A Quick Look at Anchoring

11 October 2018

How can architects benefit from the subtle nudge of an anchor? Ian Motley takes another look at the psychology of negotiation.

Although many of us believe we make financial decisions based on solid, rational financial criteria, in reality, this rarely happens. When making financial decisions many of us (and our clients) are frequently influenced by factors other than the fee.

One of the most common influences is known by behavioral economists as ‘anchoring and adjustment’. To demonstrate how anchoring works let’s borrow an experiment from Blue Turtle’s Fee Proposal Workshop.

At the start of the workshop, attendees are shown a photograph, approximately 3 feet wide by 2 feet tall, which includes a large gathering of people in a public square, all wearing different, brightly coloured shirts.

Attendees are then given a small piece of paper with a number on it. The attendees are asked to take a look at the photo and answer the following question:

 “Is the number of people in the photograph higher or lower than the number at the top of your piece of paper?”

Once attendees have written down their answer, we follow up with a second and final question:

 “How many people do you think are in the photograph?”

The trick to this experiment is that half the group are given a piece of paper with the number 284 at the top, while the other half are given a piece of paper with the number 1,423 at the top.

When we tally the results we find that those attendees who have the number 284 return an average guess of 338 people in the photograph, while those attendees who have the number 1,423 return an average guess of 978 people in the photograph.

Now, we’re all looking at the same photo, at the same time, when asked to make our guess, so why the huge difference in response?

It would appear that by including an ‘anchor’ number on the paper we’re able to influence the attendees’ estimate by more than 300%!

This same process plays out in many types of financial decisions. For example, retailers always leave the original price tag on anything they’re discounting because they know the original price tag will have a strong emotional impact on the buyer. It’s not just the price, in isolation, that’s influencing our behaviour.

Obviously, anchor numbers can be used in many ways and problems arise for design professionals when clients ‘anchor’ on the low design fee numbers, frequently provided by our competitors.

When faced with this dilemma, instead of just lowering your design fee to meet the lower anchor number, you may want to try providing the client with a range of fee and service options to choose from.

By providing a range of fee and service options, you’ll be able to bridge the gap between your, and your clients’, fee expectations while also demonstrating the benefits that a higher priced and more involved service can provide.

Ian Motley is a design fee consultant with Blue Turtle Consulting. To learn more about the concept of anchoring and other design fee psychology traits, see Blue Turtle Consulting.

Blue Turtle Consulting is conducting Fee Proposal Workshops across Australia in November 2018. ACA members receive a 15% discount on these workshops (use promo code: ACA).