There are two opposite types or schools of negotiation: Integrative and Distributive. This article introduces the important differences between each negotiating type and gives advice on which one may be right for your negotiation.
Like it or not, we are all negotiators. In fact, we use negotiation techniques almost every day and have done for much of our lives. We negotiated when we were kids trading sports cards or toys. We still negotiate today when we ask the boss for a salary raise. When we buy bigger toys like autos, we’re also entering negotiations.
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 negotiate with our friends and family in daily life, often without even realizing it.
Many people don’t like to negotiate, viewing the process as a hassle. We might consciously think we’re avoiding the overt negotiation process. However, we usually end up negotiating anyway, without realizing. Therefore, we may as well learn how to negotiate well. An efficient way of doing this is by learning about the two main negotiation types and when to use each one.
Removing the veil, we find there are two fairly distinct types of negotiation. The two types are distributive negotiations and integrative negotiations. The Negotiation Experts’ Sales course and Purchasing Negotiation course teach both methods. Both are essential to negotiate successfully in business.
Distributive Negotiations – the Fixed Pie
The term distributive means there is a giving out or a scattering of things. By the nature of the business, there is a limited or finite amount of what’s being distributed or divided. Hence, 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 but also variable.
How often has somebody shouted out, ‘Who wants the last piece of pizza?’ Everyone looks at each other, then the pizza slice, and two or more hands rush to grab it.
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 really just plain old, good old-fashioned haggling.
A distributive negotiation usually involves negotiators starting talks with no pre-existing relationship. This type of negotiation also involves being unlikely to develop a long-term relationship. Simple, everyday examples include buying or selling a car or a house. Purchasing products or services are simple business examples where distributive negotiation bargaining is often employed. Remember, even friends or business colleagues can drive a hard bargain just as well as any stranger.
Let’s say we’re dealing with someone unknown to us, and it’s a one-time only occurrence. We really have no particular interest in forming a relationship with them. Except for the purpose of the deal itself, there is no real benefit in investing in the relationship. Therefore, we are generally less concerned with how the other person perceives us. We are also less concerned about how they might regard 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 to deal. Expressing eagerness or need reveals a weakness which 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.
- The only information you should give away – The only information we should reveal is the fact we have alternative 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. This then becomes the point on which the rest of the negotiation will 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 require a more developed set of business negotiation skills. For this reason, we typically start our negotiation training courses 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 getting 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 involve looking to the future. They also tend to involve forging long-term relationships to create mutual gains. Reaching a mutually beneficial outcome is often described as the win-win scenario.
Integrative Negotiation Basics
- Multiple Issues – Integrative negotiations usually entail a multitude of issues up for negotiation. In contrast, distributive negotiations generally revolve around the price or a single issue. In integrative negotiations, each side wants to get something of value while trading something which has a lesser value.
- Sharing – To fully understand each other’s situation, both sides must realistically 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 which is of lesser value to you. If you can make this trade while realizing your objective, 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.
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 improve both our personal and professional relationships and skills. By knowing how we can utilize the negotiation process, we can harness the power of persuasion.