Sim Game Lesson #2: Anchoring

Negotiation Anchoring

It’s not enough to simply make the first offer to seize the negotiation advantage. You must also anchor your offer. How do you anchor an offer? You ensure that the conversation keeps the spotlight on your offer for long enough. Think of your anchor as a ship’s anchor. If the ship’s anchor hasn’t sunk deep enough, the ship will be moved by the current and waves. If others make the mistake of investing their time arguing against your opening offer, your anchor will sink deeper into your negotiation waters.

In the last post, we posed the question: is all lost if you allow others to make the first offer? The antidote to an opening offer is to throw out their anchor. Don’t allow the spotlight to remain on their offer. You can start by briefly invalidating their offer, and then inviting them to reconsider and to make an offer that you can consider.

Some will make immediate concessions without gaining anything in return. This makes your task easier. Others will stand firm and instead respond by inviting you to make a counteroffer. Be careful. If they haven’t retreated within their position yet, your counteroffer needs to be at least as ambitious as their opening offer. When you make your counteroffer, ensure that it is your offer, and not theirs, that enjoys the conversational anchoring effect.

If you can get them to abandon their opening offer by making a second offer that’s based on your counteroffer, you will have won the anchoring stakes and should enjoy a substantial advantage. We see this happening all the time.

Confidence is an important and yet often overlooked factor in the anchor game. If you come across as unsure, you’ll be inviting pushback and questions. Preparation and practice are key to building confidence.

Sim Example 1

Below is an example from a sim game of a skillful response to an ambitious opening offer. The seller doesn’t consider the first offer of $2200, but instead, she forces the buyer to make an immediate concession. The seller is throwing out the buyer’s anchor. The buyer gives away his opening offer leverage by abandoning his opening offer and makes a big move up to $2343 without getting any concession in return. Now the seller makes her counteroffer at $2450.

From here, it’s easy for the seller to simply compromise and close out roughly at her target price, which is halfway between her opening offer and the buyer’s second offer. The reason you’re seeing $2403 repeated four times is that this was part of a deal comprising more negotiables or terms.

 

 

 

 

 

 

Sim Example 2

In this second example, we see the buyer in green winning the anchor stakes. The seller in purple starts well with $330K. Then the seller goes wrong. They abandon their anchor by echoing back the buyer’s second offer of $225K on their next offer.

This demonstrates how an anchor can pivot the outcome at any point in a negotiation but the most important offers to plan for are the opening offers. This also demonstrates the peril of basing your next offer on your counterpart’s previous offer. Many negotiators fall into this trap. Always base your next offer on your previous offer, and not your counterpart’s previous offer.