Distributive Negotiation: What It Is and Tactics for Success

— Distributive Negotiation: What It Is and Tactics for Success

Distributive negotiation is a lot like chess. 

You have a playing field and an opponent. One goal is in mind for you both. Your main goal is to get to the king and win. 

The objective is clear, but what about all of the details in between? There are rooks and pawns to capture, a queen to wrestle with, and an opponent who wants victory just as much as you do. So how do you win?

In this article, we will discuss the definition, the characteristics, and the strategies of effective distributive negotiation. 

What Is Distributive Negotiation?

Distributive negotiation is a type of negotiation where two or more parties bargain for shares of a fixed resource or assets, such as:

  • Time
  • Money
  • Goods; or
  • Services 

The parties typically utilize concession-making over a single fixed value. Only one party can obtain this value unless it can be divided. The two parties go back and forth until there is a final solution with the winner who claims the most value and the loser who receives less value. Because of this, distributive negotiation is referred to as zero-sum negotiation or win-lose negotiation.

Curious about how you can enhance your distributive negotiation skills? You don’t have to be a finance firm or Wall Street broker to benefit from distributive negotiation tactics. Most industries can utilize the power of distributive negotiation tactics to improve business. 

You may have considered negotiation workshops for your work team before. The thought of dollars and hours spent in a stuffy room listening to a workshop leader fills you with dread. Shouldn’t there be a more interactive way to learn negotiation tactics?

The Maker Group has developed interactive, game-based workshops that are revolutionizing the way participants develop and improve negotiation skills. Learn more about our three levels of negotiation workshops

Distributive Negotiation Examples 

Distributive bargaining usually involves one issue or resource at stake — price. 

Examples of distributive negotiation include:

  • Salary negotiations
  • Budget negotiations
  • Negotiating business terms with suppliers or dealers
 

Distributive negotiation is one of the more competitive negotiation tactics that place heavy importance on winning the single fixed issues and less importance on social outcomes. Distributive negotiation may benefit the winning party if a continued relationship with the losing party is unlikely. 

A great example of distributive negotiation is haggling over the price of a car at a dealership. It’s likely that arguing for a lower price may benefit you, but cost the dealership. It’s also likely that you’re not going to buy another car any time soon, so you “win” without any future consequences. 

If both parties have a prior relationship where they rely on each other often, this type of competitive negotiation may have long-term effects. Consider this distributive negotiation example:

Mark is a 40-year-old procurement manager at a global retailer of home appliances. He manages the microwave department and oversees the company’s relationship with its suppliers. The company is responsible for 85% of the microwave supplier’s total sales. 

Mark contacts this supplier to negotiate a better deal on price. He uses distributive negotiation to hack the price down 5% while ignoring the supplier’s arguments that the terms Mark is asking for are unacceptable due to potential risks. 

Mark closes the deal and goes off to tell his boss about his good work. Whereas the microwave supplier wants to decrease its 85% reliance on Mark’s company to find a better partner for growth. Mark has achieved the short-term win for his company but may have lost long-term due to the damage he has done to the relationship with the supplier.

What Tactics in Negotiations Are Considered Distributive? 

Distributive negotiation tactics are any tactics used to win or claim more value over your opponent in a negotiation. 

In distributive bargaining, the situation may be intense and the tactics employed seem tough or slightly aggressive. Both parties are competing to win the biggest piece of the proverbial pie. To successfully employ distributive negotiation tactics one must be:

  • Resolved
  • Prepared
  • Out to win at all costs

6 Strategies To Utilize in Distributive Negotiations

#1: Be Firm, Hard, and Tough

People often conflate distributive negotiation with adversarial bargaining, where negotiators make tough demands, bluffs, or even threats. However, this is not always the case. 

An effective distributive negotiator is firm, hard, and tough, but without sacrificing their integrity or acting in bad faith. This means standing your ground and pushing hard to win. 

#2: Know Your Walk-Away Value and BATNA

A walk-away value, also referred to as a reservation point, is the minimum or maximum price you are willing to pay or accept. It is the figure to which negotiators are indifferent to accepting a deal before turning to their best alternative to a negotiated agreement (BATNA).

By knowing your walk-away value, you understand how much you are willing to sell or buy. By knowing your BATNA, you understand how low or high you are willing to go to agree on a price if your negotiations fail. Your walk-away value should always be higher than your BATNA.

For example, you’re in the market for a used car. You decide that $4,000 is your walk-away value — it is the worst deal you are willing to accept. You find a car you like for $3,000. You don’t exactly want to pay $3,000, but if you can’t get the seller to go lower, you will agree. So $3,000 is your BATNA. 

#3: Understand Your Opponent’s Walk-Away Value, BATNA, and ZOPA

It is also beneficial to know your opponents’ walk-away value because it gives you leverage during negotiation. By determining their walk-away value that fits their zone of possible agreement (ZOPA), you can effectively negotiate toward the walk-away value that benefits you the most. To do so, you can research the opposing party’s bargaining strengths and interests. 

