Why Precise and Odd Numbers Work Best in Salary Negotiations
NEW YORK ( MainStreet) Being specific in sales and job negotations can give you the upper hand, according to new research.
The "Precise Offers Are Potent Anchors" study disclosed that people making an offer using a precise dollar amount such as $5,015 versus a rounded-off dollar amount such as $5,000 were perceived to be more informed about the true value of the offer being negotiated.
When the employee was perceived to be better informed, the person on the opposite end was found to believe there is less room to negotiate.
"Signaling that you are informed and using a precise number can be used in any negotiation situation to imply you've done your homework," said Columbia Business School Profesor Malia Mason, who conducted the study with Professor Daniel Ames and doctoral students Alice Lee and Elizabeth Wiley.
Negotiators in the Columbia study were placed in everyday scenarios such as buying jewelry or negotiating the sale of a used car.
Some were asked to make an opening offer using a rounded-off dollar amount while other negotiators were asked to use a precise dollar amount.
"There is a big difference in what most people think is a good strategy when negotiating and what research shows is a good strategy," said Mason. "Negotiators should remember extra zeros add nothing to the bargaining table."
To determine whether people make round offers more often than not, researchers studied Zillow, the online real estate marketplace, and found that the overwhelming majority of displayed prices were rounded numbers. Only 2% of people listed their homes with precise dollar amounts.
Job negotiations require a little more math. "Make sure both the dollar amount and percentage increase make sense," says Stuart Coleman, a senior general manager with WinterWyman Contract Staffing.
A raise of $10,000 for an employee that earns $50,000 is a percentage increase of 20%. "What you need to know is what that number represents," Coleman said. "What percentage raise is your dollar amount request or what dollar amount is your percentage raise request. Any number by itself won't tell the whole story and without that your supervisior will interpret it through their personal filter."
For example, a 10% raise seems reasonable, but if you are highly compensated the dollar amount may seem high. "There is a lot of psychology behind numbers and how people perceive them," said Coleman. "In fact, odd numbers like 7% or $5,600 are often more impactful. When we see an odd number we think it means something."
Whether it's a precise or rounded up number, be prepared to defend your request for a salary increase during the approval process.
"Point to areas where you have outperformed, gone above and beyond and consistently exceeded expectations on reviews then it will be an easier conversation," said Coleman.