Episode 22 – Negotiation Techniques: Anchoring
In this episode of ProcurementZen we continue the ultimate list of negotiation techniques. In this episode Phil Kowalski puts focus on anchoring techniques.
Hello, my dear negotiators. In this episode, we continue the ultimate list of negotiation techniques. Today's focus will be on anchoring tactics. Again, let me please say that I do hope you are, and stay, safe and healthy. One more thing to mention, I wan to hear what your questions are, and you can now ask me directly. Go to procurementzen.com/ask and record a question. What to know how to uncover a bluff, go to procurementzen.com/ask. Need last minute tips on negotiation preparation, go to procurementzen.com/ask. Or do you want to educate yourself and want to know what the best negotiation book is? It's easy as pie, go to procurementzen.com/ask and click start recording.
I will collect your questions and publish them once per month with my responses, all for free. As always, you will find the show notes for this episode over at procurementzen.com/022, that's 22 for episode 22. And now, let's dive into today's episode about anchoring negotiation techniques. Let's go.
Are you looking to up your negotiation and procurement skills? You're in the right place. Welcome to ProcurementZen with your host Phil Kowalski.
Anchoring negotiation techniques covers anchoring, framing and reframing. The first one is a classic, big initial numbers. Use big initial numbers, especially, when you are presenting them on screen. 1.3 billion API calls sounds like a lot, although it's not when it comes to Amazon's Web Services, for example. Research has shown that big numbers, e.g., in restaurant name result in guests paying higher prices and giving higher tips. Big numbers, if you aim high, small numbers, of course, if you want low prices.
The next one is the look in the past technique. Refer to situations where the other party has acted in the way we expect them to act now. Works very good because of Cialdini's concept of Consistency and Commitment. For detailed explanation, see the video that I did on how to negotiate over at procurementzen.com/022 for episode 22. The video is embedded there under the anchoring techniques.
The next one is reframing. This is putting a fact that is important to you to another frame of reference. A salesperson motivation are incentives, but pro negotiators, buyers, can reframe so the seller wants to solve the buyers problem, e.g., better price, even if that means less revenue and less incentive. Classical starters for reframing are, "Let's see it this way," or "Consider seeing it from our point of view." But you can understand reframing also as wider approach, so I cover lots of reframing tactics in this category and they all follow the same theme.
The next is reducing their expectations. This could also be an opening technique. You open negotiations by stating what is impossible to you. "Please don't expect the order today, this is simply not possible with our processes," makes it very clear that we expect concessions from them. Also very good in salary negotiations, by the way. Here are two variants: Employer, "We can't pay you higher than your team lead, so please do not expect more than 85,000 per annum."
Or, as an employee, "I'm sure you understand that every career step should also have a development salary. Hence, I cannot work for the same money, as of today, and rather ask range for a range of 125,000 to 129,000 per annum," downplaying the other side.Downplaying here refers to downplaying the other party's facts. Revenue recognition should not pay that much of a role in our discussion, but it maybe a huge issue for the salesperson, because his incentive is relying on that.
Next is our rules. Our rules, also known as policy-based negotiation, usually starts with these sentences: "We have never before agreed to 10 days in them terms." "We cannot accept payment terms of 10 days net." And even more important, "It is not our policy to accept any payment terms below net 90." Especially the first one, "We have never before," is often used by salespeople. Combined with the look in the past technique as described before, it can be easy to overcome. Asking for proof is usually a good way to fight this tactic if applied to you.
And next is black and white. Black and white here refers to contrast. The color white is powerful when it's in contrast to black, much more as if we would contrast it to light green or pink, and the same is true for this negotiation approach. This technique is about relation between topics. A famous example comes from Cialdini's book, Influence. Question, when would you sell the high class business shirt, before or after you have sold the expensive suit? The answer is, do yourself a favor and do it afterwards, because in contrast the money spent on the expensive suit, for example $900, $120 for a business shirt are a steal. Structure your argumentation negotiations with business partners in a similar way. First, the high license cost for the software, and then the 20% maintenance fee, not the other way around.
