35. Why should you never split the difference?
As soon as someone suggests splitting the difference, the whole game changes.
The side that makes the offer has essentially revealed what they will settle for. You, a seller, should always let the buyer be the one to offer to split the difference first.
Suppose that after the initial negotiating, you a sales person, have a price of $50 per case on a one thousand case order and the customer wants to pay $45. The buyer says, "Let's split the difference." What they have just done is raised their offer to $47.50.
The negotiating range has changed. Before, the difference was $5. Now the difference is $2.50 per case.
What's your move? Acknowledge the offer with appropriate respect but make it clear that you cannot yet accept because the price is still too low. (Continue to maintain that the top of your limit is $50).
After waiting a few seconds, it becomes your turn to make a counter offer. But now the negotiating range is between $47.50 and $50.00. You say, "Let's meet half-way; I'll come down $1.25 and you come up $1.25."
The deal is struck at $48.75 per case. If you had been the one to offer to split the difference just the opposite might have happened. If you agree to split the difference you would have lowered your price to $47.50.
The buyer would have said to YOU: “Let’s meet half-way; I’ll come up $1.25 and you come down $1.25. The deal would have been struck at $46.25.
On a one thousand case order the difference would have been $2,500. (Which, of course, would have come out of your gross profit).
The first person who places a value on a product or service establishes its worth.
A perceived value must be established when the customr or buyer makes a low offer and gives you a low price. You should counter by presenting an equally high price. This is sometimes referred to as "bracketing."
Comments:
This all revolves around confidence in your selling abilities. I am, many times, tempted to take an offer of this type or to be the first to make the ‘split the difference’ offer to get the sale over with. This keeps the competitor from having another shot at the deal. However, as you stated, it can cost you profit. If you are always low bid you will eventually go out of business.
Crocker Smith
When you split the difference you are in most cases going to lose money. I can’t afford that, can you? Place the value on your service, establishing its worth and benefit. We too are in business to make money; we can’t lose profit to gain a customer every time. If we did we would not be in business….
Brooke Knight
"The person who offers to split the difference has essentially revealed what they will settle for. You, a seller, should always let the buyer be the one to offer to split the difference first."