Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy
Distributive Negotiation — 3 Powerful Examples
Key takeaways
- Distributive negotiation is a strategy that competes for the division of a fixed resource amount. It emphasizes the claim of the maximum possible value for the negotiation.
- A distributive negotiation aims for a win-lose outcome for one party.
- Integrative negotiations are more collaborative than distributive negotiations.
Distributive negotiation, also called value claiming, is a method where parties aim for personal gains by dividing values, usually centered on a win-lose scenario.
In this article, we break down this strategic approach, particularly for those unfamiliar with the term. Typically focused on a single issue, such as price, distributive negotiation involves a competitive and selective approach to secure one party’s victory.
Real-world examples illustrate the immediate gains and potential long-term consequences of this negotiation style. We also explore the differences between distributive and integrative negotiation, providing insights on when to use each method.
I have created a free-to-download negotiation-style template. It’s a PDF file that can help you assess your main negotiation style.
Distributive Negotiation – Audio Explanation
The Meaning of Distributive Negotiation
Distributive negotiation, also known as value claiming or single-issue negotiation, may be a new term for people in the field of negotiation. But hey, we are here for you to teach you what it is.
Value claiming is the method of dividing up the pie of values in negotiation. It can also be thought of as haggling. In a distributive negotiation, there is only one issue at stake, which is usually the price.
Distributive Negotiation Style
The distributive negotiation style is characterized by the intention of a win-lose for one of the parties.
A distributive negotiation is probably the easiest one to detect. You’re out to win at all costs. It’s often described as a win-lose approach. Playing hardball.
In this approach, one party is looking to get everything they want without giving anything in return that meets the needs of the other party.
Featured Download: Enjoying this article? If so, click here to find out your own negotiation styles so that you can prepare your upcoming negotiation and gain better results.
My Experience With Distributive Negotiation
Negotiation styles are a very important variable to master to achieve great deal results. Your ultimate deal will be determined by how skilled you are as a negotiator. The more skilled you are in using different styles, the more the other party will be drawn to settle close to your ideal outcome and closer to their limit.
Your selection of negotiation style should depend on your personality and the results of your earlier research on the styles that will probably be used by your negotiating counterpart. Getting to recognize the different negotiation styles will help you to negotiate way more efficiently! It’s important to know how and when to use particular styles to get more of what you want from the negotiation.
“In my time as a Procurement Manager, I had to deal with 1500 different products delivered by 70 suppliers every year. Suppliers were traditionally better equipped; most account managers that I had been dealing with, only had to focus on one customer and thus the negotiator: me. This led to what I call, the knowledge gap.
They had way more time to prepare for negotiations. Most of them kept detailed notes on my negotiation style, likes and dislikes, interests, family details, and so on. In general, they were in a better position to choose the most appropriate style to approach me in the upcoming negotiation.
My advantage, on the other hand, was the fact that I was negotiating all day & year: that experience leveraged the knowledge gap mostly: I practiced a full year with changing styles & using tactics. This helped me to have one important skill in any negotiation: I was not predictable.”
Do you also want to learn to apply effective tactics yourself and become unpredictable? There are a large number of styles & tactics that you can use in negotiations! In our Certificate Program, we will teach you when which styles to use and in what way you should use them to your advantage!
Distributive Negotiation Example
John is a 35-year-old procurement manager who works at a large global retailer of electronica.
He is in charge of air-conditioners and is negotiating with a small supplier. John’s company is responsible for 70% of the total sales of the air-conditioning producer.
John calls the supplier and starts directly asking what he wants & needs. He is solely driven by his own goal and tends not to listen to the needs and wishes of his supplier. Within the negotiation, he is using his power to negotiate the terms that are good for him & his employer, despite several arguments from the producer that the terms that John is asking for, are not acceptable due to potential risks.
John is ignoring these arguments, closes the deal that is great for him (-5% on price without any favors in returns in the new deal) and calls his boss proud to share the news.
Outtake John: “Great news, same product for a cheaper price, proud on my savings”
Outtake Producer: “We need to decrease our 70% dependency from John directly: let’s start looking for another partner for growth”.
Learning: the distributive negotiation from John leads in the short term to the win of his company, but in the long term it puts the relationship and thus the security of supply in danger: a quick win leads to a possible loss in the long term, because not both parties are satisfied with the closed deal.
Here’s another example:
Sam is a 30-year-old man who is looking to purchase a new car from a local dealership. Sam has his eyes set on a specific model and is determined to get the best possible deal on the purchase.
Sam walks into the dealership and meets with the salesperson, Lisa, who is eager to make a sale. Sam is solely driven by his goal of securing the lowest price and isn’t too concerned about other aspects of the deal.
During the negotiation, Sam immediately starts asking for a significant discount on the car’s sticker price. He uses tactics like mentioning lower prices at competing dealerships and claiming that he has seen better deals online. Sam insists that he won’t consider buying the car unless he gets the price he wants.
