Thursday April 29, 2010

Pricing Printing - how hard can that be?!

Not hard, apparently. Incredibly easy in some shops. Need to price a one-color job? Double the cost of the paper! Two colors? Triple it. There isn't another industry with as large a variety of certifiably weird and fuzzy pricing methods.

But don't go away, this will not be about the merits of one magic numbers game over another. The fact that you're reading this tells me you've downloaded Morning Flight estimating software. Guesswork and math errors are ghosts from the past.

I'm also not going to tell you how much you should charge your customers. Small to mid-level printing is a niche industry. A pricing matrix that works for you is probably not going to work for someone else in another state or the next county - or for your competitor down the street.

So what's left? Something just as important to the well-being of your company: How to increase profit margins by pricing each job based not merely on cost, but on its value to the customer! Considering the dismal profits many printers take home even in good years, 2010 not shaping up to be one of them, the art of squeezing every dollar out of every job, that's becoming a critical issue, a genuinely big deal.

Now, everyone knows that a sure way to make profits disappear is to leave significant amounts of money on the table. Value-based pricing may be just one of a number of ways to overcome that, but it's a really good place to start.

Let's imagine a price table that has as its baseline your standard Morning Flight prices. We'll now draw a few lines above and below that baseline, each of which will factor in variables such as:

Sales Volume. We may not always agree with how the airlines compute fares, but it's time we accepted that charging everyone the same price, no matter how much or how little business they bring us, has scant validity even on ethical grounds. Think of it as a quantity discount.

Customer Maintenance. How demanding is the customer? How much hand-holding do you have to do? Does he or she always need the job yesterday, then waits a month to pick it up?

Payment History and Credit Worthiness. Is the check in the mail forever, or "gee, I can't believe I forgot to sign it!" What are the chances of the account going belly-up? Keep in mind that most write-offs are caused not by crooks and scammers, but by honest people with poor business savvy who truly intended to pay you but in the end couldn't.

Reruns. Regardless of who messed up. Seriously!

Those are suggested factors. Your mileage may vary, depending on your own set of variables. Just the same, by the time you're done, you would have moved your worst low volume, high maintenance, high risk customers to the highest price line. And made sure your high volume, low maintenance, low risk accounts are at the lowest, minimizing the chance that they'll ever question value. With the rest falling somewhere in between.

Final thoughts: The goal of value-based pricing is to align price with value delivered. Your biggest challenge will be to stay on top of each customer's tipping point. That's best done in small, measured steps.

Click here to read more.

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Morning Flicks - Customizing your Prices

Our video screencasts are a great way to learn how to use Morning Flight.

Click here to watch the April video, a 3-minute demo of how to value-price with the Silver Edition.

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