The Art of Negotiation | A Case Study

Hot summer days in Scottsdale usually make for quiet times in the Old Town arts district. Last Monday was an exception.

Xanadu Gallery director Elaine recounts the following experience:

“About mid-morning, Sherry and her mom Sidney (Names changed to protect the innocent) strolled in for their first visit to Xanadu. With homes in both Chicago and Scottsdale, they were looking for art for the Arizona residence, a beautiful new Tuscan-style home in North Scottsdale. Armed with a “cheat sheet” of desired painting/artwork sizes, the duo started zeroing in on the exciting offerings in the gallery.

The first discovery was a colorful painting by husband and wife artists John and Elli Milan, “Transcending View I,” for the master bath. When the clients mentioned they would like to find one or two other paintings for the same room that would complement the Milan, I led them to the front window to see two other Milans that were perfect for what they had in mind.

The next artworks they fell in love with were a stunning new steel and wood wall sculpture by Jeanie Thorn titled “Artifact,” two colorful abstracts by Penny Benjamin Peterson, and Guilloume’s powerful bronze relief, “We Can Grow.” Moving to the southern section of the gallery, Shelley spotted the oil painting “On My Knees” by Guilloume. It was one of those goose-bump moments as I shared the narrative the artist has written about the artwork.”

I take Mondays off, but when Elaine called me about the client’s interest, I drove in to the gallery, picked up the art and drove out to the collector’s home. Sherry and Sid were an absolute delight and were excited to have found so many pieces they felt would work for their home.

I began bringing the artwork into the home while they showed me the space they had in mind for each piece. Most of the pieces fit the spaces perfectly, and it was immediately clear we had good matches. Several pieces didn’t work, but we were able to find other spots throughout the house where the work fit.

Of nine pieces delivered, only two didn’t find space (and one of those, though it didn’t fit, may lead to a commission for the artist this fall).

The clients were delighted, and I set about hanging the work. In a bathroom space, I had to remove a towel bar and touch up the paint on the wall. I helped them figure out the right positioning for each piece.

When everything was hung, Sherry said, “I love all of it – now, . . . you can offer me a collector’s discount can’t you?”

“Of course,” I said, “these pieces look spectacular. I will take care of you.”

We went to the kitchen and I started doing the math. This kind of situation presents a unique negotiating challenge. Normally, if there were only one piece involved I would ask the customer to make an offer. I couldn’t do this with this sale because I was quite sure the client had no idea what the seven pieces would add up to, and the last thing I wanted to have happen was have her give me a number so far on the low side that there would be no way to recover.

My approach was simple. I added up the total retail value of all of the pieces (I took my time doing this) and then calculated the tax. “Hmmmmmmmm . . . let’s see what I can do,” I muttered as I worked on the figures, wanting to make it clear I was going to work hard for them to help them acquire the art at a great value.

“What form of payment will you be using?” I asked.

“I can pay by check.”

“Great, that helps a lot, I can include the credit card fees in your discount.”

I continued calculating and wrote all of the figures on the sales slip. Finally, I had everything prepared and presented my offer to Shelley.

The few moments discussing the deal are delicate and must be handled carefully. I always remember that my goal is the same as the client’s: we both want them to have the artwork, but the way I present the offer can make all the difference between closing the sale and not.

Here are the figures as I presented them:

Retail:

$21,600

$1,933.20 Sales Tax

$23,533.20 Total

I talked them through each part of the calculation. “The total for all seven pieces is $21,600, the tax is $1,933.20, bringing the total to twenty-three thousand five hundred thirty three dollars and twenty cents. I spell that last number out for you here, because that’s exactly how I said it to the client. My goal is to have this number sound terrifyingly large, complicated and expensive. And then I paused . . . and let this number sink in.

Because I felt we were coming from a point where the client may not have had an idea what the total was going to be, or even the magnitude of the purchase, I want to let this number sink in. I want her mind to have a chance to adjust to it. I have no idea what number she may have had in her mind, but I want to erase that number and let this one become firmly planted. My hope is that the number takes her breath away just a little bit.

Then I begin whittling away at the number for her.

“Now as I told you, we can give you a very strong collector’s discount of $1,944.”

I rewrote the retail price and subtracted the collector’s discount.