Lisa, trying to accommodate Sam’s request, explains that the car is already competitively priced and that she doesn’t have much room to offer additional discounts. She also highlights the car’s features, warranty coverage, and after-sales services as additional value propositions.
However, Sam remains fixed on his demands and doesn’t consider the value-added aspects Lisa is presenting. He continues to pressure her for a lower price, even though Lisa is concerned about potential financial strain on the dealership if they agree to such steep discounts.
In the end, Lisa reluctantly agrees to a smaller discount than what Sam initially requested, and he finally decides to make the purchase. He leaves the dealership feeling content that he negotiated a lower price, and he shares the news with his friends, boasting about his bargaining skills.
Outtake Sam: “I got the car at a lower price! I knew I could talk them down. It’s a great deal!”
Outtake Lisa: “I had to make some concessions to close the deal, but I’m worried about the impact on our profit margins. We’ll have to find a way to recover the lost revenue from other sales.”
Learning: In this example of single-issue negotiation, Sam’s single-minded focus on getting the lowest price led to a short-term win for him as he managed to secure a smaller discount. However, he didn’t consider the potential consequences on the dealership’s profitability, and Lisa had to make concessions to close the deal.
This might affect the dealership’s ability to offer competitive prices or invest in other areas of the business. A more balanced approach, where Sam considers the overall value of the deal and the dealer’s perspective, would lead to a more sustainable and satisfactory long-term relationship for both parties.
Difference Between Distributive Negotiation and Integrative Negotiation
Want to check out more negotiation case studies? We actually created an overview with 13 inspiring real-life negotiation examples.
Advantages of Distributive Negotiation
Use this style if:
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You need to act fast
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You are 100% sure you’re right about the situation
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You are dealing with an opponent who will abuse you if you show non-competitive behavior
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The situation is important and an unpopular decision needs to be taken
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Other negotiation styles are not possible
Disadvantages of Distributive Negotiation
Potential downside of the distributive negotiation style:
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Fear of admitting ignorance of uncertainty
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Reduced communication and no opportunity to explore alternative solutions
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You’ll be surrounded by a ‘yes’ team. Because it’s tough to disagree with a competitive negotiator in your team
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You might damage the relationship with your opponent
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You’ll receive little commitment from your opponent which adds risks to the implementation phase of your deal
In general, there are 2 types of negotiations:
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Distributive negotiation = one party wins, the other loses.
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Integrative negotiation = both parties win, creating value on both sides.
There are many situations that call for an integrative negotiation, as it will create a long-lasting mutual value.
If you want to know more about integrative negotiations, this article contains 13 negotiation principles for integrative negotiations.
Distributive Negotiation Tips and Strategies
1. Know your BATNA
BATNA stands for “Best alternative to no agreement”. It’s your backup plan if your negotiation doesn’t lead to a deal. By determining a BATNA you’ll have more confidence because you have a backup plan if the negotiation doesn’t work out. Because of this, you won’t feel forced to make a bad deal.
Going into any negotiation, it’s important to have a clear understanding of your BATNA. If you’re negotiating with a supplier, be sure about the pricing of alternative suppliers. If you’re negotiating over salary, your alternatives might be a different job offer.
For example:
Mark, a procurement manager of a large supermarket is negotiating with a supplier of canned food. The supplier offers to deliver 100,000 pieces for a price of $1.50 within two weeks. The procurement manager knows that a different supplier offers the same product for $1.40, therefore Mark knows this offer is worse than his BATNA and he shouldn’t agree.
2. Have a clear strategy. What is important to you, and why?
Before your negotiation, it’s important to plan. Key things you should have a clear answer to:
Are you in a win-win or win-lose situation? What is your goal? What is your position? What is their position? What are your interests? And theirs? What is the best possible outcome? What would be a fair deal? What is your minimum acceptable deal? It is very important to think about these things thoroughly. Too many negotiations fail because people get worried about being taken advantage of that they forget what they really need. It’s silly to only focus on preventing the other party from winning, instead focus on your own goals.
In most negotiation situations you will have a continuing relationship with the other person. That’s why it’s important to come to a mutual feeling of ‘winning’ for both parties. If the other person feels like he lost, he might lack commitment in the execution phase of the deal. Or even worse, he will be after retaliation.
3. Focus on interests instead of positions
A key in value claiming can be found in underlying interests. Sounds vague? Let me explain.
Mark, a procurement manager for a big supermarket is negotiating with a supplier of canned food. Mark’s main goal is to purchase the cans for $1.40 per piece, and he assumes the supplier tries to sell them for $1.60 per piece.
They could just simply negotiate about the price of the cans. But what if they explore the underlying interests? After talking for a bit, Mark finds out the supplier has cash flow problems.
Suddenly an interesting variable is added to the table. Mark offers to do an upfront payment of 100% of the deal value if the supplier is willing to accept his price. The supplier agrees.
Procurement Expert’s Advice on Distributive Negotiation
For this article, we asked a seasoned procurement professional to share his insights regarding distributive negotiation.
