July 10th, 2013 | 6:00 am

Negotiate with Precision: Using Round Numbers May Get You a Lower Offer

filed under Money Talks

iStock_000012303174XSmallBy Melissa J. Anderson (New York City)

When it’s time to negotiate a salary or raise, what kind of number do you throw out as a first offer? According to a Columbia Business School study [PDF] published in the Journal of Experimental Social Psychology, it may be better to avoid using round numbers – for example, you may be better off asking for $98, 650 instead of a nice round $100k.

As reported in the Wall Street Journal, Quartz, and NPR, the researchers found that using a round number often leads to a lower counter-offer than if the number had been more precise. The reason why, though, is intriguing. It could change the way you talk about what you know, and negotiate for other benefits, opportunities, and everyday tasks.

The writers, Malia F. Mason, Alice J. Lee, Elizabeth A. Wile, and Daniel R. Ames, all of Columbia University, write, “First-offer recipients appear to make assumptions about their counterpart’s language and infer meanings that are not explicitly conveyed. Precise numerical expressions imply a greater level of knowledge than round numerical expressions and are therefore assumed by recipients to be more informative than the true value of the good being negotiated.”

Simply put, using precision in your offer makes you sound like you know what you’re talking about and deserve what you’re asking for.

The Research

The researchers performed several different tests to examine whether a precise-sounding opening offer resulted in a better counter-offer. In every case, they found that people who used precise numbers received a counter-offer that was closer to their initial offer than those who used round numbers for their initial offers. This held true for both hypothetical vignette and dyadic tests.

They say, “Across a range of populations and negotiated goods, across both buyer and seller roles, we found that precise offers are more potent anchors in that they yield more modest counteroffer adjustments from their recipients.”

The reason has to do with how we perceive information. When people give precise numbers for a good or service, they seem like they know more about what it’s really worth. “We argue that negotiators who use precise first offers more effectively anchor their counterparts because they seem more informed of the good’s true value than do negotiators who use round first offers,” the researchers write.

They explain:

“Speakers generally express information – and are assumed by listeners to do so – in a manner that is no more precise than their knowledge warrants. Thus, when prompted to provide estimates and forecasts of quantities, speakers compensate for their uncertainty by decreasing the precision with which they express them. Likewise, the confidence message recipients place in the accuracy of quantitative estimates decreases with the coarseness with which speakers express those estimates.”

Think about it this way: someone who tells you it’s going to be 77 degrees out today sounds like they know more about the weather than someone who says it’s going to be 80.

Similarly, when we negotiate for a salary with precise-sounding numbers, it seems like we know more about our own value, and the value of the work to be performed. The research suggests that a hiring manager will tend to counter with a smaller decrease than if we had negotiated with a round number.

How Do You Communicate What You Want?

The researchers focused specifically on numbers, but perhaps the nature of specificity in communication could have implications on the other things you might ask or negotiate for.

For example, let’s say you’ve decided it’s time to get more support at home, and you have asked your teenager to take over laundry duty. Being specific about when and how much you want done could result in you getting more of what you want. “I want the clothes washed, dried, and folded by 8:20pm on Sunday evening,” may yield a better result than, “Do the laundry this weekend.”

You may, of course, be met with some eye-rolls for that level of specificity – and not just because eye-rolling is the typical teenager’s natural response to almost any request.

In some cases, there may also be a risk in being too specific, the researchers suggest. “Signaling a willingness to accommodate can improve both interpersonal and instrumental outcomes, so negotiators who lead with precise offers might forego these benefits by seeming unyielding.”

It all depends on how you perceive the situation. The researchers didn’t investigate how power dynamics might influence the outcome. It may be in your best interest to seem unyielding in some cases. And in others, being flexible within the negotiation could help you reach a mutually beneficial agreement. But for simple, numerical negotiations on dollar amounts, it seems precision is your best bet to get what you deserve.

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