The First Number Wins: Why You Should Master Anchoring for Smarter Dealmaking

Imagine you're at a flea market, drawn to a sleek leather bag. The vendor names a price of $200. You counter with $120, expecting to haggle. But the vendor doesn't flinch, countering firmly with $180. After some back-and-forth, you agree on $160, feeling like you struck a good deal.

But did you?

The vendor skillfully anchored the conversation, using the initial $200 to pull you into their range. Even though you negotiated downward, their anchor shaped the discussion—and ultimately the outcome—in their favor.

Now, take this principle into the corporate world. Whether you're negotiating a supplier contract, closing a critical client deal, or discussing a salary package, anchoring plays a pivotal role. Setting the first offer establishes a reference point that can steer the entire conversation. Anchoring is a double-edged sword. Used strategically, it can lead to better deals. Used poorly, it can backfire—alienating the other side, derailing negotiations, or even working against you.

The Problem: We under-estimate the complexity of anchoring

Anchoring sounds simple: Set a high or low starting point, and you've framed the negotiation in your favor. But in practice, anchoring often falls flat or backfires entirely because most people approach it without a clear strategy.

Here are the three most common pitfalls

Overly aggressive anchors can derail negotiations

A strong anchor should stretch the other party's expectations, but it must also feel reasonable. The other side may walk away altogether if your anchor is perceived as wildly unrealistic.

For instance, imagine a supplier proposing a 40% price increase during contract negotiations. Without a clear rationale, this anchor can seem so disconnected from reality that the buyer disengages, viewing the supplier as untrustworthy or out of touch. Harvard's Program on Negotiation warns that overly aggressive anchors often backfire by damaging trust and shutting down the conversation.

Anchoring bias can work against you

You can be taken in by anchoring too, too. When your counterpart sets an anchor first, you're at risk of adjusting your expectations toward their reference point, even if it's unreasonable.

Consider negotiating a significant sale. A client anchors their offer at $750,000 for a product you intended to price at $1 million. Without preparation, you might unconsciously negotiate closer to their anchor, even when you have data to support your original pricing.

This vulnerability is especially problematic in ambiguous negotiations, where benchmarks are unclear. Failing to counteract the other party's anchor can leave you negotiating on their terms instead of your own.

Weak anchors undermine credibility

An anchor is only as effective as the story behind it. Throwing out a number without justification can make you seem unprepared or even unprofessional. Worse, it invites the other party to dismiss your position entirely.

For example, Red Bear Negotiation emphasizes that effective anchors are always paired with a clear rationale. A strong anchor needs a foundation, whether it's data, case studies, or logical reasoning. Without it, even reasonable anchors lose their impact.

These pitfalls highlight a crucial truth: Anchoring is a high-stakes tool that can work for or against you, depending on your preparation, execution, and ability to adapt.

A Smarter Approach to Anchoring

To use anchoring effectively, you need a strategy. Anchoring isn't just about going first; it's about framing the conversation to guide outcomes in your favor. Here's how to do it right:

Prepare Thoroughly Before Setting an Anchor

Effective anchoring begins long before the negotiation itself. Preparation ensures your anchor is credible and compelling.

• Research Benchmarks: Understand market standards, competitor pricing, and the other party's likely goals. For instance, if you're negotiating a supplier contract, study trends and use benchmarks and should-cost models to set the anchor.
• Anticipate Reactions: Consider how the other side might respond. If you're proposing a bold price reduction, be ready to defend it with data, such as operational efficiencies or long-term savings.

Preparation makes your anchor feel grounded, giving you a foundation to steer the discussion.

Set Anchors That Stretch but Don't Break

Your anchor should challenge the other party's expectations while remaining within the realm of possibility.

• Frame Your Anchor Around Value: Connect your number to tangible benefits. For instance, if you're negotiating a salary, justify a high number by emphasizing your results, such as revenue growth or cost savings you've achieved for the company. Similarly, in a supplier contract negotiation, you could anchor your offer based on the potential long-term partnership and the value you can bring to their business.
• Avoid Arbitrary Numbers: An anchor must feel intentional, not random. Use precise data or logic to explain why your number makes sense.

Ambitious but realistic anchors create room for negotiation while keeping the other party engaged.

Justify Your Anchor with a Strong Story

People buy on emotion and stories. To make your anchor stick, pair it with a compelling narrative that appeals to the emotions. For example, when negotiating a consulting fee, frame it as an investment: "Our previous clients saw a 30% increase in operational efficiency within six months."

Counteract the Other Side's Anchor

If the other party anchors first, don't let their number dictate the conversation. Push back strategically to regain control.

• Challenge Their Anchor: Ask how they arrived at their number. This forces them to justify their position and gives you an opening to introduce your anchor.
• Introduce Your Counter-Anchor: Shift the conversation by reframing it with a new anchor. For example, if they anchor low, respond with a number tied to market data and emphasize the value you bring. This is what we call a 'counter-anchor ', a strategic move to reset the negotiation in your favor.

Stay Flexible and Collaborative

Anchoring shapes the conversation. Avoid the tendency to use anchoring to dominate the conversation; it won't work. Successful negotiations require adaptability. Listen to the other side's concerns, adjust as needed, and focus on finding mutually beneficial solutions.

I wrote this article because most advice on anchoring either oversells its power or warns against its risks. Based on my experience, a balanced approach to anchoring is key to a successful negotiation.

Anchoring is one of the most powerful negotiation techniques. When used thoughtfully, it can help you shape the conversation putting you in the driver's seat. However, when used carelessly, it can derail negotiations.

To master anchoring, understand its power, justify your position with compelling logic, and tell a good story.

The next time you negotiate, ask yourself: How can I set the terms of this conversation?