Anchoring

A market research concept important to law practice developers.


"Anchoring" refers to a common or pervasive judgment prejudice. When it exists within the market of potential clients its impact on the decision process by which a law firm is engaged must be understood by the practice developer.

Theory
The pervasive prejudices of anchoring systematically influence legal service decision makers regardless of where the decision maker is in the decision process. The fact that the anchor is intellectually irrelevant or immaterial to the decision process does little to effect its impact. The work of Eric Johnson at The Wharton School at the University of Pennsylvania, as well as our research has shown that these judgment biases affect a wide range of issues including factual, economic and social judgments. Johnson suggests that anchors affect judgments by increasing the availability and construction of features that the anchor and target hold in common. He further suggests anchors function by reducing the availability of features of the target that differ from the anchor. Our research, with a slightly different nomenclature, suggests that these decision prejudices work by reducing the level of nonintellectual perceived ambiguity facing the decision maker.

Our research and that of The Wharton School point to four factors about anchoring.
In Wharton's terms ...

1. Prompting decision makers to considers aspects (of the situation) or features (of an item)
that are different from the anchor or bias reduce anchoring, while increasing consideration
has no effect.

2. Judgments were a linear function of anchor value.

3. Situational aspects that have a higher degree of ambiguity have a larger anchoring bias.

4. Anchoring is unaffected by financial incentives or the perceived informativeness of the
anchor.

Practice

What does this mean in law firm terms?

1. The biases within your market of potential clients can be changed.
Once you get their attention, you can modify a decision bias by the presentation of right facts. For example, the population of potential personal injury clients may have the anchor that engaging an attorney immediately after the accident will increase the level of post accident emotional stress compared to waiting to see how the respective insurance companies respond. This anchor can be modified by getting members of this population to consider 'facts' inconsistent with this anchor. Actually waiting on the adjusters won't change the anchor much, if at all.

Practice Tip ...
Client retention programs must recognize the anchors that are
important to your practice development plan and address
environmental and market factors that will operate during
any service hiatus.

2. The stronger the anchor the greater its impact on the legal service decision.
Some anchors are stronger than others. For example, in some communities the alignment of the ethnicity of the legal service provider to the potential client is very strong, while firm size is less so.

Practice Tip ...
Structure research inquiries to categorically weigh responses.

3. The creation / modification of anchors is dynamic.
While the theory of changes in decision prejudice is not completely understood, prejudices within a potential client population change over time. A legal service provider may be the principle agent of anchor change while in contact with the decision maker. When that contact ceases, other factors will fill the void. For example, a small firm personal injury firm may modify the decision bias in favor of choosing a larger firm, but after contact ceases, other factors will continue to influence this bias.

Practice Tip ...
In your research of former clients, be sure to tab out based on
interval since last service / sustained contact.

4. The greater the amount of uncertainty and ambiguity in an environment, the stronger the effect of anchors.
Our research suggests that anchors or decision biases are related to an emotional 'need to know'. The greater a decision maker's confidence in the 'facts' of a situation, the lesser the potency of his or her anchors. The strength of the anchor is not related to the predictive accuracy of the 'fact' but the confidence the decision maker has in it and the emotional importance of the decision. For example, All small business decision makers have some level of anxiety concerning IRS audits. The greater the level of anxiety, the stronger the anchors concerning tax related questions, including the comparative benefits of CPA vs. attorney assistance on tax matters.

Practice Tip ...
In your research remember that uncertainty and ambiguity are
always idiosyncratic. It's the converse of "well known to those
who know it well".

5. The more emotionally important the issue to the decision maker, the stronger the effect of the anchors.
Those facing emotionally unacceptable consequences have stronger anchors. For example, the parents facing the incarceration of a child as a result of a criminal charge have strong decision biases in the engagement of defense counsel. Likewise, members of a historically disadvantaged groups have strong anchors. The persistent support of Bill Clinton by members of the feminist movement demonstrate this last point.

Practice Tip ...
In your research, give equal importance to the
emotional components of the topic studied.

6. The "hard" or intellectual monetary cost of legal services is unrelated to the strength of the anchor, while the "soft" or emotional monetary cost is closely related to the strength of the anchor.
For example, the anchor "you only get what you pay for". The predictive accuracy of this anchor may be subject to intellectual challenge. Intellectually, we know that younger practitioners may charge less and still provide better services than more established practitioners who are coasting on their reputations. Emotionally, "having the best" (because he or she is the most expensive) will bias the selection process regardless of the financial resources of the decision maker. (They will want the most expensive attorney, regardless of what they can afford.)

Practice Tip ...
In your market research seek to understand the
anchor called the "emotional value of money".

7. Anchors don't always work against you, but they are always there.
Litigation attorneys facing each other in court recognize that truth and value in the "eye of the beholder" are true and valuable to the beholder. Anchors exist because they are part of human nature. Our ethical duty to serve equals our ethical duty to inform. Presenting your practice consistent with existing anchors within your potential client population is ethical. You can not serve until there exists a relationship and that relationship will not come into being until you are chosen.

Practice Tip ...
In both your client and market research, investigate the anchors
that are "aligned" with your practice and your position with your
clients and within your market and environment.


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