If you’ve been doing any negotiating, then you’ve probably heard the term “anchoring”. This, of course, brings up the question “what exactly is anchoring in negotiation, and how does it play out at the bargaining table?” If you want to become a better negotiator, then you are going to have to learn how to use this powerful negotiating tool.
The Power Of Anchoring Bias
Perhaps it would be best to start things out with an example of anchoring being used in a negotiation. Think about a situation in which you are about ready to go into a job interview hoping for a salary of $85,000, based on your past experience and industry standards. If you are only offered a salary of $55,000, you may find yourself making a counteroffer of $65,000—which is far less than you think that you are worth. Because the other side made the first offer, the possibilities for an agreement have narrowed in your mind.
The anchoring bias is a well-known cognitive bias in negotiation and in other contexts. It describes the common tendency to give too much weight to the first number put forth in a discussion and then inadequately adjust from that starting point, or the “anchor” no matter what negotiation styles or negotiating techniques are being used. Negotiators even fixate on anchors when we know they are irrelevant to the discussion at hand.
Even experts, can be powerfully affected by anchors in negotiation, research shows. Why are anchors so effective? Studies have shown that when conditions are uncertain, high anchors draw our attention to the positive qualities of the item or individual (as in the case of a salary negotiation) being discussed, and low anchors draw attention to flaws.
How You Can Drop Effective Anchors
Research on the anchoring bias has shown that negotiators can gain an edge by making the first offer and anchoring the discussion in their favor. The decision of whether you should make the first offer generally should be based on two factors: your knowledge of the zone of possible agreement, or ZOPA—that is, the range of options that should be acceptable to both sides—and your assessment of the other side’s knowledge of the ZOPA.
When you believe the other party likely knows more than you do about the size of the ZOPA, you may have difficulty anchoring effectively. Before dropping an anchor in such situations, arm yourself with as much information as possible. If both sides have a strong sense of the zone of possible agreement (ZOPA), as in the case of a longtime relationship between a supplier and customer with open books, in these cases anchors are unlikely to have a strong impact.
What should you do if your counterpart drops the first anchor? The first and perhaps most important step is to recognize the move. A common mistake in a negotiation is to respond with a counteroffer before defusing the other side’s anchor in negotiation. If someone opens with $1000, and you want to counter with $500, before presenting your number you need to make clear that $1000 is simply unacceptable.
You need to defuse the anchor clearly and forcefully: “I’m not trying to play games with you, but we are miles apart on price.” If you don’t take the time to defuse the anchor first, you are suggesting that $1000 is well within the bargaining zone. After defusing the anchor, you need to move quickly to your counterproposal, with the caveat that mentioning the anchor explicitly and repeatedly might validate it. When you are making a counteroffer, be sure to explain why it is fair and justifiable.
What All Of This Means For You
In order to become a better negotiator, you need to make sure that you understand what anchoring in a principled negotiation is. Only by learning how you can use this powerful tool and developing the ability to spot when it is being used on you can you become more successful in your next negotiation.
Anchoring occurs when someone gives too much weight to the first number put forth in a discussion and then inadequately adjusts from that starting point, or the “anchor.” Anchors, when used correctly, can draw our attention to either positive or negative aspects of what is being negotiated. Negotiators can gain an edge by making the first offer and anchoring the discussion in their favor. You need to understand what your ZOPA is in order to determine if you want to make a first offer. If the other side makes a first offer first, you’ll need to defuse it. Once you’ve done this, you can then make a counteroffer to take its place.
Anchoring is a powerful tool that every negotiator needs to learn how to use. We have the ability to drive the direction of our next negotiation with the effective use of anchors. Take the time to make sure that you understand the ZOPA of the negotiation that you are involved in, then use an anchor to get the other side to agree to the deal that you want!
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™
Question For You: If the other side tries to anchor a negotiation, do you think that you should ever walk away?
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What We’ll Be Talking About Next Time
In the world of negotiating, there are a lot of different challenges that we all face. What many of us are discovering is that one of the biggest challenges that we are having to face happens when we have to negotiate with millennials. In comparison to the baby boomers or the Generation Xers who followed, many members of the Millennial Generation – people born after 1981 who have been entering the workforce since 2000 — seem to approach work life with a sense of entitlement, a craving for praise, and an expectation that they will ascend the organizational ladder quickly. How are we supposed to deal with these people?