Getting Hooked by a Phantom Anchor
A quick word first
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Check out this used-car ad posted yesterday by a nearby dealership. Can you spot the phantom?
Yes, it’s the stated Price of $29,999 in the top right corner. But wait!!! There’s a “Sale Price” of $26,975 (in bigger type, incidentally) that’s 10 percent less than the first number.
It’s an obvious gambit and most people are quick to recognize it as manipulative. Yet even so, it’s very effective. People who see phantom offers make higher counter-offers (thus more beneficial to the seller) than if they see only the $26,975 figure. That’s nuts, of course, but there’s something tantalizing about having been given a pre-negotiation concession before you’ve said a single word.1
Also note that the sale price is not a round number, that is, something that would end with 0-0-0. That’s by design, too. When we see round numbers, we read them as soft, an estimate. But at a less than conscious level, we process odd numbers as being firmer, more carefully constructed, and signaling there’s less room to negotiate.
Another dealership right down the same street plays the game a little differently.
Here you get to see the phantom anchor ($32,999) but hidden behind the curtain there may some flexibility. You just have to click on “Get Today’s Price” to see how much better the deal might be.
Are you a little curious? I was. Here’s the hook that popped up.
Not wanting to be pestered by calls, I didn’t bite. I’m sure others did (otherwise the dealer wouldn’t use this).
With these two examples, we’ve just been kicking tires, but phantom offers come up in many contexts—job negotiations, home-buying, you name it. And they can be effective whether you’re haggling over price or dealing with a multi-issue case.
If relationships matter, there is the risk of being seen as manipulative. But research shows this can be dampened by stating a reason for making a more generous proposal without being pushed to do so. A recruiter might say, for example, “We were thinking of offering you $55,000 to start, but you’ve been so impressive in this interview, I want to bump that to $60,000.” Merely saying, “I don’t feel like haggling,” or “I want to be fair” can likewise lessen suspicion.
But here’s the question. Phantom anchors are clearly manipulative in the sense they’re aimed at influencing another person’s perceptions and behavior. But is that any different from starting a negotiation with some small talk to break the ice? Or for that matter, using active listening techniques to demonstrate that you understand the other party’s concerns?
Let’s get a conversation going. Please add your comments and insights here. Thanks! Mike
Housekeeping
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See Nazli Bhatia and Brian Gunia, “I was going to offer $10,000 but…”: The effects of phantom anchors in negotiation. Organizational Behavior and Human Decision Processes. Volume 148, Vol. 148, September 2018, Pages 70-86.