What is the anchoring strategy and how can you use it to your advantage?

1 What is anchoring?

Anchoring is a cognitive bias that affects how people perceive and evaluate information. It happens when people rely too much on the first piece of information they receive, and use it as a benchmark or anchor for making subsequent judgments or decisions. For example, if you see a product with a high price tag, you might assume that it is of high quality, and compare other products to that standard. Or, if you hear that someone has a certain personality trait, you might look for evidence that confirms that impression, and ignore or discount information that contradicts it.

2 How does anchoring work in negotiation?

Anchoring works in negotiation because it influences the range and direction of the negotiation process. The first offer or demand that is made in a negotiation sets the anchor, and creates a psychological frame of reference for both parties. The anchor affects how they perceive the value of the deal, and how much they are willing to concede or compromise. For example, if you are selling a car, and you ask for $15,000, you are setting a high anchor that signals that you value your car highly, and that you expect the buyer to pay close to that amount. The buyer might counteroffer with a lower amount, but they will likely adjust their expectations upwards from their initial estimate, and move closer to your anchor.

3 Why is anchoring effective?

Anchoring is effective because it exploits two psychological phenomena: the primacy effect and the adjustment heuristic. The primacy effect is the tendency to give more weight and attention to the first information that is presented, and to form a lasting impression based on it. The adjustment heuristic is the tendency to make adjustments from an initial value or anchor, but not enough to reflect the true value or range of possibilities. These phenomena make people susceptible to anchoring, because they tend to accept the anchor as a reasonable starting point, and to adjust their positions insufficiently from it.

5 How can you apply anchoring in different situations?

Anchoring is a powerful strategy that can be applied in various situations, such as salary negotiation, sales negotiation, or conflict resolution. It involves setting an initial reference point or expectation to influence the outcome of any negotiation. For example, in salary negotiations, you can set a high anchor that reflects your skills, experience, and market value and use supporting data or examples to justify it. In sales negotiations, you can set a high anchor that highlights the value, quality, or uniqueness of your offer and use discounts, incentives, or scarcity to create a sense of urgency or opportunity. In conflict resolution, you can set a low anchor that reflects your minimum requirements or expectations and use concessions, trade-offs, or alternatives to create a win-win situation. However, when using anchoring you must be aware of not being anchored yourself by irrelevant or misleading information. With careful consideration and wise use of anchoring techniques, you can improve your negotiation skills and get better deals.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?