4 Types of Negotiation (With Tips and Examples)

By Indeed Editorial Team

Updated May 25, 2022 | Published April 20, 2021

Updated May 25, 2022

Published April 20, 2021

From bargaining for higher pay to discussing sales contracts, the business world presents many opportunities for negotiations. Learning about negotiation types can help you improve your bargaining skills and gain a greater understanding of how negotiations work. In this article, we define negotiation, describe the two negotiation approaches, list the types of negotiation and offer negotiation tips.

Related: How To Successfully Negotiate Contract Rates

What is a negotiation?

A negotiation is a discussion in which two or more parties attempt to reach an agreement through bargaining. Here are a few examples of negotiation in business:

  • Salary negotiation: Candidates for jobs can bargain with an employer about their salary and benefits.

  • Vendor negotiation: Many businesses negotiate with vendors on the pricing and services provided in contracts.

  • Conflict-resolution: Often, conflict-resolution in the workplace involves a negotiation between two or more parties that can result in an agreement.

Negotiation approaches

Each type of negotiation falls into one of two categories. Below is a description of each negotiation approach and tips for making the most of each approach:

Distributive negotiation

Distributive negotiation, sometimes called zero-sum negotiation or win-lose negotiation, is a bargaining approach in which one person succeeds only if another person loses. A distributive negotiation usually involves discussion of a single issue.

For example, a sales business wants to enter a contract with a vendor for IT services. The business wants the most IT services for the lowest price possible, while the IT vendor wants to provide the lowest number of resources for the highest price. Each party's desire to get a better deal represents a distributive negotiation approach.

Below is a list of tips for success in a distributive negotiation:

  • Be persistent. When you're taking a distributive approach to a negotiation, persistence and polite assertiveness can help you fulfill your interests.

  • Make the first offer. In a distributive negotiation, you can make the first offer to begin the bargaining in your favor.

  • Don't communicate your minimum favorable outcome. It's important to aim high in distributive negotiations to ensure successful bargaining. You can withhold any information on the minimum you're willing to accept from bargaining for the best results.

Integrative negotiation

Integrative negotiation, sometimes called win-win negotiation or collaborative negotiation, is a bargaining approach where negotiating parties attempt to reach a mutually beneficial solution. Unlike distributive negotiations, integrative negotiations can involve multiple issues.

For example, an established fashion company and a cosmetics startup company agree to collaborate on a product geared toward their shared target market. They negotiate a contract that allows the cosmetics startup to gain greater exposure and the fashion company to reach its financial and marketing goals.

Here are a few tips you can use in an integrative negotiation:

  • Take a principled approach. You can discuss your principles during an integrative negotiation to build trust with the other party.

  • Discuss your needs and interests openly. Communicating about your goals in an integrative negotiation can promote transparency and enable a positive relationship.

  • Use bargaining to solve problems. In an integrative negotiation, both parties can use negotiations as an opportunity for collaborative problem-solving.

Related: Integrative Negotiation: Definition, Tips and Examples

4 types of negotiation

Below is a list of negotiation types:

1. Principled negotiation

Principled negotiation is a type of bargaining that uses parties' principles and interests to reach an agreement. This type of negotiation often focuses on conflict resolution. This type of bargaining uses an integrative negotiation approach to serve the interests of both parties. There are four elements to a principled negotiation:

  • Mutual gain: The integrative approach to a principled negotiation invites parties to focus on finding mutually beneficial outcomes through bargaining.

  • Focus on interests: Negotiators can identify and communicate their motivations, interests and needs in a principled negotiation.

  • Separate emotions from issues: In a principled negotiation, parties can reduce emotional responses and personality conflicts by focusing on the issues at hand, rather than how the issues make them feel.

  • Objectivity: Parties in a principled negotiation can agree to using objective criteria as a baseline for negotiations. Examples of objective criteria in negotiations include market rates, expert opinions, laws and industry standards.

For example, the leaders of two departments for a large company often argue over the resources for each department. The two leaders enter a principled negotiation to discuss solutions. They listen to each other's positions and decide to base resource allocation on the percentage of revenue each department generates for the company. The department leader who receives more resources agrees to support the other department's functions, and the two leaders reach a compromise.

