It’s anniversary night, and you’re trying to decide on the perfect place to eat. Since it’s a special occasion, you’re willing to pay a bit extra, but you also don’t want to spend money just for the sake of it. You’ve narrowed it down to two contenders, and head to their respective websites to see what they’re all about. While site A ticks all the boxes and offers a cheaper menu, site B features a short write-up about its head chef, who was personally scouted and mentored by Gordon Ramsay.
So which do you choose, A or B? Chances are you’re going with B, because you know that if anyone can survive training at the hands of Gordon Ramsey and make it out the other side, they’re bound to be extremely skilled at what they do. And by showcasing their chef’s celebrity apprenticeship, restaurant B sets customer expectations around that core value, which makes you willing to spend a bit extra on the dining experience.
What is anchoring?
Skilled negotiators use a technique called anchoring, a deliberate first offer that frames the discussion—to Position Your Case Advantageously and Set High Aspirations, two core RED BEAR negotiation principles.
Anchoring changes how the customer perceives your proposal by presenting favorable comparative data early in the negotiation. This information serves as a reference point, an “anchor” around which the rest of the discussion can take place.
This technique works in a similar way to an actual anchor. A boat will naturally move to and fro from where the anchor was dropped, but it will stay within a given range and always have the anchored location as its core reference point. So if you take charge early in the negotiation and make that core reference point one that plays to your advantage, you’ll be in a far stronger position to secure a favorable outcome.
Let’s take a closer look at why anchoring is so effective, followed by a few practical tips.
Psychologists call this effect “anchoring” because our minds naturally tie subsequent judgments and decisions to the first piece of information we receive. That initial number, statement, or proposal quietly defines the range of what feels reasonable, and everything that follows tends to be compared against it, often without our awareness.
In negotiation, these first-information effects can open or close your options long before you start trading. A strong, well-timed anchor can shape expectations, reframe what’s possible, and make ambitious outcomes seem normal. A weak or careless anchor, on the other hand, can lower your sights, restrict your creativity, and lock you into a narrow band of outcomes.
This is where the execution gap appears: many negotiators know they should “aim high,” but in the moment, they either accept the other side’s anchor or set one that misaligns with their goals. Managing information skillfully, what is said first, how it is framed, and when it is shared, is a practical way to close that gap and translate good intentions into consistent, high-value behavior at the table.
For better or for worse…
Anchoring is so effective because humans are naturally comparative beings. It’s practically impossible to hear new music or taste new food without instinctually comparing it to other meals and artists to see where it fits into one’s musical or culinary map. And more importantly, to see how it measures up. This tendency is only amplified when making a decision: for instance, when a prospective customer is deciding whether or not to close a deal with you. Seeing as they’ll naturally compare your price and offering to that of your competitors, it’s in your interest to set the stage for that comparison in a deliberate, advantageous way.
Left unchecked, these automatic comparisons and first impressions quickly migrate from psychology to your P&L: they normalize deeper discounts, anchor buyers on “concessions” instead of value, and quietly erode margins deal by deal. They also widen the execution gap. Skilled negotiators abandon strategy in the moment to “match” perceived alternatives, take unnecessary price cuts, and steer conversations into avoidable dead ends. Managing comparison bias is therefore not just a mindset issue; it is a core commercial discipline that protects price integrity and deal quality.
Another reason anchoring works is that human decision-making tends to be influenced by the first relevant information we receive. This means that if you try to save the best comparative details for last, they’ll have a hard time improving upon the customer’s first few impressions.
Dropping anchor in profitable waters
Here are a few anchoring tips to help you negotiate consistently more profitable agreements.
Consider a global manufacturer renewing a 3-year SaaS contract with a key enterprise software provider. The current annual spend is $1,000,000. Procurement’s internal target is a 10% reduction (to $900,000) with improved service levels and added analytics modules.
Scenario A – Supplier anchors high: The supplier opens with, “Given the additional users and new analytics modules you’ve requested, our proposal is $1,300,000 per year.” Procurement pushes back and negotiates, eventually landing at $1,080,000 with modest service upgrades. The manufacturer secures some value, but the final number is still 8% above their internal target because the team spends most of the time arguing down from $1,300,000 instead of shaping the total value of the deal.
Scenario B – Buyer anchors on value and total economics: Before the supplier presents a number, the manufacturer leads with, “To justify expanding our footprint with you, we need a package that delivers net savings versus our current $1,000,000, plus stronger uptime SLAs and basic analytics. We’re prepared to sign a 4-year term and make you our global standard if we can be in the $850,000–$900,000 range, contingent on agreed performance metrics.” Anchored here, the discussion focuses on which levers (longer term, reference rights, pilot sites, phased rollout of analytics) justify movement inside this band. The deal closes at $910,000 with improved SLAs, broader adoption, and committed case studies above the buyer’s initial anchor, but below the original $1,000,000 run rate and with more value on both sides.
In both scenarios, the same two companies and similar tradeables are involved. The difference in outcomes is driven largely by whose anchor frames the conversation first and whether that anchor is tied to a clear story about total value, risk, and long-term partnership economics.
1. Don’t be too reasonable
Always be wary of playing it too safe. If you’re too reasonable or modest and set targets to match, then you’ll place a hard cap on how favorable an outcome you can achieve. Be willing to test the outer limits of the customer’s range of reason and strive to reach the optimal agreement.
2. Use anchoring early in the negotiating process
Decision-making tends to be influenced by any relevant information we receive first. This means that if you try to save the best comparative details for last, they’ll have a hard time improving upon the customer’s first few impressions.
3. Be comfortable in discomfort
If you anchor effectively and set high targets, you’ll naturally create tension in the negotiation. While this can be uncomfortable for inexperienced negotiators, this healthy tension is essential for constructive discourse and creative problem-solving.
4. Remember that anchoring occurs in every negotiation
Anchoring happens naturally in every negotiation. If you don’t take a proactive approach and set the tone, the negotiation will either be anchored by the other party or default to the “reasonable” middle ground.
Throughout our history as a company, RED BEAR has helped professionals negotiate value-based, sustainable agreements within their own organizations and externally with customers and suppliers. If you’re interested in growing your team’s negotiating skills to ensure better outcomes, click here for more information.
In practice, anchoring works by quietly defining the “normal” range of possible outcomes in your favor, so the rest of the negotiation happens inside numbers that already work for you.