The next one is false split. Following Chris Voss' approach, good negotiators never split the difference. This is also the title of his masterpiece, so you can also see my book review about it. But, in some cases, you can do it. You split the difference when you have artificially increased the values. Hence, your share, "the split," is more to your favor, but you don't tell your counterpart, of course. This only works if you don't tell the other side before that you never split the difference, otherwise it might look suspicious or you simply look stupid.
The next one is topic jumping. Jumping around means changing topics that do not belong together. It's a confusion tactic that you use to derail the other side. If you ask something that is not related, but through your use of words, you relate it. This may not be a hard cut change, you either use it by soft changes to before discussed items. "Thank you for mentioning your service level performance. While we are talking about performance, I want to get back to the maintenance price you offered." Weak in experienced counterparts follow your route, and follow your guiding to your chosen topic.
Stroking one's ego. Appealing to other people's ego is powerful, but more framing than anchoring. It sets the frame in which the other side is willing to accept our requests. "You are important to us. We will consider you for our supplier award, if you could improve the conditions just by 12% more." Ever since McDonald's Employee of the Month sign, ego stroking at its best.
ProcurementZen, with your host Phil Kowalski, will be right back.
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Back to the show, ProcurementZen, with your host, Phil Kowalski.
Next is doing favors. Doing favors sounds counterintuitive, but it's a strong weapon. Cialdini explains the reason this works so well in his book, Influence. It's one of the six key influencing measures and it's called, reciprocity. Why is it in the anchoring and framing category? Because you set the frame of expectations here without saying it loud. We humans tend to give back. It's very hard for us to owe something. And if it's only the smallest thing, the magic of this negotiation tactic is that you give something of small value, then place your important request early on in the negotiation, when the impression is still new and working. Humans want to pay their debt. It's likely that they fulfill your request. I implemented this with a lunch, plus some small gifts, like branded notepads, some merchandise, and a pen, and it resulted in received discounts worth many times the value I spent.
The next one is flattery. Flattery and negotiation flattery, see next, are good initial framing exercises. They help to establish a positive mood, if this is what you want, of course. "John, I saw that your company acquired Brownstone Inc., congratulations, what a clever move. You have some very strategic thinkers in your company." It is hard for us to not like these compliments. And, again, to quote Cialdini, "We tend to give more to people we like."
Next is negotiation performance compliments. Negotiation compliments are a hardcore framing tactic. Use them to make the other party feel special. Once you have achieved this, they will do a lot of things to keep you and that perception. Quite often I have seen that the other side became more gracious because I had said something like this, "Great negotiation tactic, Jane, have not seen it executed so well before." After this compliment, they are more generous on other terms. Use this negotiation tactic on small items, then you can ask for a return on big items.
The next one is gaslighting. Gaslighting is a very aggressive tactic, so be careful if you want to use it. Heard of Brexit, perfect example for gas light. No, I don't want to make this a political discussion. Wikipedia describes gas lighting as follows: "It's a form of manipulation in which a person, or group, sows seeds of doubt in a targeted individual. This leads to confusion, self-doubt, and not knowing what's right and wrong anymore." Fake news is the key term here. Imagine a situation where you promised a better price, if they make other concessions. "James, I don't know where you got this from. I never promised you better prices. All I said was that it's considered, if the performance is good. But that is not yet the case."
Gaslighting is a mixture between lying, denial causing confusion and false interpretation. It is somewhat of an ill framing negotiation tactic. If applied on you, make sure that you stand grounded in your reality. Ask for a break and try to reframe yourself, if you fear that the other side is gaslighting.
