Setting the Right Price

By | April 27, 2011

Setting the right price in printing is a balancing act that would challenge Cirque du Soleil. Even the simplest factor in determining price – cost – is not that simple. Francis McMahon posted a while back on “The Art and Science of Competitive Bidding” citing the various complexities with estimating for digital inkjet jobs due to the different costs of C, M, Y, K, custom colors and MICR as well as the variability of coverage throughout a job. The bottom line here is that the cost is not fixed, it is variable and must be tracked and managed. Then there are the labor and operations costs. Moving from pre-printed stock to white paper can cut down on paper changes and allow higher equipment productivity levels – but what portion of these savings should/could be passed on to the customer?

I interviewed a customer recently about the cost savings they had achieved through moving to a full color, white paper, inkjet solution. The savings were substantial, but they didn’t want to talk about them because they have positioned color with their customers as a “value add” – not an efficiency driver. They want to charge more, not less. That brings us to the second area of complexity – customer perception. If it is difficult to measure the hard costs of printing, it can be even harder to assess what customers are willing to pay. How much more will a customer pay for highlight color? 4 color? 4 color plus custom matched color? The ability to include MICR on the same document? Higher color coverage?

Generally, customers are willing to pay for results but, when you are just getting started with new equipment or services, you may not have any specific results to show. Are you willing to offer success based pricing and take some risk to establish credibility? If you do, you’d best make sure that you can control the results. Many customers are happy to have you share in the risk but don’t want to let you contribute to the outcome (reviewing lists, copy, creative or mailing approach.) Shared risk witout shared control is a recipe for disaster.

The other influence on customer perception is of course competitive pricing. This is a major issue in the print industry right now. There is a lot of unused capacity and many companies are pricing themselves out of business and taking their competitors down with them. How can you price at a profit when the guy next door is pricing underwater just to keep something running on the presses?

One way to stay profitable in these situations is to be in a position to offer what retailers call “prestige pricing.” Charging a higher price than the competition is possible when exclusivity or (perceived) unique services can justify higher prices. Customer experience experts also talk about “sticky services” that make it harder for customers to move for a lower price. In printing, these sticky services are things like content management and ordering portals, data manipulation services, profiling and analytics, application development, customer service dashboards and exceptional customer service. Naturally – great printing, finishing and mailing efficiency is a must as well.

On Tuesday May 3rd, Barb Pellow of InfoTrends will be delivering a webinar on how to “Price based on the value of the work, instead of the cost, be able to better explain what your customer is getting for their spend.” You can register for free here.

There is no “Manufacturers Suggested Retail Price” in production printing. Bob Barker is not going to tell you when “the Price is Right.” There is also no “loss leader” in printing right now – just losses if you don’t price for profit from the start.

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