The influence of anchoring
During decision-making, anchoring occurs when individuals use an initial piece of information to make subsequent judgments. Once an anchor is set, other judgements are made by adjusting away from that anchor, and there is a bias toward interpreting additional information around that anchor.
Behavioural economists and cognitive psychologists are finding how much anchoring matters. Anchoring guides and constrains our thinking. Once your mind is hooked onto the anchor, it’s much harder to stray away from it.
Salespeople use it all the time, you’re much more likely to spend $800 dollars for an item that was originally priced as $1,000 than if it were simply priced at $800 from the beginning.
Everything you need to know about anchoring can be taught by my daughter….
Last year we went to a birthday party – she was three at the time – she came up to me and asked ‘Can I have 2 cupcakes?’ with her two little fingers in front of her smiling face. I very nicely said ‘No, I think you’ve had enough sugary treats today’. Then she smiled, tilted her head and replied ‘I have any idea! What about if I just have 1 cupcake?’.
And there you have it… even a three year old knows how to anchor your expectations – 1 cupcake? Sure, that’s only half as bad as 2 cupcakes… have at it little girl, have at it!
What are some of the lessons we can derive from anchoring?
- Challenge the starting point for any analysis you are doing. Are you limiting the results because you’ve started from an incorrect anchor?
- You can use anchoring to your advantage...Setting a high anchor for your personal goals can help you to exceed even your own expectations.
Author: Steph Jeuken