Next is open frames. You could also label using open frames as hitting up the other side's imagination. You use open statements that seem like you respond to the other side, but they motivate the other side to interpret them. Imagine you sent out a request for proposal. You incumbent supplier has heard that he's definitely on the short list, so supplier says, "Come on, we know that we should get a deal. You will hear from our lawyer." "Lawyer, why? Do you want to sue me?" "As I said, you will hear from our lawyer." Supplier, thinking, "What have I done wrong? Did I cause a contract breach? Why do they want to sue me?" Even though legals only want to exchange contractual document, this statement heats up imagination.
Next is introduction of new people. Introducing new people is an approach that allows to question previously agreed items. "I'm John. I make the decisions from now on, and we need to talk through a few items that you have considered closed." Warning, you can only do this once with an existing party, because you will not be able to discuss it again. If applied to you, you should have something in writing. A document that confirms that already agreed topics.
Next are electronic negotiations. Electronic negotiations are bidding platforms like MyHammer or eBay. This is also known as eProcurement. Procurement publishes tenders on platforms, maybe more on an enterprise level than eBay, on which suppliers then can bid. Why is this negotiation tactic categorized as anchoring and framing? Because through the design of the tender, the negotiator sets the frame for everyone. No self-talk can change the tender once discussions have started. This comes in as an opportunity to receive comparable bids from the counterparty. Comparability here is important, it helps to over come perceived differences in suppliers that are really not existence in reality. Platforms range from enterprise solutions like Jaguar to open source like openprocurement.org.
The final item in the anchoring category is the power of the first action. The power of the first action, also known as first movers advantage, can come in very handy. This is especially true for anchoring and framing. As we have discussed before, the first information shared often receives an importance bonus. This means that if you see a first offer as reasonable, you tend to go for it and not wait for the next one. Let's review an example of a first offer that can make sense, "To make things clear from the beginning, you cannot go beyond $93 for the blue widgets." If the 93 are within a realistic range, this is the in for all future discussions related to. By the way, always use odd numbers, so they look calculated and not guessed.
And this concludes this episode about anchoring negotiation techniques.
This was the episode about anchoring negotiation techniques. As always, you can find the show notes over at procurementzen.com/022. That's 022 for episode 22. Make sure to subscribe so you do not miss out on the remaining episodes. Let's talk next week. Stay safe and healthy in these weird times. Always, happy negotiations, yours truly, Phil. Bye.
Thanks so much for listening to this episode of ProcurementZen, with Phil Kowalski. For more great content and to stay up-to-date, visit procurementzen.com. If you enjoyed today's episode, please review and subscribe, and we'll catch you next time on ProcurementZen.
- Big initial number – big numbers if you aim high, small numbers if you want low prices
- Look into past techniques. Works very good because of consistency and commitment
- Reframing – putting a fact that is important to you to another frame of reference.
- Reducing their expectations – Open negotiations by stating what is impossible to you.
- Downplaying the other side – downplaying the other side’s facts.
- Our rules – also known as policy based. Asking for proof is best way to fight this technique if applied to you
- Black and white – refers to contrast. This technique is about the relation between topics.
- False split – good negotiators never split the difference.
- Topic jumping – It’s a confusion tactic that you use to derail the other side.
- Stroking one’s ego – appealing to other people’s ego is powerful.
- Doing favors – We humans tend to give back. It’s very hard for us to owe something.
- Flattery – They help to establish a positive mood.
- Negotiations performance compliments – Use this negotiation tactic on small items, then you can ask for return on big items.
- Gaslighting – a very aggressive tactic, so be careful if you want to use it.
- Open frames – using open frames as hitting up the other side’s imagination.
- Introduction of new people – allows to question previously agreed items.
- Electronic negotiations – through the design of the tender, the negotiator sets the frame.
- The power of the first action – This means that if you see a first offer as reasonable, you tend to go for it and not wait for the next one.
- Good negotiators never split the difference. Only split the difference when you have artificially increased the values.
- Create a positive mood while negotiating.
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