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Since the beginning of the printing press, the printer has had difficulty in expressing his art and reproducing it for others with a price. When Gutenberg produced the first and only copy of the Bible in print, the Pope asked him to then reproduce multiple copies and give him a price. Gutenberg realized he had a dilemma: what to charge the Catholic Church. He had no idea. Still today, printers have a dilemma with what to charge their customers.
There have been many books and articles written on the subject of cost and pricing. These publications seem to address the problem for offset printing, but what about for the digital print arena?
We first need to have an understanding of cost and price. Cost is referred to as a number of domestic currencies relating to producing the printed job application. The printer should utilize a fully burdened, budgeted, hour-rate calculation. These calculators help the estimator determine what the bottom line cost is to produce that job. Say the job is sold for under the cost; the print provider simply losses income. Likewise, if the job is sold for more than the cost, the printer earns profit.
Hour by Hour
The first issue to address is how complete is the budgeted hourly rate calculations. All overhead items need to be accounted for, including pressmen wages and benefits, the cost of the press with depreciation, and sales/marketing overhead. To then earn a profit, a percentage of the cost is calculated and added to the figure.
At one time not long ago, a print provider would try to achieve a minimum of 30 percent margin. Most traditional offset print providers do not achieve this margin anymore. This is because of a complex market we work within, the increase in competition, and the advent of "Do-it-Yourself." The DIY method stemmed from desktop publishing and the copier era.
Plan of Attack
There are three basic pricing strategies, which a print provider can choose from to determine a price given to a customer. The first method is Cost Plus. This is simply the determining the cost of producing the print job, then adding a margin of percentage profit. This method is widely used by most print providers for all jobs printed on all types of presses, including digital presses. It is easy to calculate by estimators, with computer programs designed to give a cost plus margin. But does this method fully quantify the quality of the print service?
Survey Your Competitors
The second method is Price Comparison. This takes into consideration the market price of the jobs based on what the competition is selling it for. It also takes into consideration what the current market will pay for the job.
Surveying your competitors, giving them the job specifications, and seeing what they would charge can derive at this simple calculation. The drawback with this method is that you lose control, margins begin to shrink, and profits are diminished.
Charging a price equal to or less than what your competitor charges is not going to increase your profit. It also doesn't take into consideration your budgeted hourly rates. Every piece of equipment in your shop has its own BHR, and that number is not equal to someone else's.
The third method is Value-Add pricing. This method takes into consideration our previous two methods, plus adds additional profit margins for the value your shop provides. Value-Add pricing is difficult to arrive at for some print providers, because some valued items are intangible.
Some examples of intangible services are intellectual data and consulting services. Many print providers think knowledge and expertise is expected to be given away at no charge; that is a cost of doing business. The downfall of this is that the printer sells their printing based on cost plus for the tangibles, and does not build enough into the margin for expert consulting.
The new print provider doing business in a digital environment needs to fully understand that they are not selling just print, but valued communication. There are marketing firms and advertising agencies that do just that—improve a company's communications. These firms charge for that service; why shouldn't you? It is time print providers stop itemizing their quotations, and begin to provide proposals.
Many say a printer is a printer and nothing more. This mind set will never get your company away from the price-commodity sale. Your margins will never rise, and you may find your business in jeopardy in the future.
Changing your business takes time, and implementing a Value-Add price strategy is a must. When selling value, charge a price that reflects what only you can provide.
Ed Bokuniewicz has 28 years in the graphic arts/printing industry. Currently, he is a business development manager for Eastman Kodak Co., and an Adjunct Professor at the New York City College of Technology, teaching a print on demand class.
author: By Ed Bokuniewicz