Negotiation Types

Negotiation is a part of our everyday lives and our history⁠—from trading cards as kids to asking our boss for a salary raise or bargaining a purchase as adults. Sales training teaches how to negotiate price increases and to ask for discounts when we buy. 

Our negotiation skills are also frequently used to maintain our personal relationships. Most of us have family and friends we organize things with, budget with, and bargain about bedtime with. At some level, we often negotiate without even realizing it.

Many people don’t like to negotiate, viewing the process as a hassle. We might think we’re avoiding the negotiation process. However, we usually end up negotiating anyway, without realizing it. So, we may as well learn how to negotiate well. Learning about the two main negotiation types is one effective way of learning the foundations of negotiation.

The two distinctive negotiation types are distributive negotiations and integrative negotiations. The Negotiation Experts’ sales course and purchasing negotiation training teach both methods. Both types are essential to negotiating successfully in business.

Distributive Negotiations – the Fixed Pie

The term distributive means a giving out or a scattering of value. By the nature of the business, there is a limited amount of what’s being distributed or divided. So, this type of negotiation is often referred to as “The Fixed Pie.” There is only so much to go around, and the proportion to be distributed is limited and variable.

How often has somebody shouted out, “Who wants the last piece of pizza?” Everyone looks at each other, then two or more hands rush to grab the last slice.

In the real world of negotiations, two teams enter discussions with the goal of claiming as much value as possible. The seller wants to go after the best price they can obtain. The buyer wants to pay the lowest price to achieve the best bargain. It’s good old-fashioned haggling.

A distributive negotiation usually involves starting talks with no pre-existing relationship. A long-term relationship is also unlikely to develop. Everyday examples include buying or selling a car or a house. The purchasing of products or services is a simple business example. Here, distributive negotiation bargaining is often employed. 

Let’s say we’re dealing with someone unknown to us, and it’s a one-time-only occurrence. Except for the deal itself, there is no real benefit in investing in the relationship. So, we are generally less concerned with how the other person perceives us. We are also less concerned about how the other person might view our reputation. Our interests and the other side’s interests are usually self-serving.

Distributive Bargaining Basics

• Play your cards close to your chest – Give little or no information to the other side. The less the other negotiator knows about our interests, the better our position. This can include why we want to make the purchase, our preferences, or the point at which we’d decline the deal. Expressing eagerness or need reveals a weakness that could be exploited.
• The opposite is equally true – Try to obtain as much information from the other side as you can. Any further information uncovered is potential leverage to negotiate a better deal.
• Let the other side know you have options – The only information we should reveal is the fact we have options. This includes other sellers we can purchase from at a competitive price. Reminding the seller of their competition shows our willingness to walk if necessary. It also lets the seller know there will be no negative consequences for us.
• Make the first offer – Whatever the first offer is will generally act as a negotiation anchor. The anchor becomes the point on which the rest of the negotiation will likely revolve. Try to make the first offer to ensure discussions set off in your favor.
• Be realistic – Being too greedy or too stingy will likely result in no agreement. So, keep expectations realistic.

Integrative Negotiations – Everyone Wins Something (usually)

Integrative negotiations need a more developed type of business negotiation skills. For this reason, we typically start our negotiation skills training with simple distributive bargaining role-plays. We then build up to more complex team-based integrative negotiation role-plays.

The word integrative means to join several parts into a whole. Integration implies cooperation, or a joining of forces, to achieve something together. It usually involves a higher degree of trust and a forming of a relationship. Both teams want to walk away feeling they’ve achieved something that has value. Ideally, this means each team achieving what they want.

In the real world of business, the results often tilt in favor of one side over the other. This is because it’s unlikely that both sides will come to the table at equal strength when talks begin.

Nonetheless, there are many advantages when both teams take a cooperative approach. Skillful mutual problem-solving generally involves some form of making value-for-value concessions. This is usually in conjunction with creative problem-solving.

Generally, integrative negotiations are future-focused, with long-term relationships in mind. The aim of our on-site negotiation training is to create ongoing mutual gains. This mutually beneficial type of negotiation outcome is often described as the win-win scenario.

Integrative Negotiation Basics

• Multiple Issues – Integrative negotiations usually involve many issues that are up for discussion. Each side wants to get something of value while trading something of lesser value. In contrast, distributive negotiations generally revolve around the price or a single issue.
• Sharing – To understand each other’s situation, both sides should share as much information as possible. This helps each side understand the other’s interests. You can’t solve a problem without knowing the parameters. Cooperation is essential.
• Problem Solving – Find solutions to each other’s problems. For example, offer something valuable to the other side that is of lesser value to you. If you can make this trade while realizing your goal, you have integrated your problems into a positive solution.
• Bridge Building – More and more businesses are engaging in long-term relationships. Relationships offer greater security and the promise of future success.

Conclusion

We often use the two types of negotiation described above in our business and personal lives. Sometimes, these two usually distinct forms of negotiation can even overlap. By understanding these negotiating types, we can be better prepared in different situations.

When we continue to learn, we can boost our personal and professional relationships and skills. By knowing how we can use the negotiation process, we can harness the power of persuasion.