Buy low; Sell high. This saying is never truer than when it comes to setting an anchor. Even more, it can serve you well in building sales confidence for your day-to-day dealings. As a salesperson, you’re charged with representing a brand and managing relationships with your clients. Most importantly, you create value and translate that value to your customers. During the back-and-forth of the sales process, that value may be subjective depending on the bias and emotions at play. Therefore, establishing control of the sale begins with knowing the landscape and setting the anchor price accordingly… and first.
How a Price Anchor Increases Sales Confidence
Price anchoring looms large in retail. In fact, that’s what limited time percentage-off discounts are all about among major retailers. By directive, they must return to the original price within a set period. The strategy is solid as it establishes a value and offers a discount under a time restraint. It’s a recognized technique to push seasonal or desired products in a timely manner. Typically, retailers compete against last year’s numbers and this practice is a governor for inventory control. Strategically, the contrast of the original price against the discounted price is the persuasive factor. It’s a head game where psychology plays a vital role.
Leverage Price Anchoring in Your Favor
1. Collect as much data as possible
2. Be the first to offer a number based on that knowledge
According to research on anchoring bias, negotiators gain an edge by making the first offer. Writing about negotiation skills for Harvard Law School, Katie Shonk says decisions to make the first offer is based on knowledge of the zone of possible agreement (ZOPA) by each side of the transaction. Her first piece of advice is to “arm yourself with as much information as possible." Second, make an aggressive first offer that will anchor the discussion to your advantage. Shonk cautions that information is key, and relationships can be fragile, so proceed thoughtfully. Your sales confidence will grow as you expand your knowledge of the buyer’s situation and drive the value of your offering.
Look at the Sticker Price
What is a sticker price? You know this: it’s the anchor price for the automotive world. It’s the first value to consider. Same for list price. Same for rate card. However, way back in 2004, Adam Galinsky, writing for Harvard Business School, pulled back the curtain. Galinsky said in situations of uncertainty, “first offers have a strong anchoring effect – they exert a strong pull throughout the rest of the negotiation”. He cites research that takes the theory further. Consistently, auto mechanics and real estate professionals, when presented with high or low values of cars or properties bent toward the anchored value indicating their judgement was swayed by the anchor price.
Better Negotiation Begins with the STA Rule
Jeff Haden, contributing editor for Inc.com says that anchors matter. Appealing to your emotional intelligence, he urges you to act and set the anchor (STA) and make the first offer. His advice should boost your sales confidence. Haden cites several studies where negotiated offers were consistent with the first offer. If you are buying, set the offer relatively low. By contrast, when you are selling, set the offer relatively high. Sound familiar?
“Every item, every service, everything has an intrinsic value, especially to you. Knowing that value before you start is the key to an effective negotiation. The key is to know what you're willing to pay, what you're willing to do, what you really want, and then sticking to that. Ignore any other cues — emotional or otherwise — that might influence your decision.” (Jeff Haden)
Photo by CHUTTERSNAP on Unsplash
Latest posts by Tim Londergan (see all)
- Empathy Tops the Salesperson Skills List — January 26, 2023
- New Year. New Selling Style. — January 19, 2023
- Set the Anchor to Build Sales Confidence — January 12, 2023
- Your Selling Tactics Should Include an Executive Presence — January 5, 2023
- How Do You Define Failure in Sales? — December 29, 2022