As much as we like to think that business-to-business (B2B) transactions are completely rational and devoid of biases, the truth is that buyers are not always purely objective in their decision-making. One of the biases that can impact B2B sales is anchoring bias.
Recognizing the bias
Humans tend to give undue weight to the first piece of information they receive. In the context of B2B sales, this means that if a buyer is presented with a low price at the outset, it can anchor the entire negotiation to a lower price point. This can make it difficult for a seller to negotiate a higher price. Once a price is set, it becomes the anchor price for the next transaction, which will impact the lifetime profitability of the customer.
There are three common scenarios in which your customers anchor on a low price. One is when a firm has a legacy pricing structure in place, where the prior deal price is available and commonly referenced. The second is when a buyer is exposed to a low-value, low-priced product, either from a competitor or from your own offerings. The third is through discounting. If you discounted in the past, the buyer expects the price to stay at that discount.
How to reset the field
To combat anchoring bias, it’s important to force buyers to reassess the value of your offering from a fresh perspective. This can be done by refreshing your offering, whether by:
- Improving your product
- Reconfiguring your product
- Changing the metric (unit of sale)
Improving your product offering can require a significant investment in product development, but it can result in capturing a bigger share of the value pie. Depending on your product offering, you may be able to position your new product as part of a total solution, rather than just an add-on. This can increase the perceived value of your offering in the eyes of the buyer.
Reconfiguring your product for different markets can be a cost-effective way to improve customer fit and shift how your customers evaluate your product. By offering different feature sets for different customer segments, you can ensure that your customers are not forced to purchase unnecessary features and improve sales volume as a result.
Changing your pricing metric can also be a way to reset your customers’ value perceptions. By switching from a per-copy pricing model to a per-user pricing model, for example, you can remind your customers of the value they are receiving from your product.
None of these actions will matter if the sales team cannot deliver the message to shift customers away from the anchor price. To communicate effectively will first require a concerted communication plan and confident communications of your message. Your customer should understand the changes you are making and why your offering should be viewed differently than the low-price anchor.
Combating anchoring bias is not trivial. It’s important to force buyers to reassess the value of your offering from a fresh perspective, whether by refreshing your offering, reconfiguring your product, or changing your price metric. By effectively communicating the value of your offering to buyers, you can increase your chances of landing a higher price. To execute these changes successfully will require a strategic effort and support from senior leadership.