Dennis Collins:
Hello again and welcome to another episode of Connect and Convert, the Sales Accelerator podcast where small business owners can learn insider secrets to growing their sales faster than ever. And as always, we promise an exciting new topic today, as in every session.

Today’s topic, “This Anchor Is Not For Your Boat.” I’m Dennis Collins and I’m alongside my partner, hey Leah, say hello to our audience.

Leah Bumphrey:
Hey Dennis, how are you doing?

Dennis Collins:
I’m good. Leah Bumphrey, all the way from Canada. I want to start today with a question for you, Leah.

Now I know you guys in Canada use some old-fashioned system to discuss temperatures, I think it’s called Celsius or something like that. This is not a trick question, but I want you to think about the answer to this question. In Fahrenheit, is the average temperature in San Francisco greater or less than 333 degrees Fahrenheit? What do you think?

Leah Bumphrey:
Well, you know what? There’s no question. It’s got to be less than that. I mean, even if I had not taken Fahrenheit in elementary school, way back when we did the big change, I know that I’m right here.

Dennis Collins:
Well, what do you think it is? Take a guess. What do you think is the average temperature in San Francisco?

Leah Bumphrey:
Average temperature in San Francisco?

Dennis Collins:
In Fahrenheit.

Leah Bumphrey:
Yeah. In Fahrenheit. Okay. Probably, I don’t know, 80?

Dennis Collins:
80. Okay.

Leah Bumphrey:
Yep.

Dennis Collins:
That’s a good guess. Good.

Leah Bumphrey:
Okay.

Dennis Collins:
For those of you who are Nick Colenda fans, some of you may be, he does a whole lot of work on anchoring and contrast. So you may have seen this example in his book. It’s all over the place. So, Leah, you did think of an exact estimate, right? I did. You came up with an exact number.

Leah Bumphrey:
It was far less than the number that I suggested, was it not?

Dennis Collins:
Oh, big time. Yeah. Of course. The number I suggested, however, influenced your final decision. Did you know that? Makes sense.

Leah Bumphrey:
Tell me how. Tell me more.

Dennis Collins:
Well, I’ll tell you how. If I hadn’t presented that number, that 333 degrees Fahrenheit, your number would have probably been lower. Okay. And how do I know that? Nerd alert. Quattrone et al., 1984, proved that when a number is thrown out before you ask a question as I ask you, even though the number is ridiculous, it is obviously wrong, it is irrational, and that number serves as an anchor for your answer.

So try this on your friends if you’re skeptical. Next time you try it, just ask them without providing a number. Just say, hey, what do you think the average temperature in San Francisco is? I’ll bet you get lower than 80. I’ll bet you 100 bucks, Canadian.

Leah Bumphrey:
All right. In 80, oh, wow. That’s hardly anything.

Dennis Collins:
Yeah, that’s true. So today we want to talk about anchoring and contrast. Have you ever read Predictably Irrational, Leah? It’s a very famous book by Dan Ariely. Have you read that book?

Leah Bumphrey:
I haven’t, but it sounds intriguing.

Dennis Collins:
I love it. Ariely, he’s a genius, and he writes about contrast and anchoring. So let me give you an experiment that he conducted with some college students. They were given some options for a subscription to a magazine. In the first case, they had two choices.

Choice A was an online subscription for $59. Choice B was an online and print subscription for $125. Leah, which one would you choose, the online for $59 or the online plus print for $125? Which way would you go on that?

Leah Bumphrey:
Well, I always like being able to touch the books and the print that I’m reading, but I don’t know.

Dennis Collins:
That’s a big difference in cost.

Leah Bumphrey:
I’d probably go for the online.

Dennis Collins:
Online only? Well, you would be in the majority. In this experiment, 68% of the college students chose option A, which is online for $59. That’s the least expensive option. That produced, in this experiment, just over $8,000 in revenue. So now they switched it up.

Now they made three choices. They kept choice A, which is online for $59, but they added another choice B, which was print only for $125, and then they added a choice C, online and print for $125. $59 for your online, choice A. Choice B is just the print for $125, and choice C, online and print for $125.

What would you choose, Leah, in this case?

Leah Bumphrey:
Well, I hate myself, but I have to say, that choice C now seems like a better deal. It seems like I’m getting more because look at B. I’m only getting—A’s and B’s, I get one, and all of a sudden it sounds better.

Dennis Collins:
Aha. So you would opt for choice C, correct?

Leah Bumphrey:
It looks like a better deal to me.

