Imagine you are negotiating with a corporate recruiter. You expect an offer of $85,000 based on your experience and current wages, but when the offer comes in your interviewer says $60,000. That $60,000 figure may get stuck in your head, causing you to settle for a lower wage. This may have happened to you with salary, when buying a new car, or even when a friend asked for some help, and it's all because of something known as the anchoring bias.

An important weapon in a negotiator's arsenal, the anchoring behavioral bias involves people's inclination to fixate on the first number they are exposed to and use that number as the starting point, or "anchor." It doesn't make any difference what the first number is--people can latch onto anchors that make no sense from a logical standpoint.

Although anchoring often involves money, it can happen with anything such as time and magnitude. In his famous study involving volunteer work, Robert Cialdini demonstrated the anchoring technique through the magnitude or size of the favors he asked.

At the onset of the study, Cialdini asked one group of students for a low-stakes favor: chaperone delinquent teens at the zoo; 17% of the students agreed. Another group was presented with the much more demanding request of counseling delinquent teens for two hours a week for two years. When these students said no to the counseling request, they were asked to chaperone delinquent teens at the zoo. Perhaps in relief at getting off so lightly, 50% of the second group agreed to serve as zoo chaperones, a three-fold increase in compliance (from 17% to 50%).

Anchoring in Business

As Cialdini and our daily experiences have proven, anchoring is real and powerful. So how can you use it in business?

One way to benefit from the anchoring bias is through strategic pricing. For instance, if you're a convenience store owner who wants to steer your customers toward your 32-oz Super Slurps at $1.99, price your 16-oz Medium Slurp at $1.69. That way, your customers will ascribe more value to the Super Slurp since it's twice as much Slurp for barely a quarter more, and they'll tailor their buying behavior accordingly.

However, consumers can latch onto any number, so showcasing any higher number next to your price can increase your likelihood of landing a sale. Think about displaying the number of satisfied customers, items sold, or even another related or unrelated item with a higher price.

There's also the notorious real estate agent tactic of showing a prospect some terrible houses before getting to the "slightly more expensive" house that's so much nicer than the others. Although this tactic isn't as rampant in this age of online house hunting, would-be consumers are driven surprisingly often by emotion rather than logic.

Anchoring in Negotiations

When it comes to getting your best deal, don't be like that job-hunter at the beginning of the article who got hit by a low-ball offer: recognize the power of the anchoring bias and make sure to set some of your own. At the very least, recognize the anchoring bias and be prepared to reign in the other party's first figure.

Published on: Mar 29, 2019
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