As with any learned art, it takes time and skill to navigate successful negotiations. It’s important for you to understand the part that anchoring in negotiations can play and how anchors allow strong successes while being aware of how to avoid the dangers they can create.
What Is Anchoring Negotiation?
The anchor of a negotiating discussion refers to the first price or offer made by either party. The anchor is then a subconscious reference point in the minds of both parties and throughout a discussion; the anchoring point is always the center of negotiations even as the discussions shift and change. Knowing the impact of anchoring on negotiations is key to being in control of your influence and can give you power when the opposing party has leveraged anchor negotiating.
When to Engage in Anchoring
While it’s often considered critical to make the first move, you must be aware of when you should engage in anchoring and when it would be detrimental to do so. People may have a bias toward the first piece of information they hear, and this is what makes anchor negotiations effective: the opposing party to an anchor negotiation may not realize that they are centering the discussion around the anchor, and this puts them at a disadvantage. Effective anchoring will allow the discussion to revolve around the reference point of your choosing.
However, despite the potential advantages of anchor negotiating, it can be a detrimental strategy if implemented blindly. The choice to make the first offer or wait for your negotiator to make their offer needs to rely on the amount of information you’ve gathered on the opposing party and on the value of what is being bought and sold. If you don’t have enough information, you should let the opposing party lead discussions to avoid low-balling the value of what you are trading. If you create a lower anchor point, you will severely undermine your ability to negotiate to a price you would prefer. A higher price can allow you more flexibility but be sure you know it is within reasonable bounds for the opposing party.
How Anchoring Works in Negotiation
Negotiation anchoring can help save time by cutting to the chase of negotiation and allowing the person who sets the anchor an advantage during discussion. However, leading with an anchor can also give away valuable information to the opposing party and allow them to counter-anchor. If the party who leads with their anchor is not skilled in anchor negotiation or has no backup plan as discussions continue, the negotiation will not be in their favor.
If your opposing negotiator is the one doing the anchoring, information is once again helpful to counteract the effects. You should always be relying on numbers that you have gathered primarily and information given by the opposing party secondarily. Once you start relying on the information your negotiator has disclosed, you will be falling victim to negotiation anchoring.
However, being opposite a negotiation anchor in no way makes you the losing party — you gain information, and with the right mindset and strategies, you can effectively counteract the effects of anchoring. Being aware of the bias an anchor creates is the best way to prevent it from working in your opposite negotiator’s favor. If you don’t have strong information about what your opposing side is willing to pay, it’s better to let them lead the discussion than to anchor negotiations at a lower price.
Steps to Negotiation Anchoring
- Gather Information
Research is an integral part to anchor negotiation, no matter if you are a part of the side anchoring or counter-anchoring. Before negotiations, you have to prepare by understanding your opponent, their background in the area, their budget, and their willingness to pay. You need to understand the market of what you are selling and know what offers are acceptable and which shouldn’t even be considered. It’s also important to check into your own financials and those of your competitors. Knowing the true value of what you are negotiating for will allow you more negotiating power.
- Be Aware of Your Anchor Bias
If the opposing party leads with their anchor, you must be cautious of your own bias. While you can’t outright ignore the anchor, it’s best to internally ignore it to prevent its effect on your subconscious and shift the discussion away from the party’s anchor. The ability to recognize a negotiating anchor for just that will allow you more power within the discussion.
- Proposing a Counter-Anchor
Another way to react to an opposing party’s anchor is to immediately counter it with an anchor of your own. This can better limit the subconscious effects of anchoring bias.
- Deliberate and Pause
When responding to an anchor, you have to rely on your own information rather than your negotiator’s and know you don’t have to come to a decision right then. Rather than counter-anchoring, you can instead ask questions to clarify their position in negotiations to probe for information or table discussions and find out answers yourself away from negotiation. However you approach it, learning more about your negotiator’s motivations can give you negotiating power and turn attention away from the anchor.
- Understanding Information Versus Leverage
When asking questions, you need to be able to distinguish between the information you’re being given and leverage. You can use the information given to your advantage if you don’t become distracted by what they are leveraging and test their commitment to said leverage by using the information you gather.
- Reject the Anchor Price Outright
If the opposing party sets an anchor negotiation that is not within the realm of possibility, you can reject it entirely. If you are not willing to negotiate from the price they give, you shouldn’t entertain the anchor price and try to dismiss it from your mind, so it doesn’t effectively become an anchor. While you should always give reasons for the dismissal, you shouldn’t negotiate from an impossible point.
Learning More About Sales Negotiation
Be sure to always learn from your experiences with successes and failures to better amplify your skills in negotiating, both by improving anchor negotiating and preventing falling victim to being anchored. By always gathering information and using it to your advantage, you can effectively negotiate from a position of control. To improve your negotiating skills and understand the balance of anchor negotiations, contact us at Shapiro Negotiations Institute for professional and seasoned expertise in sales, influence, and negotiation.