Dennis Collins:
Well, guess what? Very few chose option B when they could get the online and print for the same price. So you were in the majority. However, online only—remember that won in the first time, 68%? It dropped to 16%. Really? It dropped to 16%, online only.

The more expensive now, online and print, went from 32% to 84%. The print-only option’s mere presence is called a decoy. It’s a decoy.

Leah Bumphrey:
Why is it a decoy?

Dennis Collins:
Do you have a sense of why it might be a decoy?

Leah Bumphrey:
Well, I think of what it did to me. It gives you just something else to think about, and all of a sudden you’re seeing a better deal somewhere else, even though hard cost, it’s more. I don’t feel as unique anymore, Dennis.

Dennis Collins:
Right. There you go. Well, the decoy is put in there, as you said. The print for $125 is the decoy, choice B. Hardly anybody bought that. But they used it to compare choices A and C, A being online for $59, but C, you get online and print for $125, and all of a sudden, sales went berserk, a 43% increase in sales from just over $8,000 to almost $11,500 by just putting that decoy in there as choice B.

Leah Bumphrey:
So, having that third choice, whether you’re presenting or being presented to, just changes how you look at it.

Dennis Collins:
It absolutely changes how you look at it, and again, this is all science. This is not Dan Ariely or Dennis Collins’ opinion. This is brain science. When the new option is better, the new option is the clear winner. The new option here was online and print for $125.

Bingo! All of a sudden, 84% of the time they sold that one. However, if the new option is worse, the already existing similar option wins, so it works both ways. Isn’t that exciting?

Leah Bumphrey:
That is. That is really nice information.

Dennis Collins:
That’s all about the brain, system one thinking, quick, you know, we want things fast, automatic, we don’t want to think about it, it takes too much energy to think. System One brain makes that all possible. Okay, so today I want to make a challenge to our viewers and our listeners.

Now don’t answer this question, Leah, you probably know the answer, but don’t answer, we’ll reveal this at the end of today’s episode. Here’s the question. In sales, when you’re trying to make an initial price impression, when you want to get a price out there in a sales conversation, is it best to A, give a range, let’s say like $15,000 to $30,000, or B, to give a specific number?

Leah Bumphrey:
So when you’re talking about it. Not in the close, but initially, when you’re first talking about price.

Dennis Collins:
This is the first price impression, and we’ll do a whole podcast on price impressions someday. That’s a critical part of any sales conversation. When you give the first inkling of price, as you might guess from our previous conversation about anchoring, it has something to do with anchoring, for sure.

So when you’re trying to make that initial price impression, is a range like $15,000 to $30,000 better, or B, a specific number. We’ll give you the scientific results at the end of this episode. So a lot of people are thinking, you know, the only anchor I’m aware of is the damn anchor in my boat.

Well, that’s true, but this is not that anchor. What does the anchor in a boat do? Do you have a boat, Leah?

Dennis Collins:
You probably have a boat. You probably go zipping around up there.

Leah Bumphrey:
I do not, but I wish I did today. It’s a beautiful day in Western Canada, and there are fish to be caught, but only if you have a boat.

Dennis Collins:
Well, I don’t have a boat either, but you know what they say, don’t get a boat. Just make sure you have a lot of friends who have boats. So I do go out on a boat, and you know, you drop that anchor so you don’t drift, right? It keeps you relatively in the same position.

It’s kind of a reference point. Your boat can only move the distance of the anchor chain or the rope. So it kind of works that way in person-to-person communication. Okay, how about our second nerd alert?

Leah Bumphrey:
Get ready.

Dennis Collins:
Nerd alert number two, Dvorsky and Kahneman, 1974. They found that we humans tend to make judgments by using relative distances from anchor points. Anchoring is a cognitive bias. It’s a system one cognitive bias where we individuals rely heavily on an initial piece of information that’s called the anchor when we’re trying to make a decision.

We tend to arrive at the value of something by looking at the value of things that are nearby or something that we see right before we see the price that the salesperson wants to present. So it’s a reference point. Here’s the cool thing. It doesn’t have to be directly related to the other object, the object that you’re presenting.

It doesn’t have to be relevant. It doesn’t even have to be accurate, as I was totally inaccurate with the temperature in San Francisco. This is unconscious. It’s below consciousness. We are generally not aware of its impact. It’s called a heuristic because it’s a shortcut.

We adjust our judgments in relation to some anchor. So for example, when you gave me your estimate for San Francisco of 80 degrees, you probably started mentally at 333 and said, no, it can’t be 333 and worked out a reasonable estimate. That’s what science says happens in our brains.

