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 has a cheaper menu, site B features a small write up about their head chef and how he 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 similar technique, called anchoring. It’s an effective way to position your case favorably and set high targets (both of which are key principles of successful negotiation).
Anchoring changes how the customer perceives your proposal by putting favorable comparative data on the table early on in the negotiation. This information forms 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.
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.
Another reason anchoring works is that human 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.
Dropping anchor in profitable waters
Here are a few anchoring tips to help you negotiate consistently more profitable agreements.
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.