One of the most powerful negotiation styles and negotiating techniques that a negotiator has available to them is what is called “anchoring”. Anchoring occurs when a negotiation is starting and you make an initial offer to the other side. This offer does not have to be one that you think that they would actually accept. It can be quite arbitrary. The power of an anchor offer is that it pulls the discussion in its direction. How can you use this powerful technique to your best advantage?
Ranges When Anchoring
One of the biggest questions surrounding anchoring has always been whether or not your initial offer should be a single figure or a range of numbers. The people who study such things have looked into what the best type of initial anchor offer is. The results of their studies have shown that expressing your offer in a range can be a wise move when you are in a negotiation, thanks to the anchoring bias.
As with all such things in life, negotiation ranges don’t just come in one flavor. Instead there are three primary ranges that negotiators use when we are making price offers. The first is called a “bolstering range” and it includes the single-figure offer at one end and a more ambitious number at the other end. The next is called a “backdown range”. When you use this technique, you use the single-figure offer at one end and a less ambitious figure at the other end. Finally, you have the bracketing range. A bracketing range spans the single-figure offer such as if you wanted to spend $1,000 but you offered $900 – $1,100.
The use of ranges as part of a negotiator’s anchoring strategy has been studied by researchers. When placed in a negotiating situation, 51% of the participants in the study would use bracketing-range offers, 29% constructed backdown-range offers, and only 17% constructed bolstering-range offers. This is where things start to get interesting. Research on the anchoring bias suggests why range offers may often be ineffective. It turns out that if most people construct unambitious ranges, it’s not surprising their offers would lead to disappointing outcomes.
Why You Should Bolster A Range
What the researchers found in their studies was that when we bolster a range as part of an anchoring technique we can achieve the best results. When we aggressively stretch the bounds of a single-figure offer this is what can be highly effective in price-haggling negotiations, thanks to the anchoring bias. Studies have shown that when buyers receive bolstering-range offers they will make greater concessions and more conciliatory counteroffers than did buyers who received the other types of offers. The basic question here is why does this happen? It turns out that they assumed that their sellers had more ambitious bottom lines, or reservation prices.
The studies have also shown that buyers faced with bolstering-range offers were more concerned than buyers who received a single-figure offer that the other side would perceive them as impolite if they made an assertive counteroffer. The thinking here is that a range offer signals greater flexibility than a single-price offer. What this means is that recipients of range offers may prefer to counter within the suggested range.
There are other reasons that we may end up using the bolstering-range technique of anchoring. One reason is that negotiators who make bolstering-range offers seem to avoid the reputational damage that often accompanies aggressive offers that comes along with the anchoring bias, What happens is that ranges appear to convey flexibility and accommodation and so they may offset the assertiveness conveyed by asking for more. We need to keep in mind that there are limitations to the effectiveness of bolstering-range offers. First, very wide ranges did not yield significant gains; ranges of about 5% to 20% of the base figure appear to work best. In addition, bolstering ranges that started with an extreme value and extended to an even more aggressive figure also were not beneficial. A way to improve your negotiation skills with the help of the anchoring bias is to craft a bolstering range in which you claim more value while preserving a strong relationship with your counterpart.
What All Of This Means For You
The goal of any principled negotiation is to get the other side to accept our offer. One way to move things along is to use the anchoring technique in which you make an initial pricing offer and then all future conversations use that offer as a starting point. It turns out that there is a variation on anchoring, called ranges, that can make it even more powerful. However, there are a number of different ways to use ranges in conjunction with anchoring.
When using ranges to present an anchor price to the other side, there are three different ways that you can do it. The first is called a “bolstering range” The next is called a “backdown range”. Finally, you have the bracketing range. Studies of each of these techniques have shown that range offers may often be ineffective if people construct unambitious ranges. When we bolster a range as part of an anchoring technique we can achieve the best results. A range offer signals greater flexibility than a single-price offer. Ranges appear to convey flexibility and accommodation and so they may offset the assertiveness conveyed by asking for more.
Negotiators are always looking for new and better tools in order to make our next negotiation turn out the way that we want it to. Anchoring has been around for a while as a powerful and effective way to set the tone for a negotiation. It turns out that if we couple this technique with the use of ranges, we can move things along even faster. In your next negotiation, give anchoring with a range a try and see how it works out for you.
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™
Question For You: Under what circumstances do you think that it would make sense to use the bracketing range technique?
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What We’ll Be Talking About Next Time
Let’s face it: there are a lot of different types of negotiations that we can find ourselves in the middle of any any point in time. As negotiators we need to be able to recognize each one of them and then take the appropriate action in order to maximize the chances of being able to get the deal that we want. One type of negotiation that we most often find ourselves involved in is called a distributive negotiation. Do you know what to do when this happens?