“You mentioned you would be paying by check instead of credit card, which allows me to deduct another $588.” I wrote this number down and subtracted it from my subtotal. Now our tax is only $1,706.59. Which brings us to a total of $20,774.59″

I paused again to let this number sink in. “And,” I said after a beat, “I promised to take care of you, so it would be my pleasure to round down to $20,000.”

I underlined this number.

“Thank you! I knew you were my friend!” Sherry said, pulling out her pen to start writing the check. “I was worried I might not be able to get them all.”

This was exactly the outcome I was aiming for. Negotiation is a fine art in itself, and handled incorrectly can cause sales to crumble (I speak from experience). Handled correctly it helps everyone get what they want.

When I first started in the business almost twenty years ago, I might have handled the situation by throwing my offer out right in the beginning: “I can do it for $20,000.” This might even work from time to time. If the client has the number $17,000 in her mind, however, $20,000 seems expensive, and this is why my efforts to take the client on an odyssey up to $23,533 is worth the effort. If I can take them there and work my way back down, $20,000 now seems like a very reasonable number.

I know that negotiation can be a sensitive topic, so I look forward to hearing your comments below. Keep in mind that I am not trying to pull the wool over my customers’ eyes, or trick them into making a purchase. My motives are not nefarious. I want to help them get what they want and feel great about the purchase, and I am going to use psychology and salesmanship to help make this happen.

 

Artwork by John and Eli Milan

 

Artwork by Guilloume
Artwork by Penny Peterson
Artwork by Jeanie Thorn (left) and  John and Eli Milan (right)
Artwork by Guilloume

About the Author: Jason Horejs

Jason Horejs is the Owner of Xanadu Gallery, author of best selling books "Starving" to Successful & How to Sell Art , publisher of reddotblog.com, and founder of the Art Business Academy. Jason has helped thousands of artists prepare themselves to more effectively market their work, build relationships with galleries and collectors, and turn their artistic passion into a viable business.

47 Comments

  1. You know I just had that sort of situation but mine did not work out. This woman and her two daughters wanted to purchase 2 ceramic sculpture pieces at 300 each. She asked me for a discount and I said what did you have in mind she said 350. I said I couldn’t do it for that. If she would have offered me 450 I would have taken it but she low balled me by so much that I had no where to go but to say sorry plus she wanted shipping.

    1. There are definitely times when you just can’t come together with the prospective buyer. Interestingly, it’s often on lower valued sales that we run into the biggest negotiating snags.

  2. I am surprised that you waited till all the work was on the wall before talking price. What would have happened if she had blanched at $20,000? Or if she had countered with a much lower number? Or if this was just a game and she was trying to get the art for an outrageously lowball price? How low would the figure have had to go before you took the pictures off the wall and took them home?

    In other words, does (sort-of) posession of the work aid you in the negotiation, or does it aid the buyer?

    1. Great question Kathy. I feel that it aids me in the negotiation in a number of ways. First of all, I don’t want to begin negotiating before the client has decided she wants the work. I don’t want to negotiate and then have the client say “I tried the piece and I don’t like it as much as I thought I would . . . ”

      If I get the work into the client’s home and it looks spectacular they are now negotiating from a position of not wanting to lose the art that they can now see looks so good in their home.

      To be sure, there are times when I’ve hung the work, the client likes it, but then we can’t come together on price. I respectfully let the client know that I’m not able to give the requested discount (I’ll write a separate blog post about how to do this) and take the artwork off the walls to take it back to the gallery. I don’t consider it a negotiating disadvantage to have put in the work to deliver and hang the art.

  3. Great job, Jason. I think the key was using the visual (having the written sales figures as well as verbally explaining the price.) It cements the idea in the customer’s mind of the sale transaction already being a done deal. I use something similar when I do commissioned work. I simply show them my price list based on size and detail, and circle a couple of prices. Then it seems more like any issue with the price is not personal–it’s just–“this is my price list, and if the price seems too high, no problem–just go with a slightly smaller size.”

  4. One thing I do is explain why I can’t offer a discount. I explain that I sold a similar piece to a long time customer for the retail price and I just couldn’t in good conscience offer the piece to them for less. I go on to explain that the only time I will discount my work is if I have had it in my inventory for a long time and have changed my approach to work enough that it no longer represents my current feeling. If I can I then show the customer something that is lower priced or even direct them to another gallery or studio that has things priced less. I am constantly educating my customers on the process involved in my art making and tell them my goal is to make about the same hourly rate as a plumber or car mechanic. When they understand my thinking it usually does the trick.

