Let’s face it: there are a lot of different types of negotiations that we can find ourselves in the middle of any any point in time. As negotiators we need to be able to recognize each one of them and then take the appropriate action in order to maximize the chances of being able to get the deal that we want. One type of negotiation that we most often find ourselves involved in is called a distributive negotiation. Do you know what to do when this happens?
What Is A Distributive Negotiation?
One of the first questions that we need to deal with is what is distributive negotiation? It turns out that a distributive negotiation involves using our negotiation styles and negotiating techniques to haggle over a fixed amount of value – another way of saying this is, slicing up the fixed-size pie. In a distributive negotiation, there is probably only one issue at stake, generally price. In these types of negotiations, it may be difficult to add issues other than price to the negotiation.
Just to make sure that you understand what a distributive negotiation is, we should also take a look at integrative bargaining. In this type of negotiation, more than one issue is available to be negotiated. Whenever multiple issues are present negotiators have the potential to make trade offs across issues and create value. Often, what looks like a distributive negotiation is in fact an integrative negotiation, as there may be additional issues you can add to the discussion.
Improve Your BATNA
As a negotiator, it turns out that nothing can help you to get a bigger slice of the pie than having a very good BATNA. Your BATNA is your “best alternative to a negotiated agreement” – that is, what you’ll do if you don’t reach your goal in the current negotiation. You can try to make your BATNA better in distributive bargaining by researching the various alternatives available to you and perhaps going after several negotiations at the same time. You’ll be tempted to ask for more when you have other options available to you.
Create A Reservation Point
In this type of a negotiation, a reservation point is the figure that indicates you are indifferent between accepting the deal you’ve negotiated and instead turning to your BATNA. You’ll walk away if the other side insists on you paying more than your reservation point. It’s important to determine your reservation point before you negotiate, as there’s a good chance the other side will try to convince you to accept less than you should. When you know what your reservation point is in advance and are able to keep it in your mind, there is less of a chance that you will cave in to unreasonable offers.
Know What Is Driving The Other Side
Knowing what the other side wants is key to getting what you want out of a negotiation. It goes without saying that you won’t want to aim higher than your reservation point—but how high is too high? To help determine the most you’ll be able to get in a distributive negotiation, take some time to research the other side’s likely BATNA and reservation point. When you know how low (or high) the other side may be willing to go on price, you’ll have a better sense of how high (or low) you can aim.
Know Your ZOPA
Once you feel that you know what the other side’s reservation point and BATNA are, you should be able to determine if a “zone of possible agreement”, or ZOPA, exists in your distributive negotiation. The ZOPA is the range of all possible deals that both parties would accept. Your reservation point will be at one end of the ZOPA, and the other party’s reservation point will be at the other. If there is no overlap between your reservation point and the other party’s, then you should look for a better deal elsewhere.
What All Of This Means For You
There are many different types of negotiations that we can find ourselves in. One of the more common ones is called a distributive negotiation. In this type of principled negotiation there is probably only one issue at stake and this is more often than not the price. In these types of negotiations, it may be difficult to add issues other than price to the negotiation. As negotiators we need to enter into these types of negotiations with a game plan as to how we are going to get the deal that we want.
When entering a distributive negotiation you need to make sure that you know what your BATNA is. By doing so, you’ll know what your options are if things don’t go your way. Since you don’t want to end up paying too much or accepting too little, you need to create a reservation point so that you can evaluate every offer that is presented to you. In order to better understand what the other side is trying to accomplish, you need to take the time to try to determine their BATNA and their reservation point. Once you know this you’ll be able to calculate the ZOPA for this negotiation and find a way to make a deal happen.
Our goal when entering any negotiation is to find a way to get the deal that we are looking for. When we enter into a distributive negotiation our ability to place additional issues on the table is limited. We need to use our BATNA, reservation points, and ZOPA to find a way to convince the other side to do a deal with us. Use these techniques the next time you find yourself in a distributive negotiation and see if you can end up walking away with more of the pie!
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™
Question For You: What do you think would be the best way to figure out the other side’s BATNA?
P.S.: Free subscriptions to The Accidental Negotiator Newsletter are now available. Learn what you need to know to do the job. Subscribe now: Click Here!
What We’ll Be Talking About Next Time
One of the more popular phrases that has been used during the past few years has been “emotional intelligence”. This term first burst into the cultural imagination in 1995 with the publication of psychologist Daniel Goleman’s book. Negotiation experts have predicted that scoring high on this personality trait would boost one’s negotiating outcomes and have found many successful negotiation examples using emotional intelligence. Does this mean that during your next negotiation you need to pay more attention to your emotional intelligence?