Anchoring Effect: 1st impression impacts the decision
Anchoring Effect? The naval terminology may cause you to flounder around like rudderless ships, but it is a term used by behavioral pundits.
Shedding light on the anchoring effect, let’s say, you are in a mood to shop… You walk into a boutique and espy your favorite Tommy Hilfiger on the rack. A cursory look at the price tag makes you faint BUT (there’s always a but) remember those obsequious salesmen who are lurking in the shadows. They step forward grandly declaring the shirt is deeply discounted and was there just waiting for you! You grab at the largesse like a starving man, pay for the shirt and walk out like a Maharaja who has conquered a new kingdom.
The first steeped price that held your attention is your anchor.
Anchoring effect is a thinking pattern where a common man is heavily influenced by the first set of information offered. His subsequent actions and decisions follow the effect of this primary piece of information.
This might appear to be a simple experiment often to imply that humans are idiots. But this reasoning denotes the fundamental way humanity thinks.
Anchoring effect is not exclusive to finances. Anchoring is seen in our emotional decision making, in the prediction of our future course of actions and of course in the art of bargain/ negotiations and price fixing. This trait is so ingrained; we hardly notice it in our daily interactions.
Don’t believe us?
Consider the following situation… You and your friend are strolling together; you after feasting on a banquet while your poor friend did not have the time for lunch and is starving. A smooth talking, drop dead handsome salesman approaches you on the streets. He tries to push his company’s brand new Choco bar. You replete with the free food give a pass, I mean, who would want a teeny-weeny chocolate when you had Baskin’s for dessert, but to your starving friend it would be manna from heaven delivered directly by Moses. Look at the different reactions. You forgot to take into account that you will be hungry after 3-4 hours and your friend forgot to remember there are many takeaway’s and settled for the first thing that came his way. Voila! Anchoring effect happening right there in your oh-so-boring life.
How to Avoid Anchoring effect?
Ha! Feeling like a live, plump worm stuck to the bait (anchor) and trying to wiggle yourself free? Remember the ancient yogi baba’s sonorously saying, “The world is Maya (Illusion), Break the tapestry of Maya and embrace Moksha”.
Well since we are not Jackie Chan, we cannot break the Maya or anchoring so easily, what we must employ is Chanakya’s tantra (cunning).
Logical thinking and analysis is one mode of delivering the killer blow to the anchoring effect. The best method of un-anchoring is adopting Comparison and BATNA.
Elder’s look down the nose when the kids compare their goodies, but the act of comparison is really good! Build up an enviable collection of ’banks’ (a fixed deposit of emotions/facts); you can even surpass Rothschild in this endeavor. Compare the facts with the immediate reference point to gain objectivity.
See if BATNA works for you!
No! We are not talking BAFTA awards here. BATNA is not the highest award you receive for breaking the chains of an anchor. It is another options. People in ivory tower call it ’Best Alternative To a Negotiated Agreement’. Simply put, BATNA is all about thinking about other options when confronted with Anchoring effect.
Despite adding all these missiles to your armory, Anchoring can still be as hard to get rid of as the burr on your cloth. But hey, forewarned is forearmed, right?