Most negotiations call for very different, even opposing, skills: collaboration and competition. To get a great deal, we typically must work with others to find new sources of value while also competing with them to claim as much of that value for ourselves. Before mastering the intricacies of value creation in negotiation, it helps to have a solid foundation in value claiming. In this article, we answer the question “What is distributive negotiation?” and provide five strategies for succeeding in value-claiming negotiations.
What is Distributive Negotiation?
Distributive negotiation is the process of dividing up the pie of value in negotiation. Distributive negotiation can be thought of as haggling—the back-and-forth exchange of offers, typically price offers, which the late Harvard professor Howard Raiffa referred to as the “negotiation dance.”
The most effective bargainers in a distributive negotiation are often those who spent a lot of time preparing to negotiate. In particular, negotiators should determine their best alternative to a negotiated agreement, or BATNA—what they’ll do if they don’t achieve their goals in the current negotiation. A job seeker might decide to pursue other job openings, for example. Negotiators also need to assess their reservation point or walk away point—the figure at which they’re indifferent between accepting the deal they negotiated and instead of turning to their BATNA, such as $3,000 for a particular used car.
5 Proven Distributive Negotiation Strategies
The following five strategies from Harvard Business School professors Deepak Malhotra and Max H. Bazerman’s book Negotiation Genius: How to Overcome Obstacles and Achieve Brilliant Results at the Bargaining Table and Beyond will help you maximize the amount of value you claim in your negotiations:
- Focus on the Other Party’s BATNA and Reservation Value. In addition to determining your own BATNA and reservation value, it is also important to try to estimate the other party’s BATNA and reservation point. When you do so, you can estimate the zone of possible agreement, or ZOPA—the range of deals that both parties would accept. For example, if you’re willing to spend up to $3,000 on the seller’s used car and believe the seller might be willing to part with it for $2,500, the ZOPA ranges from $2,500 to $3,000. Negotiators who focus on the other party’s BATNA tend to aim higher and capture more value, according to Malhotra and Bazerman.
- Avoid Making Unilateral Concessions. Once each party has made an initial offer, avoid the trap of making another concession before your counterpart has reciprocated with one of her own. If the other party won’t match your concession, it may be time for you to bow out of the negotiation and exercise your BATNA.
- Be Comfortable with Silence. Negotiators often are inclined to make undue concessions or retract their offer when their counterpart seems to be taking too long to respond. But keep in mind that your partner’s silence may be strategic, designed to make you uncomfortable and cave in. When you speak when it’s their turn to do so, “you will be paying by the word,” caution the authors of Negotiation Genius.
- Label Your Concessions. As human beings, we have an innate tendency to reciprocate the gifts and concessions we receive from others. Due to this powerful norm of reciprocity, we tend to make a concession of our own when offered one by a counterpart in a distributive negotiation. At the same time, to escape such feelings of obligation, negotiators can be motivated to undervalue or overlook one another’s concessions, write Malhotra and Bazerman. For this reason, it is important in distributive bargaining to draw attention to your concessions by labeling them. That is, clarify how costly the concession will be to you and make it clear that you’re reluctant to give this value away.
- Make Contingent Concessions. To further reduce the ambiguity of your concessions, you might explicitly tie your concessions to specific actions by the other party, suggest Malhotra and Bazerman. Make it clear that you will only make your concession if the other party meets your expectations. Here’s an example: “I’m willing to pay more if you can promise me early delivery.” Contingent concessions can not only secure commitments from your counterpart but also broaden the number of issues up for discussion, perhaps transforming a distributive negotiation into an integrative one—creating value in the process.
What other distributive negotiation tactics have you used effectively?