Tactics in Distributive Negotiations

On April 26th, I started this short series on Negotiation, based on lessons learned from the Harvard Negotiations Project. I described two kinds of negotiations; Distributive and Integrative. Integrative are the ones in which you be very creative, and are the most likely to create win-win outcomes. Last week I discussed some basic tactics for those. Today, I am discussing tactics Distributive negotiations.

In Distributive negotiations, there is a fixed amount of value to be distributed between the negotiating parties. If you are buying (or selling) a boat for example,, there is the boat and the money. How those things get divided between the two parties is all that is involved. The person with the boat wants to get top dollar and the person with the money wants to pay the lowest price. This a potential win-lose if I overpay (or underpay) for the boat. These kinds of negotiations are usually conducted when there is no thought of a long term relationship between parties. Our interests are opposed (everything I “give up” to you, is something I lose). My motivation is individual gain.

This kind of negotiation is handled very much like an ADVOCACY argument in which you are in a competition. Winning the competition is based on getting more than you give (in your own opinion) and CAN be a win-win if, for instance, you have always wanted a boat like mine and are willing to pay a little more than market because I will transfer my dock to you at no charge so you don’t have to move it AND I am tired of my boat and would far rather have some cash to put in a pool.

Here are some tips:

• Don’t tell me how you’ve ALWAYS wanted a boat like this one. Don’t tell me about how you just had a windfall and that money is “no object”. Don’t let me know anything significant about your situation.


• Same tip in reverse. Find out as much as you can about my situation. Why am I selling the boat? Am I desperate for cash? Is the boat due for some expensive repairs or upgrades? Is it due for a required inspection that I don’t think it will pass? If you can learn enough to get a close estimate of my walk-away price, things will be much easier for you.


• Understand the implications of an ‘anchor’. The anchor is the first price mentioned in the negotiation that both sides are willing to talk about. There is a great deal of good evidence that shows a strong correlation between the anchor and the final price in a Distributive negotiation, so be very careful NOT to entertain lowball offers from the other side (“I’d like to talk a bit more before we start talking prices”). Then talk about your interests and concerns. Try to find out more about the other side’s position. Don’t spend time talking about unreasonable anchors, and don’t get offended. That kind of offer is a sign of inexperience, and if you hang in you have a good chance of getting the right deal against an inexperienced opponent.


• Be prepared with SOUND REASONING to defend your offer. My personal rule is that I try to offer just a little more than my estimate of the other side’s walk-away price AND I never offer an amount I wouldn’t accept if I was in the other side’s shoes. I have seldom seen anything sour a deal faster than one side trying to cheat the other with NO reasoning to support the offer.
  
• Speaking of reasoning, don’t forget to ask questions. Questioning how a price is arrived out or asking “What is your basis for considering that to be a fair offer?” is perfectly acceptable. You should be able to answer the questions if they are asked of you. This is where sound reasoning and a variety of evidence (comps, list process, etc.) come in handy. Don’t come on too strong.


• When you start negotiating the price, take your time. Move your price around slowly and try to move in small increments. Large swings may signal the other side that you are not taking things very seriously. Let the other side know when you are close to an acceptable price so they know that there you aren’t going to participate in too much more dealing. Add an expiration date to any offers you make to keep other side from extending things in order to find a better price elsewhere.


• Write down the terms. Write down the terms. Write down the terms. Write down the terms. Do NOT leave things to memory. Write down the terms and affix your signatures to them. If they don’t express the final terms, that’s great…just make SURE that is noted on the document. When the final terms are decided, write down the terms. Write down the terms. Write down the terms.


• Speak of the other party positively. Don’t brag about what a great deal you got. This leaves the other side feeling that they did the best they could and preserves your reputation as a “fair dealer” intact. That reputation will make all your future deals with others that have heard of you much easier.

I will wrap up this series within two weeks and start another topic. I am planning to do more on building great relationships. If you have anything specific that you would like me to cover, write me at gregg.oliver@PathfinderCommunication.com You can also start a NEW topic at the Pathfinder Group on LinkedIn.

Go to http://www.linkedin.com/groups?gid=1958793&trk=hb_side_g

and start a NEW topic or comment on an existing one.

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