Sim Game Lesson #1: Opening Offers
This is the first in a series of posts where we’ll be sharing the competition-beating lessons uncovered by our sim game platform’s big data. We’ve analyzed hundreds of sims negotiated by our clients on our courses. Most of the sims were created in collaboration with clients to accurately reflect their real-life business negotiations. Our sim games have been point-scored, which uniquely enables us to evaluate winners and losers in great detail. For the first time ever, we are sharing our findings in this series.
Want to quickly know whether the negotiation pro you’re talking with is any good? Ask them whether you should be making the opening offer or if you should allow others to make the first offer. If they don’t immediately and emphatically respond that you should make the opening offer, don’t walk away, run!
We have been instructing clients on the value of making the opening offer and how to best ensure that your offer gives you the advantage for over two decades, but it wasn’t until a few years ago that our sim game gathered enough data allowing us to prove this empirically with certainty.
In debriefing hundreds of sim games, our Negotiation Experts have noticed a clear pattern. The negotiator who makes the opening offer ends up coming out on top. After sifting through completed client negotiation games, our data scientists have confirmed our observation.
So what is this magic that the opening offer exerts? At the start of our courses, when we get negotiators to write out their first offer, we noticed that many abandon their opening offer after hearing someone else’s opening offer. Why would they abandon the offers they had written down? Negotiators tell us that they were influenced by the other person’s opening offer. Social scientists have known this for a long while from the many experiments that have proven this anchoring principle.
Examples of this anchoring principle in action are everywhere to be seen: in product catalogs or price lists, the big ask charities start with, and salespeople start by showing you the most expensive home, car, or outfit.
Is all lost if you allow others to make the first offer? How do you defend against a strong negotiator who has made the opening offer? See answers to these questions and more in our next post on Anchoring.
The graph below from a sim game illustrates how an ambitious opening offer was met with a moderate counteroffer, allowing the opening offer to enjoy a substantial advantage. The predictable result was all subsequent offers giving the first negotiator a sizeable value or points advantage. All that was necessary for the negotiator who made the opening offer to cruise into the winner’s podium was simply concessions within their position. The y-axis shows the value or points for both negotiators.