4 Types of Negotiation (With Helpful Tips and Strategies)

Updated 5 January 2023

Negotiation is usually a discussion about an issue or multiple issues between two or more parties to reach an agreement. Many operations involve negotiations, such as contract negotiations, supply negotiations, conflict resolution negotiations and salary negotiations. Exploring the different negotiation methods can help you adopt a negotiation strategy and technique in a professional environment. In this article, we discuss the two categories of negotiation, list four types of negotiation approaches and share some helpful tips for you to consider when negotiating with individuals and groups.

What are the categories of negotiation?

Before exploring the four types of negotiation, it's often helpful to first understand the two negotiation categories. These categories define the overall purpose of negotiations. Here is an explanation of the two types to help you learn more:

Distributive negotiations

This negotiation approach is typically when one party succeeds when the other party loses. For example, a retail store negotiates a supply contract with a manufacturer. The retail store wants the most products for the lowest price, while the manufacturer wants the highest prices for the fewest products. In this negotiation, each party benefits when the other party loses. The manufacturer benefits from selling their product at high prices, but the retailer benefits from purchasing products at low prices.

For a distributive negotiation to succeed, each party typically agrees to a point of equilibrium. Using the example, the retailer and manufacturer might agree to a contract when they both accept a reasonable price for the product. The price point might be where both parties can generate adequate revenue. Even though they may agree to the contract, both parties sacrifice potential revenue. For this reason, some professionals might refer to distributive negotiations as zero-sum or win-lose negotiations.

Integrative negotiations

This negotiation approach is when two or more parties reach a mutually beneficial agreement. All parties can benefit from the agreement without sacrificing revenue, performance or other business metrics. For example, an established automobile accessories company negotiates with a start-up production company that has a new product in the market. The established retailer wants to sell the start-up company's product in its store. The retailer wants to increase its product range and the start-up company wants to increase its brand exposure.

In integrative negotiations, both parties succeed through mutual benefits. In the example, both parties reach their goals while sacrificing no performance or financial elements. The retailer can increase its product range and target audience, leading to more sales and revenue. The start-up company can increase its brand exposure, leading to more lead generation and higher brand awareness.

4 types of negotiation

Below, you can explore the four types of negotiation:

1. Principled negotiation

This negotiation approach is an integrative negotiation where two or more parties seek a mutual benefit in an agreement. It's often useful for conflict resolutions and disagreements between parties. This negotiation style focuses on using objective criteria as a foundation for the discussion. For example, two department directors are planning a budget for next year's operations. They disagree about which department requires additional funding. They use revenue generation as an objective basis to determine which department requires the resources. The directors identify which department can produce the highest revenue with the additional resources.

2. Team negotiation

A team negotiation involves several individuals on each side of a negotiation, bargaining toward an agreement. In a team negotiation process, several individuals in each party serve a unique purpose in the negotiations. Team negotiation usually includes the following roles:

Leader: A leader in a team negotiation typically makes the final decision for their party.
Observer: An observer reviews the other party during negotiations and reports their findings to the party leader.
Relater: A relater helps foster relationships with the other party during a team negotiation process.
Recorder: A recorder takes notes and transcribes discussions during live negotiations.
Critic: A critic evaluates the consequences and negative aspects of a potential agreement.
Builder: A builder develops a bargaining package, such as the costs and agreements involved in the negotiations.

3. Multi-party negotiation

A multi-party negotiation is where two or more parties with varying interests and goals negotiate toward a collective agreement. There are many examples of multi-party negotiations in finance, business and politics. For example, a political alliance between several nations may enter negotiations to decide on shared policies regarding environmental sustainability. Each country has their own opinions and interests, but collectively they reach an agreement. Multi-party negotiations often take substantial time to conclude because they require an agreement from several parties.

4. Adversarial negotiation

Adversarial negotiations are distributive negotiations where a single party typically benefits from an agreement. It's usually an uncommon negotiation approach, as it doesn't foster healthy relationships or provide a mutual benefit for the parties involved. This approach to negotiations usually results in no agreement or an unfair agreement. For example, hard bargaining is an adversarial negotiation where a party refuses to change their acceptance criteria. This means they're unwilling to compromise or sacrifice to reach an agreement.

Tips for conducting effective negotiations

Here, you can explore several helpful tips when negotiating with others:

Use specific numbers

If the negotiations involve numbers, consider using specific numbers rather than ranges. If you use a range of numbers, the opposing party typically chooses the lowest number. For example, when negotiating a payment price for a service you provide, if you state you're happy to accept between $1,000 and $2,000, the customer is likely to choose $1,000, as they have no obligation to pay more. If you state you're happy to accept $2,000 as payment, they might accept this or provide a counteroffer.

Ask open-ended questions

Open-ended questions are questions that an individual can't answer with a yes or no. These types of questions are typically ideal for gathering information. For example, if you're negotiating with a cleaning company to clean an office space every week, you can ask open-ended questions to determine the services they typically provide in a standard package. Rather than asking 'Do you clean windows?', you can ask 'What cleaning services do you provide?'. If you ask 'Do you clean windows?', they might increase the price of their window cleaning services, as the question suggests you require window cleaning.

Conduct research

Entering negotiations with a substantial amount of information can usually help you negotiate a beneficial agreement. The information you research might be about the negotiation topic or the other party. For example, if you're negotiating with different departments to determine which requires additional resources, you can improve your case with statistics and indicators. You might discuss specific key performance indicators that show your department contributes the most to the operation's success. You might also list statistics about the other department, highlighting the fact that they don't require the same extent of resources as your department.

Prioritise an integrative negotiation

Depending on who you're negotiating with and the purpose of the negotiations, it's often helpful to reach a mutually beneficial agreement. Though it's typically important to understand that the nature of some negotiations might not facilitate a mutually beneficial outcome. When possible, consider the other party's desires and interests to determine if you can contribute to them without sacrificing or compromising your outcome. Integrative negotiations can be excellent for fostering healthy relationships with business partners, clients and customers. Having strong relationships with individuals and groups who you regularly conduct business with can increase your bargaining power in the future.

Set a minimum outcome

When negotiating, it's usually an excellent idea to ensure you define a minimum outcome. The other party doesn't require knowledge of this minimum outcome, but it can help you make the right decision. For example, if you're entering a negotiation for a construction contract to provide your building services, identify a minimum price where you can still earn a reasonable profit. If the price drops below your minimum price, you know that the contract isn't worth your services.