In 1974 Tversky and Khaneman asked two groups of people to guess the percentage of African nations that were members of the UN. Before the first group guessed, they were asked if they thought it was more or less than 10%. The second group, if they thought it was more or less than 65%. The first group then guessed a specific number, and their guesses averaged 25%, the second group’s guesses averaged 45%. The study showed just how simple it is to dramatically shift peoples’ expectations, and ultimately their judgement.
This phenomenon is known as Anchoring. It’s the reason that stores that introduce a super-premium range, see their sales mix of existing premium ranges dramatically increase: a customer’s price expectation is shifted, simply by the existence of the new lines. In the same way, dropping an anchor into a negotiation can create a significant shift in your counterpart’s expectations, often without them realising it.
Drop anchors: Your anchor might be as obvious as an opening price, or a statement of principle such as, “Any investment needs to make us a positive return”, or simply a comment in the preamble, “Our plastics costs are up 22%”. The key is that it’s planned, specific, relevant to the negotiation, and can be reinforced in subsequent conversation.
Slip anchors: Never repeat your counterpart’s opening offer – say the number out loud and it will become an anchor. Look out for their anchors and slip all those you don’t like, for example, “Your investment is 10% below your competitors (attempted anchor)”. “That’s not a measure we look at (anchor slipped) we only invest where we can drive growth (new anchor dropped). What growth can you give us?”
Accidental anchors: Sometimes, if you’re listening out for it, your counterpart will drop out a comment that could make for a fantastic anchor: “We both want to grow the business”; “Neither of us wants to see empty shelves”; “This needs to feel like a good deal for you too”. When you hear those lines, welcome them, ask to hear more about them, cement them in and make an anchor for the discussion.
BOTTOM LINE: We make our judgements based on expectations and reference points, but anchors can dramatically shift those reference points very quickly. Anchor them to your expectations, don’t let them anchor you to theirs, and your deals will dramatically improve.