By nature, our system one automatic brains are lazy. We are motivated to produce accurate judgments, however, we try to use a shortcut with the least amount of effort to produce accurate judgments. So isn’t that interesting? Do you see, Leah, how that can be used in everyday sales conversations?

Leah Bumphrey:
Absolutely. I’ve used the term, and it’s something I learned from reading Roy Williams’ information, but I use the term benchmarking because it sets it in stone, where it’s kind of a range. Now that doesn’t mean that’s exactly where you’re going to end up, but it’s that range.

Dennis Collins:
Yeah, but it’s probably never where you end up. The point is that you make that impression. It’s sometimes outrageously irrational, but it still is an anchoring in the mind of the person you’re speaking to. It’s an anchor. And so when you present your price, which may be on the high side, relatively speaking, it doesn’t sound so bad because you’ve already anchored a ridiculously high price.

Leah Bumphrey:
Do you think that’s manipulation?

Dennis Collins:
I mean, some people say, that’s ear-manipulating.

Leah Bumphrey:
I don’t think it is because when you’re having this conversation as a salesperson, I need to know, Dennis, are you looking to buy the Cadillac that’s going to cost you $90,000? Are you looking for a really serviceable Kia that’s going to get you where you need to go for $25,000?

I need to know. And by body language and by saying, hey, we could do this or this, it’s not manipulating. It’s helping you to be able to service the client.

Dennis Collins:
Well, it is. It’s trying to get inside. As you know, one of my big pet peeves is we would all make more sales if we only spent more time getting inside the brains of our customers. What’s in there? It’s their show. It’s not our show. It’s their show. And this is, in my opinion, this is one way to get inside their brain by anchoring something and seeing how they respond to that and seeing how they respond to your pricing, to your offering as compared to the anchor.

Let’s answer the challenge question that I issued a little bit earlier. My question was, when you’re trying to make an initial, first initial price impression in a sales conversation, is it, better to give a range like $15,000 to $30,000, or to give a specific number?

Leah, I’d love your opinion on this first. What do you think?

Leah Bumphrey:
Without a question, it’s the range. When you are first talking price, you need to give that range. You need to have boundaries here and here. It gives an opportunity for conversation to explain it and to hone in on the specific later in the conversation.

No question in my mind.

Dennis Collins:
So you come down on the range. Absolutely. I’m going to come down on the exact price, exact number, I should say, the exact number. So why? Let’s discuss. Let’s talk about what happens when you set a range of, say, $15,000 to $30,000. That’s a pretty broad range, isn’t it?

Where does the human brain go in those situations, to the $30,000 or to the $15,000?

Leah Bumphrey:
Always down to the lowest. Always to the lowest in the range you give.

Dennis Collins:
So if you’re prepared for that to be your anchor, that lowest number, great. Do a range. People go to what I call the wishful thinking. When they hear that you threw out that number, they’re thinking, oh, $15,000. I’m now expecting something around $15,000.

And then you come in at $20,000 or $25,000. And they’re like, what? But had they anchored at $30,000, what would happen? Oh, that’s better than I expected.

Leah Bumphrey:
They’d be pleasantly surprised.

Dennis Collins:
Yeah. The human brain tends to focus on the most favorable to us. In this case, it would be the $15,000. And I have seen ranges used, but they usually backfire because the lower number is what you end up with.

Leah Bumphrey:
So when we are benchmarking or when we are anchoring initially by stating the highest it could possibly be, even if you’re going, this is ridiculous. I’m never going to buy a Cadillac. You are establishing that you know how to do this. You know you have this available, and then you can end up giving a range as you continue the conversation.

Well, yeah, of course.

Dennis Collins:
Yeah, it’s going to be a negotiation. You’re not going to settle for the price that you give in the anchor. That never happens. I mean, the anchor is not there for that. It’s there to set an expectation at a higher level. So what is also giving a specific number?

It shows that you have confidence, that you have confidence in your pricing. Now, I don’t recommend doing a 333 Fahrenheit degree example. That’s outrageous. But I believe you should anchor with something that’s within reason, something that you could offer at a price, and use that as your anchor.

Paul Boomer:
Hey guys, it’s Boomer Yes. I came in. I came from the caves.

Dennis Collins:
He came out of the ether.

Paul Boomer:
I did. So I have a question for you that’s something that I’ve used many times with anchoring. It’s very similar to what you’ve said in terms of naming a range like “between 15,000 and 30,000.” Now, I like the idea of the lowest denominator, the wishful thinking that you said…

Dennis Collins:
Wishful thinking.

