Negotiating Your Salary
Over one billion pound is spent on clothes every day in the UK, how much money do you predict is spent on shoes everyday in the UK?
Write down your answer: _________________________________________________
Whatever answer you recorded was influence by my initial statement; over one billion pound is spent on clothes everyday in the UK. If I used a similar question with a different group of people; Over one million pound is spent on clothes every day in the UK, how much money do you predict is spent on shoes everyday in the UK?
The average answer for the million pound question would be different, to the average answer of the billion pound question. When we have no idea about the cost of something, our mind will look at our past experiences and for a comparison, alternatively our mind will just use the information presented, in this case “one billion pound” as a benchmark. As an example, in someone’s mind they may ask themselves:
- · One billion pound is spent on clothes, people spend around 70% on clothes and 30% on shoes, amount spent on shoes is X
- · One million pound is spent on clothes, people spend around 70% on clothes and 30% on shoes, amount spent on shoes is X (less than the billion pound question)
Why is this important? Because the same psychology is used in negotiating your salary.
Generally when employees negotiate their salary, the employer will first set down an offer £ xxxxx, the employee will then ask for around 10-20% increase and the employer will counter offer with a 5-10% increase – the deal is then settled, the employee is happy as they got more than the initial offer, the employer is happy as they already knew the end result salary increase (their offer plus 5-10%)
The problem with this common salary negotiation system is the employer sets the initial offer and all you as the employee get is a small increase on that offer.
to learn more about Price Psychology read Priceless – the Hidden Psychology of Value by William Poundstone
How to get a bigger pay rise
To get a larger salary YOU need to set the initial offer, £xxxxx. In many cases employers, especially in sale roles will want to negotiate with you, knock your offer down and they will use your offer as the bench mark. By setting a high initial offer (not to high so it is unrealistic) the employers counter offer will be closer to your offer then a cheaper initial offer. As an example:
- · I’m worth £45,000, the employer may offer £40,000
- · I’m worth £40,000, the employer may offer £38,000
As you can see with the two examples, there is a real difference with the employer’s offers but the reductions are not the same in monetary terms and I would add, by starting with a higher and realistic initial offer will secure you a higher salary. This can make a real difference with multi thousand pound salary negotiations.
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