Understand Anchored Thinking to make smarter choices
When I began my career as a corporate trainer I conducted workshops on public speaking for which I was paid a modest remuneration. Subsequently I offered workshops on a high value added subject of Lateral Thinking. I found myself running into high resistance in respect of my fees which were much higher than what I sought for my public speaking workshops but to my mind were in keeping with the much higher value addition that I provided.
‘You charge a fraction of this amount for your public speaking courses. Why are you charging so much for your lateral thinking workshop?” was the common refrain. I realized that a certain psychological phenomenon was at work. I reacted creatively. I lowered my fees for my public speaking workshops and even accepted a small honorarium and sometimes did it free. I then raised my fees for my lateral thinking working again in keeping with my expertise in that subject and its possible beneficial impact on my trainees.
It worked.
What was happening here ? Here I was, lowering my fees in one workshop and starting to get higher fees for my other offering!
Our mind is susceptible to anchoring .The initial impression or opinion or experience influences later developments even though the latter may be unconnected with what happened in the past.
Let me give you another example. In a class on lateral thinking I asked my trainees to write down on paper the first 3 digits of their mobile phone number. Then I placed before them a bottle of perfume and asked them what according to them was the price of the bottle. I found that all of them had suggested a price that was not very different from the 3 digit numbers they had jotted down . The actual price was in fact in double digits ! The telephone numbers had obviously no relationship to the perfume bottle price .
The minds of my trainees were anchored by the 3 digits.
To add to the fun when I showed them other perfume bottles and found that they were willing to pay prices not very different from their offer for the first bottle irrespective of the actual price of the product. The later bottles were of much better quality and much higher prices. This reminded me of my predicament when I quoted much higher fees for my lateral thinking workshops.
You may have noticed in negotiations with unions –or even your domestic help—that they start with what you may feel is an absurd amount .The latter also knows that the demand is very high. Their intention is to anchor your mind to the figure quoted . Your tendency is to negotiate a figure in relation to that figure on a plus minus basis usually the latter!
When a creative enterpreneur decided to start a chain of coffee shops in Chennai that would sell coffee at more than double the price at the adjacent Udipi hotel he was considered stupid. After all , the reasoning went , the Udipi price would serve as an anchor and who in that conservative cost conscious city would pay twice that amount for a cup of coffee. But the entrepreneur had other ideas. He created a teenage friendly ambience ,with rock music , exotic coffee flavours, unmatched by Udipi hotels. What he did was to ‘shift’ the anchor. He succeeded [KWIKY’S] . Thereafter his prices became an anchor for other chains.
Have you considered that the first job you accepted influenced your entire career thereafter ? If you took up your first job without much thinking –say you got carried away by the salary –you may have found that you were stuck with a boring demotivating situation . You are now at your wit’s end . I had that experience.You find it almost impossible to change careers and had to suffer in silence for the rest of your active life– bored and fed up.
How can one avoid anchored thinking?
Before you buy anything expensive ask yourself if you have been anchored by anyone or by any advertisement.
Even a little thinking on this score will alert you and save you a loss. Examine all your past decisions for their long term effect . Resist the temptation to grab the first thing that comes along. Wait and ponder.
Contemplate the anchors in your life. Re- examine them and ask if they are relevant today and in the future .
This will open your mind to new avenues. Many years ago I went to a cinema hall in Mumbai determined to see the film Poonam Ki Raat a 1960’s suspense thriller . My thoughts on what price to pay to the blackmarketer—I was aware that the tickets were being sold in black—were anchored by my allowance which I knew was a fraction of the going rate at the blackmarket . I bargained smartly and got the ticket at my anchor rate. I was about to congratulate myself when the ticket seller played spoilsport.
‘Saab Kishore Sahu murderer hai’ he said .It was like your car tyres had been intentionally deflated .
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Mr. Ravi. I am very happy to again comment on another intriguing article. I am aware of Kwicky’s and even went there after it opened. In someways, I would agree the anchor could be price, but it was firstly, in many ways, the ambiance. Udipi could not offer that hip and happening atmosphere – and community. It’s like Starbucks in some ways– who in America would really want to spend $5 on a cup of coffee 10 years ago? I wonder what anchors have influenced me…
Dear Mr Ravi ,
Excellent outlook.
Its sure going to change my way of thinking
- Biju