How can you use distributive negotiation to maximize value for your company?

1 Know your BATNA and reservation point

Before you enter a distributive negotiation, you need to know your best alternative to a negotiated agreement (BATNA) and your reservation point. Your BATNA is the most attractive option you have if you walk away from the negotiation, such as another buyer or seller. Your reservation point is the minimum or maximum value that you are willing to accept, based on your BATNA and other factors. Knowing these two numbers will help you set your target and anchor your position, as well as determine when to walk away or close the deal.

3 Manage concessions and trade-offs

Another challenge of distributive negotiation is that the parties tend to make concessions and trade-offs to reach an agreement, which can reduce the value for both sides. To manage this, you need to plan your concession strategy and avoid making too many or too large concessions too quickly. You also need to ask for something in return for every concession you make, such as a higher price, a longer contract, or a better warranty. Additionally, you need to identify which issues are more important to you and which ones you can compromise on, and use them as leverage or bargaining chips.

4 Build rapport and trust

Although distributive negotiation is competitive and adversarial, it does not mean that you have to be hostile or aggressive towards the other party. In fact, building rapport and trust can help you create a positive atmosphere, reduce tension, and facilitate communication. You can do this by showing respect, empathy, and professionalism, as well as finding common ground, interests, or values. You can also use humor, compliments, or small talk to break the ice and establish a connection. However, you should also be careful not to reveal too much information or fall for manipulation tactics.

5 Know when and how to close

The final step of distributive negotiation is to know when and how to close the deal. You need to recognize the signs that the other party is ready to agree, such as making more concessions, asking for your opinion, or expressing satisfaction. You also need to use effective closing techniques, such as summarizing the benefits, asking for confirmation, or proposing a deadline. Moreover, you need to confirm the details, clarify the expectations, and document the agreement, as well as follow up and deliver on your promises.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?