The title of this post might make you shudder. Many artists bristle at the concept that an artist or gallery might discount the retail price of a piece of art in order to make a sale. I’ve written on this subject before, and the discussion always generates passionate discussion. I recently had a lively discussion with an artist on the subject which got me thinking about the topic again. This artist made some great arguments against discounting and put me through the paces. In the end of the discussion, I’m not sure that either of us was swayed fully to the other’s side, but we both had something to think about.
While I don’t have a recording of the discussion, I would like to try and reproduce some of it here as best I recollect it. Just know that I’m paraphrasing and probably even dramatizing and fictionalizing some of the discussion (of course my answers are going to be better after I’ve had time to think more about it and write them down). I’ve also added some questions that I’ve heard from other artists. To be fair to my interlocutor, I encourage you to help his arguments in the comments below.
Artist: Discounting or negotiation of any kind devalues my artwork. I’ve set a fair price for the work – a price that is competitive and reasonable. If I discount, I’m undercutting the value of my artwork.
Many buyers, especially seasoned collectors, come to the market with an expectation that there is room to negotiate
Me: I understand what you’re saying and I agree that discounting undermines the stated retail value of all artwork. If a potential buyer believes that there is room to negotiate, the retail price has been undermined. The problem is that Pandora’s box has already been opened when it comes to discounts. Many buyers, especially seasoned collectors, come to the market with an expectation that there is room to negotiate. The “devaluation” has already occurred in a sense, and the broad art market has already adjusted for it by padding the price to allow room for negotiation.
Artist: So it’s all based on a falsehood. If we all just stopped offering discounts and brought our prices down a bit, we wouldn’t have to negotiate any more.
Me: I’m not sure that’s actually the case. It’s human nature to want to get the best deal possible. Negotiation goes back, I’m sure, to the very dawn of commerce. Even if we lowered our prices, I’m confident the next buyer would still ask for a better price. More importantly, I believe that removing negotiation from the market would actually decrease sales across the art market. Buyers don’t negotiate because they need to, they negotiate because they enjoy the process and it makes them feel they’re special, and they’ve worked to get a good deal.
The other problem with what your saying is that you would have to get every artist and gallery to agree to stop negotiating. As soon as one seller makes a deal with a buyer, they have a competitive advantage. From a practical standpoint, discounting isn’t going anywhere.
Artist: But I don’t negotiate the price I pay for groceries, why should I discount my art?
Me: Actually, we get “discounts” on groceries, and everything else we buy all the time. I’ll grant you that we aren’t haggling over the price we pay for fruit like buyers used to in the open street markets, but food and clothing retailers base almost all of their marketing efforts around sales. Their sales are a form of negotiation where they’ve gone ahead and taken the discount upfront. Look what happened to JC Penny when they tried to stop offering sale prices and go to an “everyday low price” strategy – it was disastrous for their business.
Artist: I feel like people are trying to take advantage of my financial situation by insisting on a discount. Art buyers have plenty of money, they don’t need to drive down my price when I need the sale to eat.
Me: I would encourage you not to take it personally any more than you take a rainstorm personally. As I said before, it’s the market that encourages negotiation. I’ve negotiated thousands of deals over the 20 years that I’ve been in the business and I’ve never felt the buyer was trying to do me or my business injury by negotiating. Remember, the worst that can happen is that you aren’t able to come to terms with the buyer and the sale doesn’t happen – exactly the same result if there hadn’t been any negotiation in the first place.
Artist: I think customers will buy even if I don’t give them a discount. If they don’t buy the piece, I’ll sell it to someone else.
Me: I believe you’re losing business and hampering your success. You may be right that some customers will buy a piece even if you don’t agree to negotiate – but you’re going to see other clients walk out the door. I had a buyer who told me a competitor of mine refused to negotiate with him. Not only did he walk , he said he would never go back to the gallery. I sold him two major pieces that day and have since sold him several more. Oh, and the gallery that refused to negotiate? Out of business.
Obviously this is anecdotal and I’m sure you can point to cases where you didn’t negotiate and made a sale. But the question is, is it worth losing sales, even if it’s only a few, by ardently refusing to negotiate? You argue that you will sell the piece to someone else, but you’ve still lost a sale – had you negotiated and sold the piece to the first client, the second client may have bought another piece and you would have two sales instead of one.
Artist: I have a friend whose work is in such demand that she can’t keep up with sales and she doesn’t have to negotiate at all.
Me: The art market is driven by supply and demand just like any other market. As supply decreases and demand increases, the value of the product increases. It sounds like your friend has increased the value of her work to eat up any slack between any possible discount and the retail price she’s asking. The fact that she’s not able to keep up with sales, however, doesn’t indicate she doesn’t have to deal with negotiation anymore, but rather that her work is now under-priced.
Of course, that’s her decision to make – she may feel that she’s willing to give up revenue to no longer need to negotiate. Make no mistake though, she is missing out on potential income, just as surely as you are if you refuse to negotiate.
