How Anchoring Impacts the Negotiation Process

Download Now: 24 Free Sales Templates
Lestraundra Alfred
Lestraundra Alfred


When making a purchase, it’s natural for buyers to experience a phenomenon called anchoring bias — the tendency to focus heavily on the first price they see in the context of a sale — and its place in the negotiation process can trip even the most seasoned sales reps up.

salesperson experiences anchoring in negotiation

By understanding how anchoring can impact the decision-making process, salespeople can be better equipped to handle challenging negotiations with prospects. Here, we'll take a closer look at the concept, see how it can sway negotiations, and go over how you can overcome its influence.

Free Download: 24 Sales Templates for Closing & Negotiating

As a rep, your goal is to facilitate a smooth, efficient sales process. Spending too much time going back and forth negotiating terms and pricing with a prospect can slow down your sales velocity and jeopardize your ability to close a deal. Let’s discuss some of the ways anchoring can impact your negotiations.

anchoring in negotiation

How Anchoring Works in Negotiation

The first value or price point a prospect hears in the context of a negotiation tends to have a significant bearing on their decision-making process — it provides the first real reference point for what they can expect out of a potential deal.

Regardless of what you might ultimately want out of your engagement with a prospect, the first value you present is going to shape their position in the negotiation. In some cases, that can work to your advantage.

If you feel like you can present a pricing package that's both financially feasible for them and profitable for you, you can get ahead of anchoring bias by presenting a thoughtfully structured, mutually beneficial offer early in the negotiation.

That’s not to say presenting an initial offer is a guaranteed way to avoid anchoring bias — there's often more context to uncover and information to gather to accurately gauge how much a prospect is willing to spend.

If you jump the gun and present an offer that's too low, you might reinforce a low anchor point that will ultimately undermine your ability to get maximum value out of a deal.

With this in mind, some reps might decide to ask for a slightly higher price in their initial proposal. That tactic can give you more room to negotiate with the buyer — reframing their conception of what a "lower" value for your offering should be and, in turn, giving you more flexibility to sell at your ideal price point.

Challenges of Anchoring in Negotiation

Maneuvering around anchoring bias isn't always as easy as high-balling your prospect and assuming they'll raise their pricing position by default. Anchoring can create challenges in the negotiation process when both parties aren't on the same page.

If the buyer makes an offer and is committed to a price that is lower than what you're asking, it can be difficult to talk them into a higher price. In this case, you risk driving down your average selling price if you accept the deal, or you could risk losing the deal altogether if the buyer decides not to buy.

If you find yourself working with a prospect who is exhibiting anchoring bias, consider the following tactics as you navigate your negotiation.

How to Overcome Anchoring in Negotiation

anchoring negotiation tactic

1. Do your research.

Take time to adequately prepare before entering a negotiation. Research your prospect's background. Make sure you understand what they are looking for, and run the financials on your end so you know exactly what you can accept as a final offer.

If you know the prospect has a set budget they want to stick to, prepare possible solutions your company can provide that suit both your sales goals and the problem the prospect is looking to solve.

Additionally, take some time to research what your competitors are offering for the same solution. In some cases, prospects may want to price-match or reference what another company is charging. If you take the time to prepare a response to this ahead of time, you’re less likely to be caught off-guard.

2. Don't name your price first.

Information-gathering is the name of the game when trying to negotiate effectively. You don't want to just jump in, throw out a price, and figure the rest out from there. Instead, ask thoughtful, probing questions to get a feel for your prospect's needs, perspective, and buying power.

That's why you always let them give the opening offer — it will give you a better understanding of their position and leverage, and you can more thoughtfully structure your negotiation strategy from there. If you put down an anchor price without understanding where they're coming from, you'll immediately put yourself at a disadvantage.

If you jump the gun and aim too high, they might think you're overstating your offering's value and be turned off. Or the figure you present might be lower than they were planning on paying — and you'll shed some potential revenue from the deal.

3. Propose a counter-anchor.

The goal of a counter-anchor is to swiftly disqualify an initial anchor before you counter with your ideal price.

For example, let’s say a buyer begins a negotiation by offering $22,000 for a product and you can’t accept less than $30,000 for it. Before providing a counter-offer at a different dollar amount, make sure the prospect understands their offer is far lower than you’re willing to accept.

After explaining why you can't accept that offer, share the price you would like to see the product go for and explain the value of what they’re getting. This establishes a new anchor point that moves your negotiation in the right direction.

4. Avoid extreme anchoring.

Throwing out a borderline-outlandishly high price point in a negotiation can be tempting. Setting an excessively high anchor might seem like the right move. In theory, it looks like a good way to let you frame your actual ideal price as a bargain and make your prospect grateful when you come down a bit.

But that's not how it generally pans out. Many prospects will see a high price point and run for the hills. You can come off as unreasonable or arrogant, or they might just see your product or service as too much of a luxury and look into what your competitors are offering.

Know what your solution is worth and where your prospect is coming from — and work from there. Don't just push an arbitrarily high price and assume a potential customer will ascribe more value to it automatically.

5. Reject the anchor price.

If during the negotiation process, you find the buyer is not budging and that the deal is not worth negotiating at that value, you can choose to reject the anchor. This is typically a last-case scenario. Choosing to reject the anchor can lead to a few outcomes:

  • You can revisit the counter-anchor strategy later in the process after they’re had more time to deliberate.
  • If they are set on spending a low dollar amount, you can start from scratch and discuss a different offer or set of terms that better aligns with their budget.
  • The two parties can reexamine if their collaboration is worth pursuing.

Price anchoring is an uncomfortable fact of life when it comes to negotiation, so you need to know how to navigate it effectively. That being said, if you can handle anchoring bias adeptly, you can make it work to your advantage and consistently close lucrative deals that work for all parties involved.

Free Resource: How to Reach & Engage Your Audience on Facebook

Related Articles

We're committed to your privacy. HubSpot uses the information you provide to us to contact you about our relevant content, products, and services. You may unsubscribe from these communications at any time. For more information, check out our Privacy Policy.

The Only Sales Templates You'll Ever Need (We Promise)

Powerful and easy-to-use sales software that drives productivity, enables customer connection, and supports growing sales orgs