2. Team negotiation

In a team negotiation, multiple people bargain toward an agreement on each side of the negotiation. Team negotiations are common with large business deals. There are several personality roles on a negotiation team. In some cases, one person may perform more than one role. Here are some common roles on negotiation teams:

  • Leader: Members of each team in a negotiation usually appoint a leader to make the final decisions during negotiations.

  • Observer: The observer pays attention to the other party's team during a negotiation, discussing their observations with the leader.

  • Relater: A relater on a negotiation team works on building relationships with members of the other team during bargaining.

  • Recorder: A recorder on a negotiating team can take notes on the discussions of a negotiation meeting.

  • Critic: While this may sound like a negative role, having a critic on the team during negotiations can help you ensure you understand the concessions and other negative results of an agreement.

  • Builder: A builder on a negotiation team creates the deal or package for a bargaining team. They can perform financial functions during negotiations, calculating the cost of an agreement.

3. Multiparty negotiation

A multiparty negotiation is a type of bargaining where more than two parties negotiate toward an agreement. An example of a multiparty negotiation is bargaining between multiple department leaders in a large company. Here are a few of the challenges of multiparty negotiations:

  • Fluctuating BATNAs: BATNA stands for best alternative to a negotiated agreement. With multiple parties in a negotiation, each party's BATNA is more likely to change, which can make it harder for parties to agree. Each party can evaluate their BATNA at each stage in negotiations to understand the results of a proposed agreement.

  • Coalition formation: Another challenge of multiparty negotiations is the possibility for different parties to form coalitions, or alliances. These alliances can add to the complexity of bargaining. Coalitions can agree to a specific set of terms to help all parties reach an agreement.

  • Process-management issues: Managing the negotiation process between multiple parties can lead to a lack of governance and miscommunications. People in multiparty negotiations can avoid these issues by choosing a leader who's willing to collaborate with others toward an agreement.

4. Adversarial negotiation

An adversarial negotiation is a distributive approach in which the most aggressive party in a negotiation achieves an agreement that serves their interests. Here are a few examples of adversarial negotiation tactics:

  • Hard bargaining: Hard bargaining is a strategy in which one party refuses to compromise in an agreement.

  • Future promise: A person using this tactic can promise the other party a future benefit in exchange for current concessions. You can counteract this tactic by asking for the future promise in writing.

  • Loss of interest: Another adversarial negotiation tactic is loss of interest, in which one party pretends they've lost their interest in pursuing an agreement.

Related: Negotiation Skills: Definition and Examples

Tips for effective negotiation

Here are some tips you can use in your next negotiation:

Use numbers instead of ranges

When you're negotiating with another party about money, you can use exact numbers instead of ranges. This has a couple of advantages. First, by not giving a range, you won't tell the other party the minimum amount of money you're willing to get from the negotiation. Another benefit of using this strategy is that using concrete numbers, like $4,560 instead of $4,000, can help you show the other party that you've done research on pricing.

Ask open-ended questions

You can ask open-ended questions during negotiations to learn information about the other party's situation that you can use as leverage.

For example, if you're representing an apartment leasing company in a negotiation with a vendor for painting services, you can ask questions like, "What services are you willing to offer for this price?" instead of "Are painting and wall repair services included?" The former question can prompt the vendor to expand on the services they're willing to include in the contract. The latter question can prompt the vendor to add wall repair services at an additional cost.

Perform research

Another strategy that can lead to successful negotiation is thorough research. When you approach a negotiation empowered with information about market rates for services, for example, you can use this information to negotiate a better deal.

Related: What Is BATNA and How Can It Help You Negotiate?

Listen during negotiation discussions

During negotiations, you can use your listening skills to understand the other party's motivations and needs. Listening more than you speak during negotiations can also prompt the other party to give you more information about their situation.

Aim for a win-win scenario

The best negotiations serve the interests of all involved. By focusing on what the other party needs and wants from the negotiation, you can enable an agreement that benefits everyone.

Consider your timing

Timing can make a difference in negotiations. In many industries, the best time to buy services is at the end of the month or quarter, when quotas are due for salespeople and vendors.

You can also consider timing during a negotiation. The time you make a request or concede during a negotiation can be just as critical as the request or concession itself. For example, waiting until you have the stronger position in a negotiation can give you more bargaining power when making requests.

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