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Negotiating salary: Ask for a precise number!

Monday, August 12, 2013
posted by Rita Handrich

salary-negotiation-300x258We’ve written before about salary negotiations in general, the difference in what men and women are paid, and salary negotiations for women only. So here’s another new study that says, whether you are male or female, going in with a specific number (like $5,015 rather than $5,000) gives you an edge in negotiations.

Researchers examined the use of round numbers in negotiations (in both the classroom and on Zillow–a real estate website). They found round numbers were much more often the initial offer on the table. For example, when looking at Zillow in four American cities, 73% of homes in the $10K to $99.9K range and 71% of homes in the $100K to $999K range “ended with at least three trailing zeros”. 98% of homes in the $1M to $10M range had listing prices that contained at “least three trailing zeros”.

So, the researchers wondered what would happen if you gave a more precise number rather than one with multiple zeros at the end. After multiple experiments, the researchers concluded that precise initial offers (that is, specific numbers not ended with trailing zeros) acted as “more potent anchors” than did round numbers (with trailing zeros). Round numbers have appeal, say the researchers, because they are easier to remember, fairly noncommittal, and “imprecision is a form of prudence”. (We are not sure exactly what that means but it’s an evocative phrase.)

The researchers believe that when you lead with a precise number, in any sort of negotiation, you send the message that you are prepared, informed, and knowledgeable about the value of either the item for which you are offering money or for salaries in your field. This precise offer leads the recipient of your opening bid to offer a returning number that is higher (when negotiating salaries or bartering on CraigsList items) than you might get if you offer a round initial request.

It’s an interesting piece of work, with applications to salary, mediation offers, jury charge “asks”, auto purchases, and even bartering at the farmer’s market. The researchers recommend bumping a $50 item to $49.75 (if you are the seller) or offering $50.25 if you are the buyer. They also comment that the research “highlight[s] how a lack of awareness about the power of precision may put the recipient of a precise offer at a disadvantage”. It’s intriguing research to experiment with in your day-to-day life–whether for mediation or that nice bunch of carrots next to the bright red radishes.

Mason, MF, Lee, AJ, Wiley, EA, & Ames, DR (2013). Precise offers are potent anchors: Conciliatory counter-offers and attributions of knowledge in negotiations. Journal of Experimental Social Psychology, 49, 759-763

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