This video can show you how psychology can help you when bargaining.
Haggling is hard. It’s uncomfortable too. But whether you’re buying a house, a car or just some over priced souvenir, you can’t afford to shy away form it. So, how can psychology help you get a better deal?
Well, it turns out. There is a powerful subconscious process, you can exploit. And while it’s happened to everyone, it’s hardly mentioned. It’s called anchoring. Now, anchoring states that in unfamiliar situations our minds rely too heavily on the first piece of info we see. All thoughts and information that comes afterwards are interpreted based of that initial info. Normally, this gives us a good estimate, but the problem arises, when the first piece of info is irrelevant or wrong.
To show you, imagine you’re eyeing the hottest pair of shoes, you check the price tag and unfortunately its $300, which is too expensive, but at that exact moment, a sales person approaches you, telling you the shoes are marked down to a $150. That’s a bargain, right. You’re probably tempted to buy it. Okay, now, imagine the same scenario. But this time, that pair of shoes starts off at $150. No markdowns. Suddenly, it’s not a bargain and you more hesitant to buy it. And yet, this is completely irrational because this is the exact same final price. What’s happening is in the first example; your mind is anchored to the $300 dollar and when you compare it to $150, it just feels more reasonable.
In fact marketers constantly exploit you with this cognitive flow because it’s powerful, undetectable, and almost unavoidable. For instance, in a study published by the American Marketing Association, the supermarket tried a new tactic to sell cans of soup. They told everyone that there was a 10% discount off the cans of soup and then forced a limit of 12 cans per customer. Now, you might be thinking, I wasn’t going to buy 12 cans anyway, but that wasn’t the point; the point was to secretly anchor you to the number 12. And sure enough with a limit of 12, shoppers bought 7 cans on average, twice as many as they bought when there were no limits. That’s simple science, double profits. So, how can you use anchoring in negotiations?
Well, the first trick is to make the initial offer. An analysis of 16 different studies found that regardless of what’s you’re haggling over, you are always better off offering first. This is because the initial price sets the playing for you for negotiation. By offering first, the other party is anchored to your initial price, not the other way around.
The second tip is to make a precise offer. Unfortunately, you’ve already fallen for this trick. Ever wonder why you’d never see car sale for a round number like $17,000, it’s always $16,995. Well, researchers from the University of Florida found that a precise offer anchors people to a precise scale. What this means is? If you sell a toy for a round number like $30, people might place that on a scale of 10’s of dollars. So when they adjust the anchor, they will take larger steps and maybe counter off for $20, but if its $29.75, they’ll subconsciously consider the cents and adjust in smaller steps. Therefore, they stay closer to your bid and you get a better deal. Overall, a great negotiation tactic is simply to make a precise first offer. So be cautious of anchoring, the next time you’re doing business.