It was Sunday 10am, when I received a call from the fish market. This was a regular call which the fish seller would make whenever he received a good supply of fish. Today it was large sized prawns and it was very high quality. Would I like to have it cleaned and delivered at home ?

Weekends are usual time to have a good meal with family and I was very open to trying out 'Prawn Malai Curry’ for lunch. I asked the price. He said, I have been selling this for Rs 800/- per kg to others. For you, I will give it for Rs 650/-. It was expensive for me, but I continued. How big are the prawns, I asked. They are really large pieces – 3/4 pieces per kg. I ordered two kilos. As I reflected, I was out of pocket by Rs 1300/- in two minutes of discussion.

I sat down at my table to understand the psychology of the conversation. Did I really want to spend Rs 1300/- on prawns ? Should I go back, and say no to the fish order ? Has this kind of transaction happened with me earlier ?

I thought of an organisation where I had worked many years back. We had few sales executives who would always meet targets and many times exceed them. They were the CEO’s darling – without a doubt. Slowly, their equity within the system changed to such an extent – that no one could question them on their plans. All their plans, initiatives would get approved in a jiffy. Rest of the Sales team would merely stare at each other. Slowly, came the Mid year.

 

The HR Leadership was seen in frequent huddles with the Sales Leadership team. Discussion about promotions, increments was at a feverish pitch. When all the requests from the Business had come in, the proportion of increments and promotions from the Sales team was close to 70%.

In the CEO’s meeting room, all the function heads were individually unhappy with the high percentage of promotion request but were helpless as a group. One of the request was for a promotion of a sales person besides a request to correct his salary. He had got promoted last year ! There were muted protests from the HODs ('how can we promote someone every year ?’) but everyone knew the inevitable !!

When it came to numbers, the revised salary after promotion would be twice his last salary. If this was not approved, the firm would 'lose’ him to competition, the CEO was told. Finally, the hike was closed at 40%.

In both cases (prawn and promotion), what was happening was a phenomenon called 'Anchoring’. Research has shown that when we place a number on the negotiating table, subsequent climbdowns are closer to the opening number. For the first number to stick for a while on the table, enough preparation has to happen before coming to the negotiating table.

In the case of the fish seller, he had earned my trust by selling me high quality fish earlier. There had been only one case of bad quality and he had quickly replaced it. So when, he mentioned Rs 800/- as the selling price to other clients, and Rs 650/- for me, my mind was on the saving of Rs 150/- per kilo. The saving of Rs 300/- was more appealing than an outflow of Rs 1300/-.

Similarly, the sales executive had earned the equity of the system, through his effort. So, when he asked for a 100% hike, it was a great anchor. In hindsight, a 40% hike was better than a hike which comes with a job change.

I spoke to few experts and this was what they said - the longer the `anchor’ stays on the discussion table, it becomes more and more difficult for the other side to get a lower price. So if you are anchoring, keep it on the table as long as you can. If you are on the opposite side, quickly find ways to run down the anchor.

I am still searching for some answers - After a point, will the other person not see through my tactic of anchoring and then negotiating a slightly lower price but still managing to get away with a good value?

TESTIMONIALS

"Dear Kingshuk, The programme went very well. You really had some innovative ways to explain Performance Management. Further you have "Well Straightened" the myths on "Bell Curve".

K.Sendhil Naathan
Vice President

(Marketing & Business Development) Diversified Industrial Business Group with USD 20 billion revenues

Connect

LIGHTBULB MOMENTS CONSULTING

Level 4, Dynasty Business Park,
Andheri - Kurla Road,
Andheri (East), Mumbai - 400 059,
INDIA.

Mob: + 91 99875 89084

Email: kg@lightbulb-moments.com