In my recent post I spoke about why in a negotiation you
should put your price on the table first. It is all about setting an
expectation or an anchor. Once the anchor is set, the negotiation will revolve
around the anchor point.
Most of the time we already store an anchor of certain
products in our head. You expect to pay $4.00 for a Sushi roll for lunch, or
$3.50 for a regular size coffee from the coffee shop next to your office.
But what happens with products that we don’t buy very often,
and we are less familiar with?
A few weeks ago, our washing machine blew up. During the
spin cycle smoke came out of the back of the washing machine which was the end
of it. The last time I bought a washing machine was probably 7 or 8 years ago,
so I had no idea how much a front loader from a particular brand would cost now.
What most of us do, and I did it too, is consult the
internet and look at the next best website that sells washing machines. The
first price we see for that product then becomes our anchor point and we are
now using this price and measuring it against other similar products.
Is it rational? No, but we are not rational in our decision
making, that makes it all so interesting. According to Gerald Zaltman a Harvard
marketing professor ‘95% of our thoughts, emotions and learnings occur without
our conscious awareness’. Our unconscious mind dictates our behaviours and
decision making.
Let’s say your friend bought a new TV and told you that she
paid $3500 for it. You now go to the shop and buy that TV for $3000. You
automatically think that you got a better deal whether your friend was right or
not with what she paid. You just took her word and used the $3500 as an anchor.
The introduction of the i-Phone was a good example of how
apple used an anchor to keep the expectation for the price high. The first
i-phone was sold in the US for USD 599, in Australia for AUD 820 in 2007. This
set the expectation that it is a premium product sold at a premium price. Apple
products are perceived as more expensive and premium in the market, so when
buying an apple product, the consumer is already willing to pay more which
makes any subsequent reductions seem like a huge bargain.
You also accept to pay more for the same bottle of wine in a
restaurant than you would at the bottle shop.
Key takeaway is that anchors are important, but make sure
you set your anchor wisely.
Let's say you are looking to buy a house. You have done your
research on the house prices in the area and you can afford to buy. The maximum
you want to spend is $950,000; your maximum acceptance point is $950,000. You
can't go above that as you don't have more money.
By putting an offer on the table, you are setting an achor;
this anchor should be well below the $950,000 but it needs to be realistic.
Don't offer half as that would insult the other party and they might not be
willing to negotiate with you at all.
Anchors are an important part of good negotiation skills but
make sure you do your research and understand the market.
#negotiationskills
#negotiationtraining
www.octalonegotiation.com
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