by Jeanette Nyden, J.D.

There is a lot of power in making an opening offer.

In fact, the opening offer anchors the entire price conversation. Do you want to set the anchor, or allow the customer to set the anchor? This must be a conscience choice.

By setting the anchor, you are determining the scope and range of the price conversation. If you are unprepared, you could set the price anchor too low or too high. Both of these circumstances are bad for business.

By allowing your customer to set the anchor, they are determining the scope and range for the price conversation. Their anchor could cost you. Professional purchasers intentionally set the anchor low and expect you to drive a hard bargain. Are your prepared for that?

There is no hard and fast rule for deciding if or when to make the first offer. I've set the anchor and allowed others to set the anchor. Each decision was made based on the information I had at the time.. If you do choose to make the first offer (i.e. submit a bid or proposal with a price), answer these three questions first:

1. Do I know what the market will bear for my company's product or service?

Times are very different than they were just one year ago. We've experienced a lot of price deflation, meaning perceived value has changed. If you don't have a handle on this question, you may be leaving money on the table, or asking way too much.

2. Do I understand my company's internal costs to produce this product or offer this service?

Again, times have changed. You, as the negotiator, must have an idea of how internal costs have changed. If you are not sure, you may very well bargain away net profit without even recognizing it.

3. Do I have a reasonable idea of what the other company's budget range for this product or service might be?

I find that more purchasers are going on fishing expeditions long before they have real money to spend. So, when the expenditure is approved, it is often less than your proposal, forcing you to reduce price. This means that you are negotiating against yourself. You have to ask. Just don't assume that you are being told the truth.

If you are not sure about the answers to the above questions, think twice about making the opening offer. You might not be prepared well enough to anchor the conversation to your advantage!

About the Author

Jeanette Nyden, author of "Negotiation Rules! A Practical Approach to Big Deal Negotiations," is a negotiation skills trainer, professional mediator and business attorney. For more information about negotiation skills training and complimentary articles, visit www.jnyden.com.

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