Types of Negotiation
In business, there’re many different types of negotiation; the trick is understanding when and where to use them. Whilst you may be tempted to fall back on your natural negotiation style, tactics, and skills for every encounter, this can have a negative impact if it isn’t appropriately pitched and tailored to the deal or problem at hand. To help you pick the right type of negotiation, we will explore each one and explain how to use them effectively.
Approaches to Negotiation
Negotiation types require you to utilise one of two approaches: distributive or integrative negotiation. Understanding the differences between these negotiation approaches can help you improve your bargaining skills, adapt easily, and achieve more win-win scenarios.
You’ll usually encounter or use a distributive negotiation approach when discussing a single issue that offers limited and variable value. For example, a manufacturing business wants to set up a contract with a material supplier. The manufacturer wants the most materials for the lowest price, while the supplier wants to provide the smallest number of materials for the highest price. The aim for both parties is to gain the largest share of resources, which is why you might also know it as a win-lose negotiation approach. Often in these scenarios, there is no prior relationship; it may even be a short-term partnership, so investing time and effort into the other party's perception isn't necessary. To get the best out of a distributive negotiation approach, you should:
- Keep critical information confidential, like why you want to negotiate a deal and your minimum favourable outcome. These can be exploited by the other party to secure a better deal for themselves.
- Do your research to acquire leverage. Whilst you don’t want the opposition to know your goals, needs and motivations, you’ll want to know theirs to help you negotiate a more advantageous deal.
- Be patient and persevere. A distributive negotiation approach requires you to be well-mannered and assertive in pursuing your goals. There will be hurdles, but you have to be willing to continue negotiations until you reach an agreement.
- Make the first offer, as it puts your interests at the heart of the negotiation and starts the bargaining in your favour.
- Let them know you are willing to work with their competitors. This puts the other party under pressure to secure a deal with you. If they know you’ll happily pursue deals with other sellers, it can push them to offer more competitive prices and add valuable perks to stop you from taking your business elsewhere.
- Be pragmatic and practical about the ZOPA you set. Ask for too much, and they’ll walk; ask for too little, and you’ll sell yourself short.
Integrative negotiation focuses on reaching a mutually beneficial solution for both parties, centring around collaboration and relationship building. For example, a prominent sportswear brand may be looking to secure a long-term product collaboration and marketing campaign with a famous athlete (turned social media influencer). Using an integrative negotiation approach, the sportswear brand increases its profits and audience reach whilst the athlete increases their exposure and secures more opportunities for future brand deals. Arguably this negotiation approach is more complex, involves multiple issues and will take far longer to achieve an outcome. It requires well-honed interpersonal skills, adaptive problem-solving and a shared focus on cooperation. To achieve the best results from an integrative negotiation strategy, you should:
- Build trust and rapport by taking the time to understand the other party’s position and parameters for success. They’ll feel heard, and you’ll know what you need to do to make the negotiation mutually beneficial.
- Be open about your needs, wants and motivations, as it’s essential to co-operation. If the other party feels you are hiding information, they will be less open to innovation and developing a long-lasting relationship.
- Come prepared to problem solve by using your research to provide alternative options and various solutions to anticipated issues.
- Focus on the future by investing in the business relationship even after reaching an agreement by scheduling future opportunities to revisit and alter terms, for example.
The first negotiation type we will explore is team negotiations, where both parties are composed of multiple people pursuing a successful deal. Usually, this type is used during major business or union negotiations. These can be complex because there’re various personalities and negotiation styles at play, so an integrative negotiation approach is critical to its success.
To help navigate this, you should know that in a team, different people will take on different roles in the discussion, and you should be aware that one person can hold more than one role. Understanding what those are and what to look out for is crucial. Common roles include:
- Lead Negotiator: They are the primary point of contact, speaker and finaliser of any decisions for their team.
- Spectator: Their job is to observe the other party and share their findings with the lead negotiator. They’ll be looking at body language, actively listening to word choices and the roles within the opposing team.
- Rapport Builder: They’ll be working on building relationships using their interpersonal skills.
- Scribe: They’ll be taking notes on the discussion.
- Commentator: Their role is to challenge the other party using their analysis of their arguments to reveal any issues, hidden motivations, or anticipate negative results.
- Creator: They’ll construct the deal and outline the agreed parameters.
When there are two or more parties involved, it’s called a multiparty negotiation. This is a type commonly used in international negotiations, construction projects or inter-departmental discussions within one company. An integrative negotiation approach can be utilised effectively here as this type of negotiation will require you to think collaboratively and problem-solve effectively to reach an agreement. Obstacles you will encounter in a multiparty negotiation include:
- Unifying multiple negotiation styles, strategies and goals. With so many individual needs, motivations, and objectives, you must be able to adapt your negotiation tactics skilfully and unify them into a mutually beneficial and long-lasting agreement.
- Changeable BATNAs. A BATNA is the best alternative to a negotiated agreement. With multiple parties involved in a discussion, variables, values, and motivations can become more fluid, changing the parameters needed to agree on a deal.
- New alliances. In a multiparty negotiation, the possibility of two or more parties forming alliances is high, and they will use this to alter the terms of the deal. It adds complexity and requires strong interpersonal skills to overcome obstacles.
- No clear leader. If there’s no management oversight of the negotiation process, it can result in unnecessary miscommunications, a laborious process and an inability to reach a resolution. Installing a leader to ensure the negotiation runs smoothly is crucial.
Typically used in conflict resolution, this type of negotiation focuses on the principles and interests of each party and uses them to reach an agreement. For example, when negotiating the terms of a product collaboration, one party may be keen to use an eco-friendly supplier, whilst the other may be hesitant about that company's credentials and prices based on their initial research. Using a principled negotiation, they can listen to each other's perspectives, interrogate independent sources and find a practical solution that meets both parties’ requirements. In this example, that could look like using an eco-friendly supplier whose credentials and prices are approved by the opposing party. This solution meets the eco-conscious interests of one business and the financial interests of the other. For a principled negotiation to resolve successfully, you should:
- Focus on finding mutually beneficial outcomes that satisfy the interests of both parties.
- Focus on interests by identifying and utilising the motivations, goals, and needs.
- Focus on the issue, not the emotions behind it.
- Create and use objective criteria to find solutions, e.g. financial data, rates, expert opinion and laws.
Adversarial negotiation requires a distributive approach and is generally a feature of short-term, one-off agreements. This type of negotiation typically ends in a win-lose scenario whereby the most powerful party strong-arms their opposition into a contract that serves their interests. In an adversarial negotiation, you’ll need to know the kinds of strategies that could be used and how to spot them. These can look like this:
- Re-presenting old obstacles that you’d previously agreed on mid-way through a separate discussion could be a delay tactic or a way to trigger a knee-jerk response in their favour.
- A refusal to compromise or make any concessions to meet your needs or goals causes a stalemate and is a way to force the other party to make changes to the agreement.
- Negotiating the future, which involves promising a benefit later in exchange for a current concession. Unless this is written into the agreement, they’ll unlikely follow through on the promise.
- Feigning a loss of interest puts pressure on the other party to make a decision or make further concessions to stay competitive.
- False or delayed deadlines are also used to apply pressure and create anxiety which can cause the other party to panic, give in to demands or say yes to a poor deal.
- Intimidation tactics like making the room feel uncomfortable or outnumbering the other party may be used. The intention is to bully the other side into making snap decisions and disrupt their thinking process.
- Emotional manipulation is where the strongest party pulls on the heartstrings either by bringing up past negative experiences as leverage, e.g. there was a delay with an unforeseen delay with a previous project.