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Distributive Bargaining Strategies

Strategies to enlarge your slice of the pie

Do I name an outrageously low figure and spend 15 minutes in flamboyant bargaining? Should I submit a cautious and reasonable proposal in writing, then stick to that proposal? Should I make a modest offer so that the other party isn't offended?

Every negotiation is a gamble, a strategy game. A simple list will not turn you into a brilliant negotiator. Much depends on the kind of business you are in, cultural expectations, personality, and the strength of your position. Look over the suggestions below before you go into a negotiation and use the ones that fit your situation. Then come back to the list afterward to see which ideas might improve your outcome next time.

1. Preparation

  • Prepare yourself to walk away, to get your needs met elsewhere, so that you aren't "needy" during the negotiation (for a deal, for attention, for control, etc.)
  • Develop a strong BATNA and keep it to yourself. Otherwise the other party is likely to push you right to the edge of your alternative. (Exception: narrow bargaining zone and excellent BATNA.)
  • Research their BATNA and their intangible needs. How far can you press them? What matters to them?
  • Set high aspirations for yourself. Don't look at your minimum standard (=reservation point) and say "anything better than this is a deal." Research what the deal is worth in the market, think about the best real-world outcome you can imagine, then stretch some more and go for it! Negotiators often worry about appearing greedy. Base your high-yet-realistic goal on your research, rather than on your guess about what the other party thinks is reasonable.
  • Have a purpose, an agenda, and a "what next" in mind before each interaction with the other party.

2. Opening Offers

  • It's always wise to listen carefully and ask many questions before making any proposal.
  • Make the first offer IF you've done your homework and have a good idea about what the transaction is worth.
  • After making an offer ..........................WAIT for a response.
  • Be quick to counteroffer.
  • Base your discussion on "objective" standards, principles, rationales, norms of fairness. (This is especially important in most corporate and Anglo/American public settings. In other cultures, or in close relationships, emotional and personal perspectives can be more persuasive.)
  • Beware of giving information that lowers your leverage just to seem "nice" or to signal that you trust them. They may not notice your signal or interpret it as you intended. Leverage given away is tough to regain.

4. Concessions and Decisions

  • Make sure you receive something of similar value for each concession you offer.
  • Start with small concessions (if any) --> give larger, more generous concessions towards the end.
  • Focus on your goal, don't let your fears, anger, wearinesss, or ego derail you.
  • Don't agree to split the difference unless it meets your interests.
  • Help the other party save face. Achieve what you need without humilating others. Leave doors open.

Wise Allocation Of The Pie

You are negotiating employee vacation schedules. You're settling insurance claims. You're grading on a curve. You're negotiating a discount for a preferred client. What do these situations have in common?

These are negotiations that occur repeatedly (either with the same person over time, or similar transactions with many parties.) When you negotiations many distributive transactions over time, you need to be particularly careful about your decision-making mechanisms and the quality of your outcomes, not just the outcome of the current negotiation.

Checklist for frequent negotiations

Your outcome should be:

  1. Consistent, generalizable
  2. Simple to understand
  3. Unambiguous
  4. Justifiable
  5. Based on a consensus about allocation process
  6. (Relatively) satisfactory to the parties.

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