What is Distributive Negotiation? 3 Powerful Examples

Key Takeaways:

• Distributive negotiation is the method of dividing up the pie of values in negotiation.
• Distributive negotiation is the easiest one to detect. You’re out to win at all costs. It is usually described as a win-lose approach.
• BATNA is your backup plan if your negotiation doesn’t lead to a deal.

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.

An example of the founder of Procurement Tactics

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.