an inverted U pattern. They offered a significantly lower amount of money to the most precise demand (e.g. € 27, 837.63) than they did to the moderately precise demand (e.g. €27,830.00). Further, their response to the most precise demand was also marginally lower than their response to the most generalized demand. (e.g. €28,000). But, the researchers also found that providing a rationale or back-up information counteracted this effect. That is, the salesmen – expert negotiators- were willing to pay more in response to the highly precise demand (e.g. € 27,837.63) IF they were also given the rationale for the precise price. (Id.)
In sum, these experts offered a medium amount to the least precise demand, a little more to the medium precise demand but the least amount to the most precise demand unless given additional supporting information to which their response was almost as much as their response to the medium precise demand. (Id.) (See, Fig. 5 in Study at p. 1582.)
Their other experiments bore out this result. While amateur negotiators would increase their offers linearly as the demands became more precise, the experts would not. Rather, their responses formed an inverted -U. They would increase their response up to a point but then would wonder why was the offer so precise (thus questioning the competency of the other party) and without the supporting data, were unwilling to increase their response. Rather, if anything, the experts would respond with a lower amount in response to more precision without the additional supporting rationale being provided.
Thus, while precise opening offers may have an anchoring effect on amateur negotiators, “… in negotiations with experts, moderately precise anchors are most effective. Experts react against too precise a price- unless a rationale that boosts the perceived competence of the first mover is provided.” (Id. at 1585.)
So- the moral of this study is if one is going to make a demand that is very precise, down to the exact dollar and/or penny, be sure to also provide the supporting data. Otherwise, it may meet with a great deal of resistance if the other party happens to be an expert!
… Just something to think about.