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It's risky to say you have a competing offer, 50-50 they just tell you they can't match and you should take the other offer. Most times even when people have competing offers, the advice is not to try and negotiate with your current firm because then they'll always see you as one foot out the door. You can say you believe the market value for the role is xyz and use that to justify the raise instead. You should also be prepared to explain the ways you've contributed/demonstrated good performance to earn the raise as well
Appreciate the advice
Be prepared to leave if you say this, had a friend get laid off doing this
He had an offer too but it was not nearly as good as he portrayed it
The “competing offer” normally is asked to be provided as proof so best not to lie
Don’t do this. They will require you to submit the other offer if they are willing to match it.