Paul Boomer:
Of course, I’m going to go with 15,000 because I don’t want to have to spend 30,000 dollars to get X, Y, Z. One of my questions is, what if somebody says, “Well, the range is between 15,000 and 30,000, but most people spend about 20,000?” What does that do to the equation? Does that do anything?

Dennis Collins:
Yes. OK. Remember, social proof. Most people spend 20,000. We are very interested in what people like us do, and how much they spend. I get in my feed every day online, “Here’s what the average person in your age group has for their net worth.”

I always look at that and I’m always below it. I don’t know what happened. We love to compare ourselves to people like us who could have a better chance of working other than just leaving it out there, “15 to 30,” leaving that range generally works against you. Do you see what I’m saying?

Leah Bumphrey:
That goes back to our example of having three.

Dennis Collins:
Right.

Leah Bumphrey:
Yes. We have the one that is not designed to be there.

Dennis Collins:
Right.

Leah Bumphrey:
See, what Paul’s doing is setting up a triplicate of choice, basically, where you have the low end, the very high end, and then, of course, the middle.

Dennis Collins:
And most people, when they give it or they’re given a triplicate of choice, will choose the middle. Most people. So that has some validity in science. I also have seen it work in real life where you suggest a number that most people do because it uses social proof and it uses the principle of anchoring and contrast.

Paul Boomer:
Awesome. So I appreciate that, Dennis. I’m going to go back into my cave now and let you guys continue with the conversation I appreciate that. That helps a lot.

Dennis Collins:
Well, I’m glad it’s always good to hear from you, buddy. Make sure you’re alive and well back there.

Paul Boomer:
I’ll keep my finger on the trigger.

Leah Bumphrey:
We’ll send coffee. You know what, Dennis? It tells me that we have to come back to this topic because there are a lot of variations on the theory. There are.

Dennis Collins:
I would bet in the minds of our viewers and listeners, I have probably stirred up more questions than answers. Good. That’s what we’re here for. We’re here to stir it up. And just like it triggered something with Boomer, I’ll bet it’s triggered something with you.

So please send us your questions. Speaking of that, do you have a question for today? We always try to answer a question and maybe today you have one.

Leah Bumphrey:
We do. We had a question come in from one of our listeners and he wanted to know, how is it possible to show influence and authority without coming across as a person — I’m not going to read the word on air — but as somebody that you really don’t want to be hanging out with.

We know those people.

Dennis Collins:
We do. And I think I get the question. We’re talking about Cialdini’s principle of authority, of course, which is one of the seven principles of influence. And yes, to our dear listener, and viewer, you do have to be cautious with authority because authority can turn into arrogance.

It certainly can, but it doesn’t have to. Here are some thoughts. Number one, always have someone introduce your authority. If you introduce it yourself, then it can sound arrogant, narcissistic, and self-serving. Like if you’re going to give a speech, if you’re going to present something to a client, say maybe the first time you’ve ever met this client and they don’t know your credentials, they don’t know your authority. Don’t be the one to present it yourself.

Have a partner of yours, a colleague, write a note, write a letter describing your credentials. Why do we do that? Because once again, if you claim authority on your own, that weakens it. That totally weakens the authority, like, “Oh yeah, of course, he’s going to say that. He’s talking about himself, right?” So always have someone else claim your authority. Does that make sense?

Leah Bumphrey:
I think that’s an excellent answer. That gets right to the heart of it.

Dennis Collins:
And there are many other ways that we can do a whole session. Should we do an episode on authority? I guess we probably should, shouldn’t we?

Leah Bumphrey:
I think so. I think influence is such a misunderstood opportunity for helping people. I think we need to go there, but it’s not going to be today, Dennis. Nope. We’re out of time today.

Dennis Collins:
So I just want to, again, challenge our viewers, our listeners. Remember what is said or written first determines the impact of what is said next, okay? It can add to your impact. It can subtract from it. Commit to some experiments this week. Start slowly with no chance of any big losses and build your way up to become an anchoring master.

Leah Bumphrey:
We welcome your emails. Let us know how it goes. This is exciting stuff when you start seeing it in action.

Dennis Collins:
We might use your question or your comment in the next episode of Connect and Convert.

Leah Bumphrey:
Hey, that’s all for today. Thank you, Leah, as always.

Dennis Collins:
I thank producer Paul for booming in and adding to the discussion. And I look forward to seeing everyone next week on Connect and Convert.

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