    1. This comes to the core question – to negotiate or not to negotiate, that is the question . . . I completely understand that some artists chose not to negotiate, but I feel it puts them at a competitive disadvantage. Again, there’s too much to unpack here in a comment, but negotiation is a critical element of selling, so expect to see a longer post on this in the near future.

  5. Great negotiating! My question is: when you negotiate lower, who takes the hit: you or the artist? Or do you do the same percentage split? I am assuming it is the percentage, but what if the artist hasn’t figured that lower price into what they need for the artwork?

    1. Commissions are paid from the price at which the work sells, so the gallery and artist share equally in the discount. I’ve worked out the parameters of negotiation ahead of time with the artists I represent.

      Gretchen, you use the word “hit”, as in “who takes the hit” and I think this points to an interesting mindset that I see among many artists when negotiation is discussed. Many see a discount as a negative and a hit, just as you said, but what is often overlooked is that negotiation is actually a very powerful tool that allows the seller to close a significantly higher percentage of sales. I urge artists to expect discounts on many of their sales, and to plan and price accordingly.

      One could argue that this means prices are inflated to allow for the discounts. While this is absolutely true, behavioral economics tells us that people are happier when they perceive they have bought at a discount than paying the full price, even if the amount paid is identical. In other words, I’ll be happier paying $1,000 for something I saw at $1,200, than I will be walking into the store and buying the same thing that is listed at $1,000.

        1. No. And my artists and I don’t think of it this way. We’re each making 50% of a sale that wouldn’t have happened without the ability to discount. My artists, without exception, have told me they would rather have 80%-90% of a sale that happens because of negotiation than 100% of sale that doesn’t happen because we weren’t able to negotiate.

  6. Phew! Good job there Jason! I once sold quite a few pieces to a collector who offered a price for all of them. I have such a bad head for figures and didn’t give myself time to do the maths , thought I was getting a good deal , but he got the good deal in the end! Now I make sure I sit down and write it out first just like you did, and with a calculator !

  7. Jason I am confused by the way you figured this entire discount situation.
    How did you come to the first figure of $1944 for the collector discount? Do you typically use a standard percentage of just the retail price or calculate in on the retail price plus sales tax?
    I don’t understand the paying by check discount either – even though she is paying by check you still are out that amount of money as if she had used a credit card. I guess you are ok with paying it anyway as it helps you in your negotiation?
    So the way I see it, you gave her a discount of $3,306 plus you still have to pay nearly a $1,ooo in sales tax. Is that correct?
    Who bears the cost of these discounts? You? Both you & the artist? Or do you build into the price of each painting for these discounts?

    1. I’ve worked out parameters with the artists I represent. Commissions are paid off the sales price, so the artist and gallery share in the discount equally.

      As far as the discount amount, I know approximately where I want to be in terms of the discount based on the size of the sale, but ultimately I’m aiming for a nice round number, as mentioned in the article, and in this case I wanted to hit $20,000.

      As far as the credit card goes – if we had negotiated and she had used a credit card there would have been a fee, but since she paid by check, it gave me a little more leeway in the discount. And truthfully, it serves as a positive signal for the client – “oh good, if I pay by check, I save even more”

    2. Fiona, credit institutes charge a fee for credit card use, which is around 2 -3.5 percent of the price. The gallery would have to paid that, so by avoiding credit cards & this fee you can happily give it as a discount to the buyer. I live in Europe, a lot of small businesses refuse accepting credit cards for this reason, or even charge an extra 2.5% on the listed price!

  8. Looks like about a 9-10% discount, split some way between gallery and artist, with an additional adjustment of about 2-3% for not using a credit card.
    8-10% seems to be a usual “collector” discount.

  9. I have sometimes had to cut the prices on my work by up to 15% to get the person to purchase it. I’m not really happy about it, but sometimes I just want to get the sale for the sake of getting a sale. Wrong attitude I know. Most people are willing to pay full price for my work however and I don’t have to negotiate that often, which is good since I am so bad at it.

