We’ve all experienced sticker shock.
We decide we want to buy something and believe we know what it will cost, but when we get to the store, we see a number way above what we thought it would be.
We may feel surprised, frustrated, or even outraged.
Once we’ve calmed down and adjusted our expectations (and/or budget), going back to the store and finding the right product becomes easy.
We’re no longer shocked by the numbers – we’ve become comfortable with them. If you’ve had this kind of encounter, you’ve experienced anchoring.
Anchoring is a sales technique that sets a mental baseline for price from which all other offers are compared.
The initial information is referred to as the “anchor.” It provides the brain with a mental shortcut when considering whether a good or bad deal is being offered.
Using Anchoring to Get what You Need
There are many ways to use anchoring to get the resources you need for your program.
Let’s say that your risk assessment shows that your third-party due diligence program is outdated, and because your company does business in Russia, sanctions risk is increasing. You know you need software, so you schedule a demo and receive your first offer.
It’s $50,000 per year and you nearly faint. You’d thought it was going to come in at about $25,000.
You schedule two more demos and receive two more offers, one at $47,000 and the other at $55,000. The second two numbers don’t affect you like the first one did, because suddenly they are in the range you expected because of the anchor number.
Anchoring the Boss
You’ve now got to go to the boss to get the budget.
You’ll want to anchor the boss at $55,000 so that the other two offers look less expensive. It’s helpful to consider that your boss might be shocked by the anchor number at first, but they are likely to get comfortable with it after a minute or two when they can review all three proposals.
If you’ve negotiated a discount or additional features that sweeten the deal, don’t reveal those until after you’ve anchored the original higher price.
When you tell the boss you’ve found terrific software for $47,000 but if you sign the contract by the end of the quarter, the software company will give you 10% off, the final number of $42,300 seems like a steal compared to $55,000 (the anchor).
What if we anchor at a price point but we still can’t get the resource we need?
That’s OK – we’ve now created an anchor from which we’re negotiating.
If the boss won’t approve $42,300 because they expected the software to be closer to $25,000, then you’ve moved the anchor point up by $18,000. That puts you in a much better negotiating position to get more than you would have otherwise.
Cost is relative, and the comparison between the anchor number and the other offers creates magic. By intentionally anchoring your requests for budget or resources, you are more likely to get to yes quickly.