Pricing – And now, what is the best strategy for negotiating a sale of a product or service? Exploring the seller and buyer behavior.

An insecurity that plagues every growing entrepreneur in their start-up or new business is the issue of presenting their prices.
From strategic profitability goals, how do you seek to get better out of product or service offerings, without driving away a potential customer or buyer?
Of course there are hundreds of different schools and trading techniques. Also the market experience can help a lot. But a study recently released by the renowned INSEAD Business School on Organizational Behavior shows that a “value” that you have defined, from some study of your product, brand, market conditions and competitors, can be achieved or not, depending on the relationship between the degree of accuracy shown numerically in a price offer and the level of knowledge and professionalism of the customer or potential buyer.

Depending on who you are dealing with, your offers may be presented more or less accurately in numerical terms.

After all, presenting an offer of $ 199.95 is better than presenting another $ 200.00 round or not?

The current convention is that the more you need your offer, the better the outcome of your negotiation.
This strategy is based on the idea that more accurate or broken offers (for example, $ 198,75) tend to anchor customers more strongly than “vacant or full” offers (eg $ 200.00).

For example, proposing a price of $ 2,340 for a couch will probably lead to a better deal than offering it for $ 2,400, because more accurate or “broken” numbers make it harder for people on the opposite side against against bidding.

The existing research offered two different explanations to explain why more accurate numbers tend to anchor people more. The first explanation suggests that people operate mentally (and negotiate) on a more refined scale when they are exposed to a more accurate value. A number of $ 198.75, for example, may encourage people to think in increments of 25 cents, leading to a counter offer of $ 198.50. In contrast, a round number like $ 200.00 causes people to operate on a coarser scale with larger increments, later leading to much more aggressive counters, such as $ 110.00 or $ 130.00 for example.

It is known that the more aggressive the counter-offer of the opponent, the less value the seller of a negotiation can claim.

The second explanation as to why the more accurate offerings have stronger anchoring power is related to competency assignments. When someone makes a precise offer, the recipient of the offer assumes that the other person is an expert, or just knows more about it, and is thus able to come up with a more detailed and accurate number.
As a consequence of such attributions, it is more likely that a recipient of the offer will be closer to a precise offer by making a counter offer.

But we have to be careful to realize that on the other side there is a savvy person or a shopping expert. the trading experts are probably familiar with the types of deals that are usually made in a particular market and are not easily deceived by very precise deals.
As a consequence, experts may be wary of offers that are very accurate.

So if the explanation of the mental scale is true, more accurate offerings should always lead to better results – no matter how experienced the negotiation counterpart is. But if the attribution of the proficiency explanation holds, making offers that are very accurate can be counterproductive when one is facing an expert adversary.

In field research both novices and experts in different fields were approached from brokers to jewelers and car dealers.

In an experiment with real estate participants, we asked individuals who had experience in professional negotiation (experts) and those without (novices) to make counter-offers for a property offer after they were randomly exposed to an initial offer of variable accuracy. These initial offers varied from R $ 980,000.00 (low precision) to R $ 981,200.00 (moderate precision), and finally to $ 981,218.37 (high precision).

For amateurs, a linear effect was found: The more you need an offer, the closer the initial offer the amateurs were willing to pay (see the figure on the left below).
For the experts, however, we find a curvilinear effect. The availability of experts to pay has increased with precision, but only up to a point.
When the offers were very accurate, the experts despise