One of the most ubiquitous tactics, anchoring is an attempt to launch negotiations from an advantageous statement of value, regardless whether the position is rational or arbitrary.
Opening offers are anchors whether you intend them as a tactical move or not because the opening offer often has the psychological effect of framing what each side will view as the possible outcomes in the ensuing negotiation.
Expect this tactic to be used as part of one of these Negotiation Strategies (competitive, collaborative, avoidance, accommodation, compromise) and in these stages of the Negotiation Process (Preparation, Exchange, Bargain, Conclude, Execution).
Negotiation Strategies: Collaborative, Competitive and Compromise
Negotiation Stage: Bargain
Use of Anchoring in Collaborative Negotiations
Anchoring is inevitable because one of the parties has to open first in negotiations. The key is whether you are anchoring with a rational or irrational reference point.
Anchoring with an opening offer that is rational and justifiable is an appropriate use of best practices: BNP 12: Thing Big and Ask for What You Want. Anchoring that is defensible is especially effective when you are relatively certain of your counterpart's LAA (Least Acceptable Agreement) and can anchor them just beyond it.
Anchoring with an irrational or arbitrary value advantageous to you is a tactic, but one that should be considered when the value of the subject is ambiguous. The higher the uncertainty in value, the more likely your anchor will weigh down your counterpart, because while you can't defend the rationale behind the anchor, your counterpart can't dispute it either. In situations of uncertain value, better your opening offer serve as the anchor than your counterpart's opening offer.
- Determine your MDO (most desired outcome) without reference to your LAA. When you set your LAA first, it acts as a psychological anchor from which you make adjustments to determine your opening offer.
Anchoring can backfire in collaborative negotiations when:
- There are objective criteria available to measure the subject's value and your attempt at anchoring is too aggressive, leaving you at high risk of losing credibility.
- You have no idea what your counterpart's LAA might be. Allow your counterpart to open first so you gain more insight into your counterpart's negotiating envelope and walk-away position.
- Your counterpart lacks power or confidence and thus executes their BATNA (plan B) in response to your opening offer based on their assumption that no agreement is possible.
- Your counterpart has a powerful need to be respected and thus takes great personal offense at your anchoring tactic, thereby harming the relationship and trust.
Defend Against Anchoring
There are preventive and defensive measures for Anchoring.
Prevention. You can prevent the other side from Anchoring by presenting the first offer.
Defense. You can't stop your counterpart from tossing the anchor, but you can ensure it doesn't weigh you down. Use these strategies:
- BNP 6: Prepare, prepare, prepare. Reduce the power of the anchor by reducing the uncertainty in value. Come to the bargaining table with relevant information on value, such as prior contracts, competing offers, and other objective criteria.
- Counter-anchor; don't counter-offer. Understand the difference. To counter-anchor is to assert your MDO, BNP 12: Thing Big and Ask for What You Want, and move (make concessions) from your own MDO (not your counterpart's anchor), with trades of value that are defensible. To counter-offer is to use your counterpart's opening offer as a starting point for concessions. Counter-offers simply legitimize the anchor.
- Re-anchor. BNP 4: Build in time and be patient. Ignore the anchoring tactic, and explore the parties' interests, concerns and needs. Use BNP 16: Probe to explore and create options. As a clear result of those discussions, present a new anchor. To re-anchor effectively, your anchor must come with greater authority/justification/legitimacy than did the original anchor.
- When presented with an outrageously aggressive opening, use the tactical Probe, or Crunch. A Crunch is a response to an offer that demonstrates you recognize the anchoring tactic and don't intend to be weighed down by it. Facial and verbal expressions can be effective. Another Crunch is to respond with an equally ridiculous counter-offer.