Who Has To Give A First Price On A Negotiation Table?

Jordi Servat Founder and Consultant of Gestión del Cambio Empresarial

In all the negotiations that I have been able to be present during the exercise of my profession, or in those others that I have had to live in my private life, there has always been a moment in which it seems that time stops when someone has to give the first price for that operation in which I was.

That moment has always reminded me of American Western films just before the duel on the main street of the town in question, between the two gunmen, one always in the role of the good guy and the other in the role of the bad guy, where they look into each other’s eyes, the silence in the street is absolute, they hold their breath, people look out of the windows and no one draws, until, finally, one shoots.

At the negotiation table, a similar phenomenon occurs when it seems that no one decides to offer the first value of the transaction, and both parties wait for the other to be the first to speak and therefore to offer.

Experience shows that there is also a better way to do this.

It is not indifferent who begins to open the fire in the negotiation process, for this it is fundamental to know how to always assess who really has the strength at that particular moment, understanding strength, the one which by the concrete circumstances is in a better position and if no agreement is reached, it affects the person less because he is relatively interested in what is offered or has another better alternative.

It is not the biggest company as opposed to the smallest one that has the strength, nor the richest as opposed to the poorest, because the most economically powerful or the largest, or the most recognized in the market, may need what the other company offers to complete its puzzle and when that part is missing, until it has it, it cannot do anything with the rest of the pieces, that is why it is so important to it.

Therefore, depending on what you are negotiating, one must ask oneself

How important is the (product and/or service) to me?

And for the other negotiator?

What is the maximum price I am willing to pay?

And for the other party, what might be his or her entry price?

If we answer these questions, we already know from the answers, who is the first one to speak. If I am the strongest, I hope that the other party will speak first, because it may happen that I will be offered a value so low that I could never have imagined, and I will automatically move my price range down (my entry price and my exit price), so that I will most probably close the deal, if nothing extraordinary happens to interfere with the outcome of the deal, at a much better price than I could have ever imagined.

If the price offered for the weakest position is out of context, the arguments and logic of the negotiation will make the other party focus and move back into fair values so that the transaction will be closed, unless for emotional reasons, or because of the existence of better alternatives for the opposing party, make it decide to leave the negotiating table.

In this case, when the other party decides to leave the negotiation table, your loss will be small, because at the end of the day, the price offered is far above what you thought you would pay for it, or because you have another better alternative or simply because you consider that the product and/or service is not worth the amount requested.

Before getting up from a table and breaking off a negotiation for good, once it has been seen that it is impossible to reach an agreement due to being in very distant positions, a new opportunity can be created, putting the maximum of imagination on both sides.

By asking the right questions, we can discover what the other party values that I can offer, without too much effort, and on the contrary, what the other party has that I value and that it costs it little to offer, in such a way that we enter into a new scenario that could be beneficial to both parties.

For this to happen, a climate must first be created which facilitates collaboration on both sides, without which it will be impossible to construct a new proposal which allows us to reach agreements.

Finally, when you are in the weakest position, after having rationed the forces, it is up to you, after what was said before, to start talking, but… at what price?… at the price that is reasonable and high enough, because that initial price that we call the anchor point is going to set the trend in the negotiation, so if we can enter higher, we will surely close the operation at a higher price, than if we had entered with a lower entry point.

Knowing the concept that the anchor point must be as high as possible to reach a deal, determining the exact figure is still an art.

Lots of method and science but also negotiation is an art.


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