A salesperson's most important tool for influencing prices is anchoring, which we introduced at the end of Part I. The power of anchoring is the basis for our recommending ‘Make the first move!’, rather than waiting to see what price the customer uses to establish the reference price or anchor that will guide the rest of the negotiation.

However, you can't simply throw out any high price as an anchor just to make subsequent prices look more appealing. Setting an anchor presents several challenges. What specific customer behaviour do you want your anchor to encourage? Everything else derives from your answer to that question. You need to be clear on how you want the buyer to understand the anchor and how they will incorporate it into their decision making, so that you can avoid misinterpretations. You also need to maintain a consistent credible link between price and value, limit the buyer's ability to directly compare offerings, and avoid letting your anchors become less potent due to familiarity.

These guidelines will enable you to address these challenges and tap into the tremendous power of anchoring effectively and ethically.

• Anchors are not target prices: The anchor price serves as a reference point, not a selling point. Customer familiarity and the nature of the relationship will define the separation between these two price points. The less familiar the buyer is with an offering, the stronger the influence of your reference price will be and the more latitude you will have to set it. If the buyer is more familiar with the offering, the anchor should reflect a fully valued price. The fully valued price means that the seller retains all the value instead of sharing some of the offering's added value with the buyer. The ultimate selling price is a way to calibrate who gets what share. Finally, setting an anchor will also depend on whether the negotiation is transactional – meaning each side is trying to maximize its take within that single deal – or whether the relationship is ongoing, which means the anchor will carry over to future transactions.
• Anchors need anchors: The anchor in the fundraising experiment in Singapore (see Chapter 4) was linked to a plausible level of value. Such anchors help potential buyers determine whether a price–value relationship is fair and reasonable, and then decide whether they should act on it. This is especially important when prices are not transparent or customer uncertainty is high.
• Make anchoring a habit: Anchoring is more than an important technique. It should become a habit, something that you work at daily, both in terms of awareness and action. Awareness is important, because in the Invisible Game in order to create and control the frames of a negotiation, all parties – you, your customers, and competitors – are trying to gain an edge. When any company makes a public statement about price levels, that form of anchoring is known as signalling. Many industries, especially highly concentrated ones with only slight differentiation across products, usually have at least one company that makes regular public announcements about the future course of prices, either by announcing specific changes or by citing major trends that would warrant price changes. Both your customers and your competitors give you signals that are cues for setting your own specific anchors for your next negotiation. If the public announcements are about trends rather than specific price points, suppliers have an opportunity to assess those trends and get ahead of the curve.
• Anchors can wear out: Few things are more frustrating for salesperson than trying to sell a next-generation product when the buyers are relying on past-generation price anchors. But that is happening with increasing frequency. In the 2020s, almost all markets have become more dynamic, with shorter product life cycles, lower barriers to entry, and greater access to information. In these situations, you don't want a price anchor to become analogous to a physical anchor, something that prevents your business from moving forward. Gone are the slow-moving ‘good old days’ when markets had a stable balance of power and an established set of competitors, customers, and products. The more dynamic your market is, the more strategically you need to manage your anchor prices and the more frequently you will need to review and change them.
• You often need an integrated system of anchors: Anchors not only help buyers distinguish between your prices and your competitors' but also across your own portfolio of products and services. That means that you cannot successfully set anchors without taking into account their effect on your entire portfolio.
• Anchors also calibrate future negotiations, not just current ones: The most successful pricing stories follow a long narrative arc – with future moves already plotted far ahead of time – rather than a collection of short stories and episodes involving the same characters. The ability to do that is part of the mastery of pricing.

Setting an anchor can become an ongoing process. Different contexts throughout the year – dinners, social events, industry conferences – create opportunities to make subtle references to anchors. Indirect references to leading indicators, commodity forecasts, gross domestic product (GDP), or other data help create a space for your stories and numbers to live in. This increases the chances that your anchor not only becomes their anchor, but also becomes the basis for calculating any just actionable differences.

One form of anchoring that reflects all of these challenges acutely is the list price. List prices were the dominant form of price communication in pre-internet days, when printed catalogues and price sheets provided buyers with their initial cues on prices. List prices can still serve as important anchors in markets with greater complexity or whenever prices are less comparable. This is especially true for service businesses. But list prices carry a greater risk in more commoditized businesses or in situations when professional procurement drives the decision. The issue is the ability to compare prices quickly. While this was always done in the days of printed catalogues, online research allows purchasers to compare multiple list prices instantaneously and immediately exclude companies that appear to be outliers. In other words, your list prices can eliminate you from competition before you ever have an opportunity to speak with the customer.

The key issue is the price–value relationship that your list price is supposed to express. Are you establishing the highest price for your largest premium? Are you providing customers with a standard price for a standard product, knowing that most of your customers will add or subtract some form of customization to make their product (and thus their ultimate price) unique?

The standards you set – and the value drivers that support them – won't be clear to buyers unless they are also clear to everyone in your company. Likewise, everyone in your company must be clear on when you can deviate from these standards. If you have the premium anchor, you will need a system for allowing prices and features to deviate from the maximum. If you have standard prices, the final price may be lower if the customer places a large single order or hits a volume threshold in a given period. Likewise, the customer may receive a lower price to encourage or reward behaviours that improve your operational efficiency, such as standard consistent orders versus less than truckload, or standard delivery versus faster or slower delivery. Conversely, they could face higher prices or surcharges if their requests – especially for services – deviate significantly from standards. The common thread here is that any discount should involve reciprocity, or at least the appearance of reciprocity. As we discussed in Chapter 11, the nature of your relationship with the buyers will determine whether that reciprocity occurs over time – across multiple transactions – or is confined to one transaction (tit-for-tat.)

Companies with large portfolios will need multiple anchor prices, and therefore multiple list prices if they decide to make their prices public and transparent. Anchor prices need to make sense individually and collectively in order to have the desired effects on customer behaviour.