Let’s go back to our used car example. The used car you want is being sold for $3,000. You want to use distributive negotiation to negotiate a better price with the seller. After doing some research on how long the car has been on the market, what the car usually sells for, and the availability of similar cars in the area, you decide that the seller may be willing to part with it for $2,500. 

This means the zone of possible agreement is between $2,500 and $3,000. The seller is likely to have a reservation point or walk-away value at or below $2,500 and a BATNA within their ZOPA. So using this knowledge you approach the seller with the $2,500 or less (if you’re feeling lucky) to begin negotiating from there. 

According to the book “Negotiation Genius,” written by Malhotra and Bazerman, distributive negotiators who focus on the other party’s BATNA tend to aim higher and successfully capture more value.

#4: Be Comfortable Sitting in Silence

Research shows that silence can be effectively used to weaken an opponent’s resolve during distributive negotiation. Sometimes when making an offer to a business counterpart, the opponent may take longer than expected to respond. This can create an uncomfortable air that could yield retractions or concessions. 

Expect silence when using distributive negotiation; use it to your advantage by using it for more time to prepare an effective response. 

#5: Understand Concessions

Concessions are the act of making compromises or offers of value to help reach an agreement with another party. It generally involves one party showing the willingness to give something up to potentially gain something in return. 

In distributive bargaining, you typically want to avoid making concessions if you want to “win.” 

Avoid Unilateral Concessions

Unilateral concessions are one-sided offers that eliminate the possibility for the other party to present a counteroffer. 

In distributive negotiation, making unilateral concessions is risky. Once you make an offer, you’ll want to wait for a counteroffer to be presented before making any unilateral concession. By making a concession before a counteroffer is presented, you lose leverage and may appear weak to your opponent. 

Label Concessions

Exchanging concessions is not always as easy as it seems. 

It can be a delicate balance of reciprocation, firm recognition, and appreciation. As humans, our innate tendencies drive us to reciprocate gifts of concessions when we receive them from others. In the same breath, distributive negotiators may often overlook or underappreciate an opponent’s concessions which can then make it hard for them to want to value yours. 

By labeling your concessions, you can emphasize how much more costly it would be for you to make concessions. 

Tie Concessions to Actions

Further reduce the ambiguity of your concessions by making them contingent on your opponent’s concessions. Make it clear that you will only satisfy your responsibility for the arrangement if the other party meets your expectations.

#6: Know Your Zone of Possible Agreement 

A zone of possible agreement is a bargaining range where the negotiating parties may find common ground, and therefore a solution to the negotiation. A ZOPA can only exist when a solution overlaps between both parties’ expectations and wishes regarding an agreement.

If the parties involved in the negotiation cannot reach a ZOPA, they are in a negative bargaining zone where one party must make concessions or exercise their reservation point.

Distributive vs. Integrative Negotiation: What’s the Difference?

Distributive negotiation is like two or more individuals fighting over who gets the bigger piece of the pie. One person will get a bigger piece than everyone else. What if there was a way for each person to negotiate for a slice that benefits them all? Instead of dividing the proverbial pie, integrative negotiation seeks to expand it so that everyone can get a piece that meets their needs. 

If distributive negotiation is a win-lose solution, integrative bargaining is a win-win solution. Integrative negotiation is often used in business situations where the relational outcome is important and multiple values are often involved. 

Labor union strike negotiations are a great example of integrative negotiation. It is a situation where both parties need to come to a beneficial agreement. Consider this: the labor union will not continue to work until demands are met. The demands include a substantial pay raise, better working conditions, and an improved benefits package. 

The company cannot give in to all of the demands of the labor union, but it cannot afford to continue the strike or replace the entire workforce. The labor union participants cannot afford to lose their jobs. Instead of one of the parties completely conceding to demands that do not benefit them at all, both parties must work together to find a solution that benefits them both.

Learn How to Properly Engage in Distributive Negotiation With The Maker Group’s Negotiation Workshops

The Maker Group’s experiential approach and proprietary technology have revolutionized the way high-value employees learn to negotiate. You may have endured negotiating training before, but not like this. 

As opposed to sitting around in a group listening to someone drone over a PowerPoint, we have developed a game technology to keep our workshops engaging and entertaining. 

We offer three levels of negotiation workshops, which are:

  1. Level one: A virtual game-based approach to learning about the definition, fundamentals, and common languages of negotiation.
  2. Level two: An in-person or virtual workshop for establishing the foundation of negotiation. This level is designed for groups of 12 or more where participants learn a structured framework for how to approach, plan, prepare, and execute negotiations. This level consists of three modules that are each 4 hours in length.
  3. Level three: An intensive in-person or virtual workshop designed for those who are leading and executing high-value and complex negotiation situations. The courses are based on modern behavioral psychology and science. It is designed so that participants can dive deep into the minds of master negotiators to learn how to make sense of other’s actions during negotiation. This level contains 4 modules that are each 4-6 hours in length. 
 

Help your team expand the horizons of their negotiation abilities with The Maker Group. Book a consultation today.