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September 26, 2018

What Is Distributive Negotiation?

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Jeff Cochran

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In some cases, such as when there is a fixed amount of value on the table, distributive negotiation is the preferred method to reaching a desired outcome. While integrative negotiation typically involves several complex factors, distributive negotiation involves a process where the outcome revolves around one factor, such as price.

For example, you might use integrative or interest-based bargaining when negotiating several aspects of a job – salary, benefits, time off, or even start date. By contrast, distributive negotiation involves one fixed point, and the assumption that both parties want to divvy up the pie in the best manner possible. Distributive negotiation examples typically involve purchases, such as a used car (for a consumer) or a large order from a vendor.

Distributive negotiation tends to be simpler than the integrative approach, simply because of the lack of external factors involved. However, both benefit from a thoughtful and exhaustively prepared approach. The more you prepare for any negotiation, the more likely you are to come out with a desirable outcome. Using a variety of strategies can help ensure that you’re coming away with a fair piece of the pie. Here’s how to do it:

 

1. Come Up With a Compelling BATNA

At the heart of any negotiation should be an effective BATNA, or best alternative to a negotiated agreement. In other words, what will you do if you cannot reach your first desired outcome? Generally, parties entering a distributive arrangement have a desired end goal, such as a price they’re willing to pay, or accept as payment.

The best way to improve your BATNA for distributive negotiation is to create various alternatives through research. For example, if you’re in the process of ordering a large amount of supplies from a vendor, it can be helpful to pursue several negotiations from different vendors at once. This better positions you to negotiate and achieve the best price possible by maximizing available benefits and even bouncing the possible alternative across vendors.

 

2. Find Your “Reservation Point”

Another key aspect of distributive negotiation is determining when you will walk away from the negotiation. For distributive negotiating, this is usually a fixed price point. For example, you might decide ahead of time, based on conversations with stakeholders and management, that you’re willing to buy supplies for $5,000, but will walk away if the other party refuses to come to that level.

It’s essential to determine your reservation point well before entering any negotiation, whether it’s a price you’re willing to pay, or what you’re willing to sell a product or service for. If you don’t determine this point before the negotiations begin, you could end up in a low-ball situation.

 

3. Think About the Other Party Involved

The key to understanding and effectively navigating any negotiation is accepting that you are only one of two parties involved. You don’t want to go beyond your reservation point, but neither does the other party involved in the negotiation. Knowing the other party’s BATNA and reservation point can help streamline the negotiation and smooth any major differences in opinion. In some cases, it can even narrow your options and determine when a negotiation simply isn’t worth pursuing.

Better understanding the other party requires proper research. Using the same example of vendor supplies, you might research the availability of other services in the area and how willing (or desperate) the other party might be to make a deal. When you have an idea of how much flexibility the other party has on price, you’re better suited to aim as high (if you’re the one selling) or as low (if you’re the one buying) as possible.

The distributive approach to negotiation involves acknowledging the differences that are inherent to both parties and understanding the basic definitions of BATNA and reservation point. When negotiating, keep those elements in mind and use them as strategies to achieve the best possible price. Remember, distributive bargaining involves taking home the largest slice of pie possible, a process that can require practice and additional training.

 

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