Anchoring in Negotiation – How to Protect Yourself and Use It to Your Advantage.

Among the many decisions a negotiator needs to make, one of the most important is whether or not to make the first offer. To have a basis for making a good decision in this regard, it is necessary to understand the anchoring bias.

Our brain gives disproportionate weight to the first information it receives. As a result, our judgment becomes anchored in the information, impressions, and estimates we receive. This effect is called the anchoring bias.

In a negotiation, when your counterpart makes an initial offer, that initial offer becomes an anchor. The debates about the value start to revolve around the anchor.

When the other person makes the first offer, the first step is to recognize the anchor. Becoming aware makes your brain switch from automatic mode to reasoning mode.

"Un-anchor" directly and assertively, showing that there is a significant gap between what you are willing to accept and what the other party is offering. Thus, you show that the other party's offer is outside what can be discussed, outside the ZOPA (Zone of Possible Agreement), which is the range within which a negotiation is possible, between the minimum a seller is willing to accept and the maximum a buyer is willing to pay.

After that, use a remedy, which is "re-anchor." By doing this, you divert your brain's attention from that information. Since negotiation is also a communication process, justifying your "re-anchoring" gives it more strength.

In decision-making, more broadly, there are preventive remedies, measures you can take to avoid falling victim to anchoring bias.

One of them is to seek different perspectives on the problem you are trying to solve. For example, how the issue would be viewed by the marketing, finance, and sales teams, and so on.

And consulting other people is one of the best ways to find new points of view. When doing this, it is interesting that you have already reflected quite a bit on the problem so that you do not become anchored to the opinions of others. It is also important that when describing the problem to the people you are consulting, you are succinct and as neutral as possible so that they are not anchored to your opinion.

And, of course, it is important that you remain open to new ideas, information, and opinions, even those coming from your counterpart in a negotiation.

By now, you should have realized that anchoring is both a threat and a tool that you can use to your advantage. Here are some tips for using anchoring effectively.

To make the first offer efficiently and securely, you need to have a good understanding of the ZOPA. It is also important that you assess whether your counterpart is well-acquainted with the ZOPA.

If the other party has more information than you, your anchoring might not have good effects. You run the risk of anchoring in a way that favors the other party. Another possible situation is that both have good knowledge and good information, which makes an anchor lose much of its power.

If you have plenty of information and good knowledge about the ZOPA and believe that your counterpart does not have as much information, you are in an excellent position to anchor effectively.

If you are the seller, do not anchor too far above the ZOPA limit. An exaggerated anchor has the potential to make the other party feel offended, distrust your good intentions. There is even a risk that the other party might give up on negotiating and your negotiation could fail before it has even started.

It is also necessary that you know how to justify your anchor. Of course, you won't share strategic details, but it's always possible to share your reasoning. Knowing how to justify your proposal gives strength to it and the negotiation process, as it demonstrates that you seek a negotiation based on good faith and fair criteria.

Knowing about anchoring, being able to protect oneself from its effects, and knowing how to use it as a tool are essential for a successful negotiation.

By Alessandra Corrêa

This post was originally published in Portuguese on the Head Energia blog.