Negotiating Strategy and Tactics – Anchoring

Yesterday I started talking about negotiation as a skill to develop to lead a more efficient life.

Have you ever been in a negotiation where you made an offer and the other party immediately accepted your offer and left you feeling like you offer way too much?

Today I’m going to talk about the strategies and tactics I use when negotiating to help avoid that feeling like you could have done better. Be aware of the strategies and tactics available for you to use in a negotiation makes seeing through them easier.

The first strategy is anchoring. Anchoring is the idea that people are attached to the first number they hear or see. Retailers everywhere use anchoring to make you think you are getting a better deal than you really are. Look at this watch below. Do you really think anyone ever paid $695 dollars for it. No, but it makes you think at $59.99 it is a pretty good deal.

Watch anchor

Tactics for using anchoring

When you should give out the first number

If you have a solid understanding of the value of an item or service and there is a well-defined market you should eagerly try to provide the first number in the negotiation. Of course, your number should be slightly higher than you expect to get, but should be a reasonable number. You are trying to anchor the other party to this value in their head.

When you shouldn’t give out the first number

If you are negotiating over something that doesn’t have a well-defined value or market, you should avoid making the first offer because you may inadvertently give away a large portion of the negotiating range without realizing it. If you have done this, a poor negotiator will immediately accept your offer leaving you with that feeling like you could have done better. An experience negotiator will immediately recalibrate their expectations and bargain with you further, you’ll never know you gave away a bunch of value. Next time you are negotiating and hear someone accept your offer a little too quick take that as opportunity to learn that you likely left money on the table during that negotiation.

How you should react after hearing an offer

You’ve managed to avoid giving the first number and now you’ve just heard what the other party’s offer will be. It is a better offer than you could have imaged and you want to jump up and down and accept it immediately. DON’T! Everyone will feel better about the negotiation if you act interested but not impressed. Use this time as an opportunity to learn more about the other party and how they arrived at that number. Once you’ve learned more about the offer if you find it is truly remarkable go ahead and accept it otherwise feel free to politely counter it with and offer of your own. If you do chose to the counter the offer you should expect that the final number will end up being split between their initial offer and your initial counter offer.

What are your experiences with making the first offer or not making the first offer? Let me hear your story below.

2 thoughts on “Negotiating Strategy and Tactics – Anchoring”

  1. Good points! I use this tactic a lot when I’m working out advertising rates for my blog. I’ll usually go in hot first to set the scene and keep my real price up my sleeve. Often if we can’t agree on a final compromise, I’m prepared to walk away from the deal – also very important in negotiations.

    1. Hi MMD, Thanks for stopping by! I’ve been keeping up with the comments over at the mad fientist and you’ve got some really great insights over there. I hope to hear more from you.

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