Each of these serves to “frame” the sale and subsequent negotiation. This framing is called “Anchoring ”, and is often a difficult concept to describe. First, I want you to have the visual of being on a small boat in a lake and you drop an anchor to the bottom. Assuming the anchor holds fast, your boat will not sit perfectly still, but will rotate around in a small arc. This is what happens to negotiations. When an anchor is effectively “dropped”, the final negotiated deal will tend to stay in close proximity to that anchor – meaning the final deal will not move far from that point of anchor.

Anchors are intended to change the frame of reference of the sale and negotiation. Therefore they impact the selling and negotiation processes and thus the final outcomes. We don’t want to react to the other side’s anchors and yet we do want to anchor effectively. In short, what we start selling is usually what we end up negotiating. Look at the figure below for examples of how buyers and sellers anchor negotiations.

Let’s first look at how buyers typically try and anchor us. When you hear “Your price is 20% too high…” what happens? We tend to forget everything else and focus on the one issue of price and we will tend to measure our negotiating success by how much we can get the buyer to come off that 20% number. Do you see what has just happened? The buyer doesn’t have to do anything else because we are playing their game! Most likely they were only looking for 10% off and we’ll feel like “expert negotiators” if we can get them down to that number. Because they’ve effectively anchored us, they’ve already won. The final deal will be a lot closer to that 20% off anchor than we would have ever previously considered.

How about when they tell us “Our budget is only X…” What usually happens?  We forget about everything else we are trying to accomplish and we focus on that figure of “X”. Have we ever tried to cram a $1M solution into a $500K budget?  It happens all of the time.  The buyer has already won and this, in short, is the power of anchors.  But they will only work if you don’t recognize what they are and how to manage them.

Without getting too deep into the theory of anchoring, perhaps the biggest anchors that buyers use are RFPs and RFQs.  In those documents, they tell you “what” you get to talk about, “how” you can talk about it and “when” you can talk about it.  They are completely framing or anchoring the conversation.  That’s why so many deals are won or lost before the RFP.  If you were asked to help write the specs for an RFP, would you gladly jump at the chance?  Of course, because you can anchor it in your favor.  If you did not help write them, then who did?  Probably someone else (competitor or consultant) that has a different agenda – and it doesn’t include you!

Unfortunately, as sellers, we often inadvertently anchor ourselves. For instance, if we begin a selling motion talking about a product or service, why should we be surprised when the negotiation is only about the “price” of that product or service? After all, we set it up that way!

Finally, perhaps the biggest anchor we, as sellers, must contend with are the previous deals done with this customer. Have you ever taken over an account where the previous Sales Rep did some “unnatural acts” to bring a deal in before quarter or year end? Rest assured, from the customer’s perspective, any new negotiation will begin with the concessions they previously received – and now they want more! This is how anchors and anchoring works in business deals.  And how they lead to the “wrong negotiation.”

Instead, by anchoring the sale on customer outcomes, the right Deal Levers to achieve those outcomes, aiming for a Great Deal, and presenting the customer with options (allowing them to buy and construct “their deal”), we have been anchoring the sale and negotiation from the outset! This is what it really means to be “negotiating” all of the time.

It is all about their outcomes and their deal (the option they help construct) and this will be immensely helpful in ensuring we are having the right negotiation, which will allow us to negotiate the “right way.” In the next blog, we will ask “Are we negotiating the right way?”

Good Selling!


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