You won't believe how easy it is
Conventional wisdom says that, in negotiations, it’s better to offer the other party a firm number rather than a range. The thinking is that a hiring manager who hears, “I want between $40,000 and $45,000″ will focus on the lower number, or somebody you want to buy a car from will jump on the higher number if you tell them, “I can pay between $8,000 and $8,500.”
That conventional wisdom is wrong. New research finds that people who offer a range really give themselves a better chance at getting the number they really want — but you have to do it the right way.
Columbia Business School professor Daniel Ames says there are a couple things going on when you negotiate with a range as opposed to a single number. For starters, there’s the psychological concept of “tandem anchoring.” When we hear a range, our minds are predisposed to take both numbers into account, not just the one that we want to hear.
“Our research shows that people receiving a range offer are often influenced by both ends of that range in estimating their counterpart’s limits,” Ames says.
The other psychological component at work is what Ames calls the “politeness effect.” While we generally think we drive a hard bargain when we negotiate, we’re not really as tough as we think we are. “We tend to think of negotiators as being reasonably shrewd and skeptical and self-interested,” Ames says. “But across multiple studies, that’s not what we found… When we look at the counteroffers that negotiators made, it was partly predicted by how rude or polite they thought it would be to make that proposal.” Even in cases where a negotiation is anonymous and buyer and seller don’t expect to cross paths again, most of us are still reluctant to be overly cutthroat.
The key to turning this into a number you want to hear — whether you’re landing a job or buying a car — is to give the other party what Ames calls a “bolstering range;” in plain English, tilt the numbers in your favor. If you want a salary of $50,000, tell the hiring manager you’d like between $50,000 and $55,000.”Range offers tend to shift what offer-recipients think about the offer-makers’ limits,” Ames says. “Adding a higher number… tends to tug assumptions about that limit higher.”
Now, Ames points out there are a few limits to this. “That doesn’t necessarily mean they assume the limit is the mid-point of the range,” he says. In one experiment where subjects were asked how much they would pay for a hypothetical catered event, those who heard the caterer’s estimate of $100 countered with an average of $77, although even those who heard an estimated range of $100 to $120 only offered an average of $83. “They didn’t all necessarily end up inside the range itself, but they tended to end up with more than they would have gotten with just the point offer,” Ames says.
So aim high, but keep it reasonable, Ames warns. “Range offers have some limits,” he says. “[They] tend to work best when they start at assertive, but not outrageous, levels and when they span a modest width.” In other words, if you want a $60,000 salary in a job offer, don’t suggest a range of $75,000 to $80,000. And don’t make the range so broad that it can damage your credibility, he cautions. “Range offers that go beyond normal widths, which tend to be 5-20%, tend not to bring extra value.”