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 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.
Distributive negotiation is the method of dividing up the pie of values in negotiation. It can be also 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.
AdvantagesDistributive Negotiation
Use this style if:
- 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
DisadvantagesDistributive Negotiation
Potential downside of the distributive negotiation style:
- Fear of admitting ignorance of uncertainty
- Reduced communication and no opportunity to explore alternative solutions
- You’ll be surrounded by a ‘yes’ team. Because it’s tough to disagree with a competitive negotiator in your team
- You might damage the relationship with your opponent
- 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:
- Distributive negotiation= one party wins, the other loses.
- 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.
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!
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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. Withing 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 favours 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.
Want to check out more negotiation case studies? We actually created an overview with 13 inspiring real-life negotiation examples.
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 distributive negotiations 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.
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.
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