How the Anchoring Effect Is a Helpful Tool for Persuasion

This article is an excerpt from the Shortform book guide to "How Highly Effective People Speak" by Peter Andrei. Shortform has the world's best summaries and analyses of books you should be reading.

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What’s the most basic negotiation tactic? How’s your perception of a wine’s price affected by your knowledge of the price of other wines?

In How Highly Effective People Speak, Peter D. Andrei shares the basic strategies of powerful communication, teaching you how to speak with eloquence and persuasion by tapping into patterns of thinking that affect human behavior and perception. One of these patterns is the anchoring effect.

Keep reading to learn how to convey your message in the most efficient and effective way possible by understanding the anchoring effect.

The Anchoring Effect

Andrei contends that, if you understand cognitive biases (how people tend to receive information and make decisions), you can communicate more effectively, especially if you’re communicating to persuade others. One cognitive bias that he discusses is the anchoring effect. Also known as the anchoring bias, it’s the tendency for a person’s decisions to be excessively influenced by an initial reference point, or anchor. For example, when purchasing a new oven, if the first oven you like is priced at $1,200, that price is going to affect your perception for the rest of your shopping experience. When you see a similar oven for $800, it’s going to seem like a great deal even if it isn’t.

The anchoring bias is largely due to our relative perception of the world. We need a point of reference, a way to contextualize information, to understand what anything means. If the salary of a job you’re applying for is $40,000, you can’t do much with this information unless you compare it to what you make now, what the average salary for this particular job is, and the cost of living in your area. Without a point of reference and additional information, the number $40,000 is useless. As Andrei points out, you might be happy with earning $40,000 a year until you learn that someone with the same job is making $50,000.

(Shortform note: The relativity of perception may also be a big factor in our prejudices. As Jennifer Eberhardt explains in Biased, our implicit racial biases, especially anti-black bias in the US, determine how we make decisions and even how we see the world. For example, if you grow up in an environment where you’re only used to interacting with one race, you’re more likely to experience the “other-race effect”—in which you struggle to differentiate between faces of other races. In this case, your perception is relative to the environment you grew up in.)

Anchoring bias is a helpful tool in persuasive speech or writing, but you can also use it to your advantage in all sorts of interactions. Whether you’re a politician persuading someone to vote for you, a new hire trying to negotiate a higher salary, or a salesperson trying to convince someone to buy a product, the anchoring bias can be used to great effect.

(Shortform note: A salary negotiation may seem like the perfect time to use the anchoring bias, but experts suggest otherwise. Some say this is because being the first to inquire about money leaves a bad impression, so trying to be the first to insert an anchor in the negotiation may be off-putting. In What Color is Your Parachute, Richard Nelson Bolles says that, for unknown reasons, whoever mentions a number first in salary negotiations usually loses, which suggests that the anchoring bias isn’t always effective.)

Let’s go over a couple of specific tactics that Andrei suggests.

Use Relevant Anchors to Raise or Lower Expectations

This tactic involves setting an anchor that is directly related to the matter at hand. In its simplest form, this is the most basic negotiation tactic. If you want to buy something cheap, your original offer should be much lower than what you’re willing to pay. If you’re selling something, you start with a much higher price than you’re willing to sell for. This tactic can be used in a variety of subtle ways. For example, if you’re selling a product, you could anchor it with the price of the most expensive comparable product (our competitor charges $120, we only charge $75) or the price before a discount (this originally cost $30, now it’s only $18).

This anchoring tactic can also be used in persuasive speech or writing. Let’s say you’re a mayor running for reelection. You start your speech by pointing out that the average annual economic growth in your city over the past 20 years is 1.4%. Then, you tell your audience that over your last four years as mayor, the annual growth rate has averaged over 3%. Because of the original anchor you set, your 3% will seem a lot more impressive to potential voters and you’ll appear to be a more attractive candidate.

(Shortform note: In Predictably Irrational, Dan Ariely argues that our tendency to use anchors in our lives can lead to a phenomenon known as “self-herding,” which is when you make a decision based on your own past behavior (which serves as the anchor for your future behavior). This can lead you to believe that your current behavior is a personal preference when really it’s just a decision based on past decisions. To avoid self-herding, he recommends asking yourself how a certain preference came to be and if it’s really worth the time and money you’re spending on it.)

Use Irrelevant Anchors to Raise or Lower Expectations

Another way to engage a person’s anchoring bias that Andrei recommends is to set an anchor unrelated to the matter at hand. Let’s say you work at a wine store and want to sell more expensive bottles of wine. Instead of anchoring with a higher original price, you can anchor customers with the price of an irrelevant, but expensive, item. For example, you might casually mention that a previous customer was carrying an $800 handbag. This puts a high dollar amount in the customer’s head, and even though the handbag has nothing to do with what they’re shopping for, they might still be affected by the number and be willing to fork over more money for a bottle of wine.

(Shortform note: Dan Ariely explains that the anchoring bias works even when the prices or figures we use are completely arbitrary. He points to an experiment that found something as random as social security numbers can serve as an anchor for how much one is willing to pay for a good. In the experiment, participants were asked to write the last two digits of their social security number in the form of a price next to specific items and then write what they’d prefer to pay for each item. Those with higher social security numbers were willing to bid higher amounts than those with lower numbers.)

How the Anchoring Effect Is a Helpful Tool for Persuasion