June 2013

How old was Gandhi when he died? A sales tip for you!


Here's a sure-fire, easy and important tip on how to sell or negotiate more effectively, backed up by tons of academic research. 


First let me tell you about an experiment conducted by the German psychologists Fritz Strak and Thomas Mussweiler.  They asked a group of people these two questions:

"Was Gandhi older or younger than 9 years when he died? How old was Gandhi when he died?" 

 Then they asked a second group of people, blind to the first test, "Was Gandhi older or younger than 144 years when he died?  How old was Gandhi when he died?"

Even though the respondents surely knew that the ages of 9 and 144 were preposterous, the answers given by the first group averaged 50 years old.  The second group's average answer was 67, a gap of 17 years.  This phenomenon is called the "anchoring rule."  It describes our natural tendency to be influenced in our judgment by numbers even when we know they 're ridiculous, or have nothing to do with the matter at hand.

In a single issue negotiation, you cannot help but be influenced by the first price offered, for example on a car.  Your brain will automatically anchor to that price.  In his book "Thinking, Fast and Slow," the Nobel-winning economist Daniel Kahneman suggests that if you feel you are being "anchored" in a negotiation, don't make a counter-offer.  Simply state that you won't negotiate at all based on an unfair number.

Suppose you're selling commercial financial services that have fees attached, such as cash management or a loan commitment.  You might say, "I'm going to come back with a proposal, but I doubt it will be as much as $X."  Then when you come back with $X minus 25%, your offer will seem more attractive.

As long as you don't drive off your buyer with Gandhi-like numbers, you have many opportunities to use anchors to improve sales performance. 

Anchors are often used in advertising.  You've seen ads that say, "You would expect to pay $200 for this set of knives, but if you take advantage of our special TV offer for a limited time, you'll pay only..."

If you're still not convinced of the anchoring phenomenon, I'll share more anchoring experiments on my blog this Friday, including a technique to help you get a bigger raise after your next performance review. 

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Think Like Your Customer

Gregory LaMothe

Gregory LaMothe

ActionSystems, Principal