  10. I use to CONSTANTLY get asked for some kind of discount on my work. I would briefly explain my process of creating and a ballpark of how long it took me to complete it (rounded out to days not actual hours worked on) all the while never saying I wouldn’t discount but watching for the customers reaction, facial expressions, for a sign of where to go with the discount. Then I would mention that they had to PROMISE to give it a good home and to tell ALL their friends where they got it… then told them if they DID that I could offer them a 10% discount. (actually worked about 75% of the time). I don’t like to GIVE my work away but… I would rather sell it then keep it in my storage space. So a few years back I started adding an additional 10% or so to my pricing from the start. For example a painting that I think should retail (or is “worth) for $1500 I price it at $1650. That way I have an automatic 10% I can play with when asked for a discount. The funny thing about it is that since doing this I rarely have been asked for a discount and get the extra 10% on top of what I wanted for the painting. Negotiating is the fun part of the sales process. I enjoy haggling and “overcoming” those objections.

  11. Thanks for answering my questions Jason! One more for you – when you sell a large amount of paintings to one client and offer a very big discount to make the sale, how do you split the amount that was discounted amongst all of the artists and yourself? Do you evenly split it – even the sales tax amount that you will have to carry?

  12. The article is great and I can really appreciate the strategy you outlined in it. One point though, when trying to “protect the innocent”, you need to keep your aliases straight – was it Sherry or Shelley? LOL

  13. A sidenote….I’d love to see how you packed the artist’s work in your van to deliver it. I’d feel squeamish driving $20k around in my van! You are the pro!!
    Another blog topic perhaps?
    Thank you!!!!

  14. Good job. Sounds like a win/win all the way around. It is good to have an idea of what you feel is a fare price, and a price you could negotiate.

  15. Take the client on an odyssey…that is brilliant! I can remember that. And the strategic pauses…that strategy has been used on me before, and it worked! I have to become a master of the odyssey.

  16. I was wondering about the painting in a bathroom? I would think the constant changes in humidity, temperature etc. would destroy it in a rather short while. Have you ever refused to hang a painting in such a location or advised a client against it? I learn a lot from you, thank you for your generosity in sharing your expertise and experiences.

  17. I just did a big 3 day art festival, and I encountered two scenarios that caught me off guard. One out of state customer I gave a 15% discount to then demanded I also not charge tax and pretend I shipped it out of state. I removed the tax but of course paid it at the end of the festival because I’m a honest person, but what bothered me was how he bragged about how he likes to bargin and insinuated he would of paid regardless as I was packaging up his purchase for his wife standing next to him. I felt totally taken. The 2nd scenario was people looking for discounts they believed they should get just because it was the last day of the festival…. Its so hard to find a balance so you don’t feel used by a customer who just loves the hunt for the discount and not feel undervalued for all your hard work.

  18. I have a slight twist on negotiating the price of an artwork. A client wanted to purchase one of my larger artworks. They asked about a discount. I suggested bringing the work by and hanging it in the space to be sure it worked for them. They agreed. The painting looked great. They ended up paying the asking price and had their decorator redesign the room to go with the painting. I’ve only had that happen a couple times, but fond/fun memories.
    I don’t enjoy negotiating the price of an artwork with a client and prefer being with a gallery and letting the gallery do it. They are much more adept at it than I am.
    Thanks, Jason, for another great and informative article.

  19. Great article, Jason- what a great learning experience! There truly IS an art to negotiating, and when both parties leave happy, it’s a positive experience remembered by all- and very likely the beginning of a relationship with a collector. This is, at times, the toughest part of being an artist- to distance oneself enough from the art in order to successfully sell it. That’s why I appreciate the gallery owners I work with!

  20. One gallery that has represented me since 1989 came up with a solution for those who request a discount. When asked; “Can you do any better on the price?” the gallery replies; “We have a COLLECTOR’S CLUB lifetime membership card that entitles you to a 10% discount on this and ALL FUTURE PURCHASES. The membership fee is $100 so the piece you are considering will pay for your membership AND give you a 10% discount on all future purchases. ”

    This saves face for the gallery, provides a dignified answer to discount inquires and creates a desire in the client to purchase more artwork from the gallery because they now belong to the gallery’s “Collectors Club”.

  21. Thanks Jason. I am very new at negotiating and you gave very helpful tips. I too have calculated the cost of credit cards in my price and offer a discount for cash.

