Change Leadership Secret – 44 – Be Careful Where You Cast Your Anchor

Change Leadership — Secret # 44
Be Careful Where You Cast Your Anchor

To reach a port we must sail, sometimes with the wind, and sometimes against it. But we must not drift or lie at anchor. —Oliver Wendell Holmes

What I Need to Know

“Anchoring” is the cognitive bias whereby people are overly influenced by an initial data point, either in the past or present.

The potential trap for your customer is that she may limit herself and miss opportunities. For example, if you try a new restaurant and have a bad experience, you may vow never to go back. But what if two months later the bad manager is gone and a new manager is doing a great job? You will be missing an opportunity for a great experience because you anchored yourself to the initial data point. Fortunately, even though people are often too lazy to pursue more than one data point, they will usually be willing to consider new data if you provide it.

You can fall into the same trap as a salesperson. Maybe you determine that a customer is not able or willing to make certain changes. Then, you write that customer off your list and never go back. But what happens if two months later that person is gone and a new manager is in? The opportunity goes to your competitor.

Another trap for you is setting initial customer expectations. If you sheepishly lowball your initial cost estimates, the customer will be anchored to that number; it may be nearly impossible for you to raise the cost when you inevitably realize the actual cost is much higher.

What I Need to Do

A common practice among salespeople is to bait the customer with an initial low price and then switch to a much higher price, later. The ethics of this practice are debatable. But as much as I hate to admit it, this practice has been proven to work. In Forceful Selling, I talked about my house painter initially quoting me a price of $35 per hour and then coming back with thousands and thousands of dollars of invoices. He didn’t do anything unethical—the hours just add up fast. (By the way, I have written two books—and he is still there! He’s getting paid by the hour, after all.)

Sometimes, you may want to consider making your proposal two or three times bigger than your initial estimates would indicate—just be sure to justify it with objective data. This has the effect of anchoring the customer’s expectations at a much higher price, making the ultimate price seem relatively small and achievable. This tactic is standard practice for tort attorneys who initially ask for tens of millions of dollars in damages, hoping to bias a jury toward a higher judgment in the end.

Action Summary

  • Be aware of the perils and opportunities created by anchoring.
  • Use anchoring as a tool.
  • Do not pay your painter by the hour!
Change Leadership Secret - 44 Be Careful Where You Cast Your Anchor

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