Artist: If I discount my work, I’m betraying past buyers who have paid full price for my work.
Me: I disagree. Let’s face it, the value of any work of art is mostly arbitrary. A client is willing to buy a piece of artwork because she feels it is worth whatever she is paying. If she paid full price, it’s because she felt it was worth it. Some buyers feel uncomfortable negotiating and are willing to pay full retail to avoid the necessity of “haggling”. Paying full price may also make them feel more successful (“I could negotiate if I wanted to, but I’m successful enough that I don’t have to”). In other words, she getting something of value to her in return for not negotiating.
A caveat though: there are limits to what constitutes a reasonable discount. If you are giving some clients 50% discounts, you may very well alienate past buyers.
Artist: I’m not currently represented by a gallery, but wouldn’t I undercut them if I sell my work at any discount?
Me: You certainly want to nurture your gallery relationships. Undercutting the gallery will completely undermine trust. First, if a client saw your work in a gallery first, you should refer that client back to the gallery for any sales. Second, you can still negotiate with your direct buyers as long as you give your galleries the same latitude to negotiate that you give yourself.
Negotiation is a skill, and once you master it, you will see your sales increase substantially
Artist: I don’t care what you say, I hate negotiating!
Me: That may just be because you’ve never learned how much fun it can be, and how to do it properly. Negotiation is a skill, and once you master it, you will see your sales increase substantially. When you successfully negotiate a sale, everyone wins.
Our discussion went on to other topics from here. If you are a reluctant negotiator, however, I hope I’ve given you something to think about.
I would be remiss if I convinced you to think more favorably about negotiation and then didn’t give you some guidelines for better negotiation. I devote an entire chapter of my book How to Sell Art to negotiating. Below is an excerpt I think you will find helpful the next time you find yourself in a negotiation with a potential buyer.
When Pricing Your Artwork, Build in Room to Negotiate
With the knowledge that negotiation is likely to occur, it makes sound sense to account for it when setting prices. In my first book, “Starving” to Successful, I devote an entire chapter to the mechanics of determining the pricing of one’s work. While it is not my purpose to cover the details for price setting here, I do encourage the artist and the gallerist to build in some room to negotiate when pricing art. The breadth of each negotiation will vary, but if one allows a 20% margin for negotiation, she will have sufficient flexibility for virtually every scenario.
An artist selling her work directly to collectors at shows and through her studio, while also showing in galleries, needs to make sure she is pricing her work consistently. Her galleries need to have the same latitude to negotiate with customers that she adopts when making direct sales. The 20% margin must therefore be the standard application across the board.
Get the Client to Make an Offer
When a client approaches me inquiring whether the price of a particular piece is negotiable, I reply that the artist does give me a little bit of room to move if it will help a client who loves the piece to acquire it. I then state the retail price on the piece, and ask what the client has in mind. It is my strong preference to have the client put a number on the table before I start fishing for an alternate price.
What if the customer makes a ridiculously low offer? I don’t let it phase me, and I take no offense. After all, the initial offer is not the end of the negotiation process; it is just the beginning.
Not every client will be willing to put a specific offer on the table – “I just want your very best price,” is a common declaration. I don’t push hard to get a number, but if I can get the customer to make an offer, I have found it makes the rest of the negotiation progress more smoothly.
I have also discovered that the typical collector will not low-ball me with a ludicrous offer. By requesting that he make an offer, I am putting him ever so gently on the spot. While he wants a great bargain on the art, he neither wants to embarrass himself, nor to offend me. Occasionally, the first offer from the customer entails the need for a smaller discount than I would have proffered.
Confirm the Offer and Commit the Customer
As soon as the client has given me a number, I echo the offer. Then I get a firm commitment that if I find a way to make the offer work, the transaction will be completed today.
“You are offering $4,500 – if I can make that number work, will you purchase the sculpture today?”
Requiring the client to commit in the here-and-now eliminates the opportunity to introduce other obstacles that might compromise the purchase. I don’t want to begin intense negotiations if he still needs to measure a space, or to decide if he likes the sculpture enough to secure it – I will negotiate only if he is ready to purchase at the mutually acceptable price.
Write Up a Counter-Offer
Now that the client has committed to purchase the piece, I ask for a moment. I make my way back to my desk, where I enter a state of intense calculation. I am going to admit it: I put on a bit of a show here. Even though I usually know what my counter-offer is going to be as soon as the client has made her offer, I never (NEVER!) accept nor counter an offer straightway.
I sit at my desk and calculate. I pull up my inventory database and confirm the retail price. I pull out a notepad and jot down figures. I run the numbers on my calculator. I calculate, I contemplate, all the while scratching numbers on my notepad (more about what I write on the pad to come). I furrow my brow and mutter under my breath.
Why all the fuss? There is a method in my madness: I want the client to know I am working hard for him – and I am.
At the conclusion of all the calculation and contemplation, I finally reach the moment of triumph – the moment wherein I have figured out how to make my clients the proud owners of a new work of art, at an incredible value.
