Anchoring Bias

Recall Time  

Recall the instance when you went out to shop for something/ purchase something and ended up paying a price that was purely guided by the initial price set/ floated by the sales person; also the time when all our negotiations were around that initial established value over which we had no control whatsoever !  

Recall the instance when you went for that important salary negotiation and ended up discussing about it totally based upon your previously drawn salary. Alternatively, recall the instance, when as a freelancer,  your commercial negotiations for an assignment was being discussed and getting finalised based on some arbitrarily  assigned value/ number/ criteria !

Remember - the discounted sale where you were led into buying a lot of stuff (much beyond what your budgets/ pockets could afford) and that too with the "feel good" factor that the items were bought on a heavily discounted price vis-a-vis the initial price (Sales Price) ! 

Well, we could go on recalling plenty of similar instances as mentioned above, where a particular piece of information, already established, guided our decision and this piece of information or value is what triggered the bias known as "Anchoring". The point to note here is that this type of bias could creep in any area of our life and lead us into taking irrational decisions which is clearly highlighted by the examples quoted above.

Definition 

Anchoring Bias is a cognitive/ psychological phenomenon where people get influenced and made to rely too heavily on the first piece of information or value that they come across (related to the context). Much like the way, when a ship drops its anchor and thereafter all the subsequent movement of the ship is around that anchor point, in the same way, when we get affected by "anchoring bias" , all our subsequent judgements/ decisions are totally based on/ around the initial piece of information received by us.  

The simplest indication that we have fallen trap to the "anchoring bias" is when we find ourself  adjusting our judgement and decision around some available information or established value and not based on any logic or appropriate information.

Real Life Application/ Occurence 

• Marketers use anchoring technique very heavily to influence customers in some of the following ways
• Discounted price vis-a-vis Original price
• Annual package vis-a-vis Monthly package for subscription to magazines, channels, online tools, and similar stuff
• Combo deals on various items in departmental stores and other places
• Upgrades on gadgets, appliances, etc. offered on installment basis

• For Human Resource Professionals, anchoring bias comes into play during 
• Hiring where "last drawn salary" becomes the anchor
• Performance Appraisal/ Evaluation, when relative performance is set as an anchor
• Negotiation, when we let the other party set the anchor

• Healthcare when the first diagnostic establishes the initial impression and influences the subsequent line of treatment for the patient inspite of new/ other alternatives being available 

• Not opting to treat mental health issues because of stigma attached with them in many cultures  

Overcoming Anchoring Bias

• Don't always believe the "first impression" or your"gut reaction". Be prepared to look beyond these
• If need be, reset the existing "psychological anchor(s)"
• Whenever possible, set your own anchor and be flexible to adjust if and when the need arises
• Gather more facts, figures, supporting evidence and past history before taking the decision
• Don't take a decision when under stress. Whenever needed, go slow and take your time to decide. 

So, whether you are making a purchase, negotiating salary, pushing for promotion or planning to undergo treatment, don't let the first impression fool you into relying on the initial information / value for taking decision. Just remember that there's more to it than meets the eye !