anchoring negotiation

Mind Reading is not a Negotiation Strategy, Try Anchoring Instead

Imagine that you’re preparing for a negotiation. You wonder who should go first. In that moment, don’t you wish you were a mind reader? Not all the time, just selectively. You don’t really want to know what your co-workers are thinking, but you do want to know what the other party has in mind before you go into a negotiation. You don’t want to risk embarrassing yourself by starting too high or too low. You don’t want to offend them or make them laugh. You may have heard at some point in your career that the one who starts loses, so you’re worried that if you make the first offer, you’re doomed to failure. This is absolutely wrong!

You should make the first move. And you can do it without mind-reading by anchoring.

The one who starts first creates an anchor

Imagine that you’re on a boat. You’re ready to stop, so you need to throw out your anchor. You’re not going to throw out an anchor willy-nilly in the middle of a 1000-foot-deep pit. You’re going to navigate to a shallow spot, look at the current and carefully choose the best place.

It’s the same in negotiations. Before you throw out your anchor, you need to do two things:

  • Do your research so you come up with a number (or a deadline or a project scope, whatever it is that you are negotiating) that is realistic. You’ll know it’s realistic because it’s based on data and not just your opinion. This will give you confidence.
  • Practice saying it out loud. Research consistently backs the idea that practice builds confidence. You may not need to follow Malcolm Gladwell’s 10,000 hour rule for your negotiations, but the more you say it out loud, the easier it will be to say it when you are negotiating.

You may be skeptical that it’s that easy, so let me tell you why anchors work.

Why anchors work in negotiation

Let’s imitate a famous experiment done by Drazen Prelec and Dan Ariely at MIT in 2006. Take out a pen and a piece of paper. Go ahead, this will only take a minute. Now answer these questions:

  • Did the Titanic sink before 1953? (yes/no)
  • What year did the Titanic sink? (write down the year you think it sunk)

OK, you can go look up the answer now.

How close did you guess to 1953? Most people (assuming you didn’t know the answer!) are influenced by the first thing they hear. When you guess, you guess closer to what you most recently heard. By starting with 1953 you were statistically more likely to guess a higher year. If we’d started with a lower number, you would have guessed lower. There are a few famous studies on this topic (Strack & Mussweiler, 1997 and Tversky & Kahneman, 1974), but a favorite article on the subject is by David McRaney on his blog and in his books “You are not so smart: A celebration of self-delusion”. Read it and be amazed by this hidden influencer.

Think about what you say first and weigh the importance of making the first offer against that. What’s the best move, to start at a reasonable place or to start at the very tip top of what you can support with your data?

Two benefits you get from your high anchor  

Now you know that when you start first and start high, you establish a high anchor. If you let the other person go first, they will anchor the negotiation to their benefit.

Imagine that you are negotiating over delivery time. The engineer you are talking to says, “We can get these changes to you in 6 weeks.” Shoot, you were going to suggest 2 weeks. But now that 6 weeks has been put on the table as the anchor, most people will have a natural reaction to adjust to that number. You may think, “I can’t ask for 2 weeks when she said it would take 6. 2 weeks sounds ridiculous now. I guess I have to start at 4 weeks.”

People love to quote Gustave Flaubert, “There Is No Truth. There Is Only Perception.” This quote is popular because it gives us hope that we’re not hopelessly at the mercy of the other party when it comes to getting what we want. Starting high has 2 beneficial outcomes related to perception:

  • Shaping the perception of value: A bigger anchor influences the perception of the other party. After all, “you get what you pay for,” right? For a number of well-researched reasons, we think that bigger is better, more expensive is better, and harder to get is better. Your anchor affects the perceived value of your product, service, idea or proposal. Even if you end up meeting in the middle, your middle will be higher.
  • Knowing their position: How they react tells you a lot about how they perceive your value. You’ll be nervous if they panic over your high anchor, but just stay calm and start asking questions to uncover more about why they are reacting so strongly. On the other hand, what’s your first thought if they barely blink at your high anchor? Typically, “I should have started higher!”

It’s ok to be nervous if the other party panics over your high anchor. Take a deep, slow breath and step back. Do not cave in or give a concession.

Figure out what the objection is…it may not be what you think.

Ask some questions to figure out what the other person is reacting to.  The answers will help you figure out what to do next!

The bottom line – Anchor to influence the other parties perception of value in your favor

The one who starts in a negotiation is the one who creates a high anchor, so go first when you can. Even if you meet in the middle, the middle will be higher. Research supports that we are influenced by a high anchor, so use this knowledge to your benefit. Be sure your anchor is based on fact, not opinion, and then practice saying it aloud to increase your confidence.

Close the skill gap for your negotiators with RED BEAR Negotiation Company solutions.