During this three-minute exercise in “crunching the numbers”, my anxious patrons have either been making their way around the gallery, or waiting before the piece of art for my answer. They can’t help but make furtive glances in my direction, and take notice of the intensity in my application. There are moments when they think I will surely come back with bad news, perhaps even chase them out of the gallery for making such a preposterous offer.
Now, at the triumphal moment, an exultant smile has taken over my face. It becomes clear that everything is going to be okay. I rise from my chair, and stride briskly to where they stand to deliver the happy news.
On my notepad, I have written the following:
+$82.50 Sales Tax
I have purposefully made the [retail sales amount] appear complex and expensive, in sharp contrast to the beautiful simplicity of the [final price]. I use my notepad to illustrate the counter-offer.
“I think I have come up with something that will work for you,” I say. “Let me show you what I was able to do.”
When I extend the pad for their examination, I initially cover my counter-offer with my right thumb. I proceed to explain, step-by-step, the retail price and any additional charges. I conclude by underlining the retail price.
“The retail on this piece is $5,000. I estimate the crating and delivery would be about $180, which brings us to $5,180. Because we’re shipping out of state, there is no state sales tax; however, there is an $82.50 charge to satisfy the city tax. That brings the total to five thousand, two hundred sixty-two dollars, and fifty cents.”
I want that last number to be long, complex, and expensive. I give the full version instead of shortening it to fifty-two, sixty-two, and fifty cents ($5,262.50).
“It is my pleasure to offer the piece to you at $4,700 (and I say it forty-seven hundred, not four thousand, seven hundred) all-inclusive. I will cover the tax and the delivery.”
I skip a couple of beats while they look at the pad, and then I move to close.
“May I write that up for you?”
Many times, the couple in this position sees and acknowledges everything that I am doing for them, nods, and accepts the deal at $4,700. We move to the desk to write up the sale (see Chapter 7 | Go for the Close).
There are, however, many instances when the clients look at the counter offer, and then make a counter-counter offer. In this example, it might be $4,500.
“$4,500?” I restate. “And you would have me include the shipping and tax?”
Upon confirmation from the clients that I understand their counter offer correctly, I pause for another moment, and then extend my hand to shake theirs and say, “It would be my pleasure. Congratulations – the piece is yours.”
Notice that I did not say anything about the couple’s original offer during the negotiation. The initial offer may have been $4,500, but remember, I was using that offer to ascertain where the client stood, and to make sure I did not offer a deeper discount than was sought or expected. The original offer may have had some impact on the size of the discount, but had it been absurdly low, it would in no way have dictated my response.
Never Apologize When Presenting the Counter-Offer
I remember very early in my sales career hearing a colleague return to a customer who had made an offer and say something to the effect:
“I’m sorry, but it looks like the best I can do is . . .”
Think about this response for a minute. What he was saying to his customer translated as: “Prepare yourself to be disappointed and to not buy.” Even then, with very little training or experience, I knew that this was not the message I wanted to convey in my own transactions.
I understand the inclination to say something like what I overheard, especially in the situation where my number differs radically from the offer. My approach, though, is to simply pretend the low offer does not exist – it was never made. I return to the customer, proud to share the great value I have secured for them.
“I think I’ve come up with something that is going to work for you. Let me show you what I have done.”
Now, instead of priming the customer for disappointment, I have secured his readiness to hear the great news I have in hand. I show him my notepad, covering my counter-offer with my thumb. I emphasize the expensive retail price first, and then finish on a high note when I uncover the magic number in the right column.
Make Someone Else the Bad Guy
This advice won’t work for the artist. After all, when it comes to her work, the buck stops with her. For gallerists (or artists’ spouses), moving the decision making process away from oneself can be an excellent way to conduct a negotiation.
“I need to make a quick phone call and check with the artist – can you give me just a moment?”
I love saying this to the customer. As soon as I say the words, two things happen. First, I make the buyer an ally in the negotiation process. (Guess who just became the bad guy?) Second, he suddenly realizes he is transacting business not only with the gallery owner, but is also negotiating with the artist herself. This knowledge can maximize the client’s offer.
If You Cannot Agree, Get Out Gracefully
In spite of your best efforts, you will occasionally experience negotiations that hold no possibility for successful resolution or positive outcome. A customer might be unwilling or unable to pay enough to make the transaction profitable for you. When this is the case, maintain your cool, and be gracious in declining his offer. Make the attempt to leave the door open should he have a change of heart upon further reflection.
“Thank you for your offer. Unfortunately I am unable to accept it at this time. My offer of $4,500 remains open to you if you change your mind, so long as the piece is still available.”
Notice I do not offer a reason why I cannot accept the offer (more on that to come), nor do I tell the customer to take a hike. I remain professional, yet make it clear that I have gone as low as I can go. Perhaps the customer will step back to confer with a companion, or to give my offer further consideration, before agreeing to accept the terms. But even if he decides to walk away, he can now do so with the assurance that I have respected him and his offer, and have treated him fairly and squarely.
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