Sjoerd Goedhart
Owner, Goedhart Interim Management & Consultancy
LinkedIn Profile: https://www.linkedin.com/in/sjoerdgoedhart/
1. Can you share a personal example of distributive negotiation? What can readers learn from this?
“As a seller of a high-rotation food product to a buying group for several supermarkets, negotiations often revolved around just one aspect – the price. As a manufacturer, we tried to negotiate other variables, but the buyers were not open to discussing them. If a negotiation is one-dimensional like this, the supplier must have strong arguments and evidence to support a price increase. This enables a fact-based negotiation, and if the buyer does not agree to the supplier’s price, they will have to question the validity of the arguments presented. In cases where the price increase is due to raw material developments, the supplier must provide clear overviews of the impact of these developments on the product. It is also important for the supplier to have a cost-price breakdown that calculates the exact impact of each component on the product.”
2. What should readers know about distributive Negotiation?
“Distributive negotiation is not a matter of powerplay. It’s a matter of good preparation and having clear objectives of the others. Without good preparation, none of the parties is a winner in a distributive negotiation.”
3. What is the biggest misconception about distributive negotiation? What do most people get wrong about this topic?
“It is a common misconception that distributive negotiation always damages the relationship between the buyer and seller. However, in strategic negotiation, both parties should prepare for all possible negotiation strategies and have an appropriate response or alternative to them. If both parties are aware that all negotiation strategies are allowed, they can prepare for this without harming their relationship during the negotiation. Even if no agreement can be reached, it does not necessarily lead to the disruption of their relationship. Both parties will remain in contact with each other as the buyer must have alternative suppliers, and as a seller, you are always looking for potential customers.”
4. What are the key tactics used in distributive negotiation, and when is this approach most effective?
“It is important to know exactly what your position is and the position of the other person and to have a clear picture of the outcome you want to achieve and want to hold to. Also, think about possible sticks to “force” the other parties to move toward your price.”
5. Can you discuss a case where distributive negotiation was successfully employed in procurement?
“During the Ukrain-crises many of these cases were successfully employed, driven by the very high prices of raw materials. Suppliers asked proactively for higher prices under the condition to stop deliveries if not accepted. They knew that their customers had a lot of issues with the extremely increasing prices and availability of the goods. they didn’t have time to negotiate because having goods on the shelves was the highest priority.”
Follow-up Question: In terms of relationships with suppliers, how were these maintained or impacted during the distributive negotiations, and were there long-term consequences on the supplier-customer relationships?
“When it comes to maintaining relationships with suppliers, distributive negotiations can indeed have an impact. During the COVID-19 crisis, there was often a heightened sense of commitment to align and reach agreements due to the challenging circumstances faced by both parties. However, there can be long-term consequences on the supplier-customer relationship as a result of distributive negotiations. This possibility should be considered and addressed during preparation. Sometimes, the impact on the relationship is acknowledged as an unavoidable consequence. In such cases, negotiations may take a tougher stance. However, if preserving the relationship is a priority, alternative negotiation strategies may be employed to mitigate potential damage.”
6. Is distributive negotiation inherently negative because it prioritizes the victory of only one party in the negotiation?
“In my opinion not. If it is a strategy of both parties, this does not necessarily have to be negative. Parties must be aware that there is a chance that they will not do business and should have to have a BATNA. If they have a BATNA, it doesn’t necessarily mean that only one side has achieved a victory.”
7. In distributive negotiation, is it possible for the other party to perceive a sense of victory in the negotiation as well?
“Of course, that depends on the defined breakpoint. If the “losing” party’s deal is completed within the specified breakpoint, this party may still make a profit and/or perceive a sense of victory.”
Featured Download: Enjoying this article? If so, click here to find out your own negotiation styles so that you can prepare your upcoming negotiation and gain better results.
Conclusion
Distributive negotiation, also known as value claiming, is a strategy focused on dividing up the pie of values, often characterized by a win-lose approach. This is typically centered around a single issue, such as price.
The difference between distributive and integrative negotiation is highlighted by the competitive nature of the former and the collaborative approach of the latter.
Overall, understanding the nuances of distributive negotiation is crucial for negotiators aiming for successful outcomes while maintaining long-term relationships.
Frequentlyasked questions
Why is distributive negotiation important?
Personally, we’re not a big fan of distributive negotiations. It’s more of a powerplay.
In this approach, one party is looking to get everything they want without giving anything in return that meets the needs of the other party.
The competitive negotiation style is frequently described as the disagreeable negotiator. Dealing with a disagreeable negotiator opponent is considered tough and should be avoided if possible. If possible, look for alternative solutions to avoid a disagreeable negotiation.
When to use distributive negotiation?
- You need to act fast
- You are 100% sure you’re right about the situation
- You are dealing with an opponent who will abuse you if you show non-competitive behavior
- The situation is important and an unpopular decision needs to be taken
- Other negotiation styles are not possible
What does distributive negotiation mean?
In this approach, one party is looking to get everything they want without giving anything in return that meets the needs of the other party.
About the author
My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.