  22. Thanks, Jason, and congratulations on the sale! I once had a couple visit my studio to discuss a commission. A friend of theirs owned one of my pieces, and they wanted me to create a smaller piece for them. After a lengthy discussion of time-frame, size, color composition, etc., we got around to price. They were aghast at my price: $3000. They said they could get something much cheaper down at the Old Town Art Fair. I suggested that they do that. I then told them that the larger piece their friends owned cost them $5000. I wish I had saved the time and stress of a studio visit by starting out with that information via email or phone before they even arrived. Then again, maybe they will come into more money in the future, and contact me when they do. I am curious to hear what you think about that.

  23. Jason – I think your technique for negotiation is spot on. I work in another career, besides art, as a mediator in litigation. While there are other considerations involved there, it often helps the negotiation to detail out the basis for the numbers as you negotiate back and forth.

  24. Excellent lesson. I’m new to sales, and struggling with pricing. I’ll post a new painting, get dozens of positive responses, but when asked on the price, I hear crickets at my answer. Recently, I was working on a piece that was based on a beautiful location up in Bainbridge Island, WA. A friend who was moving there asked about it. I gave her a “friend discount” price of between half and 2/3 what I would have posted on my website. She was very appreciative, and bought it before it was even finished. I don’t feel like I asked for too low of an amount for the size of the painting, I have a very happy customer, who will be displaying my work in her beautiful new home on an island where there are a LOT of art patrons. I consider it an investment.

  25. In addition to being an artist in the 1960’s and early 1970’s and again in the last ten years I have been in retail all my working life including 38 of the 42 years my own store has existed. During that period I was a direct importer of hand crafts and antiques from many countries, so I’m no stranger to negotiations. That said the last decade or so has been a different experience from what came before. For many years, Oriental rugs were our main stock in trade and we found many of our customers to have an interest, second only to aesthetics, in the background story of the pieces that caught their eyes. When a potential buyer was enthralled with a rug that turned out to be out of his or her price range, I would ask what they had hoped its price would be. They often responded by saying “I wouldn’t want to insult you with a too low an offer.”
    Well folks those days are over. Now we’ll show a a rug that has been marked down by 50% or more to our cost or below and we’ll be shamelessly offered half of that with a ‘take it or leave it’ attitude that forced me into retirement.Nobody offers less than the stated price to their electric utilities or the grocery stores they shop in on a daily basis but they treat many other purchases as commodities to be bargained for and they have subscribed to the dictum that ‘nobody pays retail.’
    Consider yourself blessed when you sell a piece of art at or near what you want for it.

  26. Very helpful. Now I can think through a better process before the next person sashays into my Fiber Arts Gallery Clara’s Loom and asks ‘What’s your best price?.

  27. Several years ago, I took a workshop from an internationally known watermedia artist. During some gallery time with him, he told me he never discounts his work. (He has his own gallery in Colorado and shows in another in Santa Fe and makes a good living.)
    “But,” he continued, “there are people who simply have to feel like they got a bargain. Even though they have plenty of money, they will walk away if they don’t get some kind of a deal. When that happens, I pull out some of my books (retailing at $35 at that time; he has written several through North Light Books/Artists Network, and they are beautifully illustrated with his paintings) and offer one or two with my autograph, depending on how much they are buying. That almost always satisfies them, and we both walk away happy.”
    I have prepared to follow that example, having been published in one book, but haven’t really had to deal with it much yet, probably because I’m not that well known yet and I lived for a long time in a very difficult art sales area. Most people either bought without batting an eyelash or were seriously amazed that art would cost “that much”. Thinking about it, I’ve probably lost three or four sales over the last 20 years because I didn’t know how to start or conduct a negotiation, but mostly a 10% discount wouldn’t have been enough for the people who were amazed.
    Your post definitely helps me think about it further. Thanks.

  28. Me and another artist were commissioned to do paintings of a friend of a friends pets.
    When presenting the patron with the paintings and the price of 700.00 each I could see she was backing off. The paintings were oils about 32X36 in size.
    The next day my artist friend offered her paintings at 1/3 the price. Which I thought was a fair price but more than expected. Since we are new at selling our work we obviously made mistakes. How would you have handled this. Thanks.

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