Printing industry prices are decreasing at a record pace, and profit margins are heading south with them. The average printer’s profit margins decrease by 0.5% each year. There are a number of different factors which contribute to this decrease, but the question we must ask ourselves is “why are we doing this to ourselves?” The printing industry far too often chooses to shoot itself in the foot, and we are thus primarily to blame for the mergers and bankruptcies currently plaguing our industry. In this article, I will focus on what we can do about prices—the most basic contributor to a printer’s bottom line.
Despite the statistics on prices, everyone has a preconceived conception of how prices will change over time. This perceived price is different for everyone, and vastly different between printers and clients. Many in the industry have become so hungry for work that the client’s perceived cost has become more important than the actual cost for doing a job. The mentality for many printers has become “we must give the client what he wants, or he will go elsewhere to fulfill his needs.”
Because nearly everyone has adopted this faulty mentality, the client is not wrong in thinking the same way. It is the printer who has set the precedent of “we can do anything”—the client is simply taking advantage of that offer. It only takes one printer making such an offer to set off a domino effect—soon every other printer feels compelled to follow suit in order to keep clients.
The mentality of “if you won’t do it, than I will” has gripped the industry, and the number of printers left standing is quickly dwindling. Many printers have left highly competitive markets in search of more profitable pastures. While changing focus has worked for many printers, the long term will see every market become highly competitive, as more and more plants expand their product and service offerings.
New technology has offered many ways of speeding up the printing process and increasing profits again. It has also created many new forms of competition that were not a factor ten years ago.
The client mentality is technology on the whole should allow you to create a better product, in less time, and at a lower cost. To some degree this conception is correct, but many new technologies are not incorporated for at least a decade after conception. How many times have you heard that JDF will save the industry?
Other technologies are so expensive and experimental that purchasing them right away would lead to a printer being on the “bleeding edge” rather than the “leading edge”. Technology may not be the panacea it is made out to be for the average printer.
The mentality of “I’m getting what I asked for” is another factor which leads to a discrepancy in pricing from printer to printer. Making sure your client is comparing “apples to apples” is essential in keeping your company competitive. Client specifications are often inaccurate, which can lead to inaccurate price comparisons. When coupled with printers tweaking specs to optimize their equipment, or taking liberties with stock names or weights, it’s often difficult to determine the best value—especially if the client is unfamiliar with the printing industry.
Asking to see a competitors specifications (not the price or the name) can be very helpful in discerning where the price differences are. Also, make sure that the estimator, the sales rep, the client, and all other involved parties are involved in any changes to the original specs. Miscommunication can lead to the dreaded reprint, and we all know how costly that is.
As I have already stated, we as printers often make the choices that make us unprofitable, thus, we must start taking industry-wide action to move towards profitability again. While there is no easy answer or action, I have often thought that a marketing board—a group of unbiased people that produce a floor and ceiling of acceptable prices for given jobs—may be one step in the right direction. But even the most unbiased board would have its limitations and drawbacks.
Attempting to change a person’s perception on pricing is futile, the best you can do is to educate your clients and hope they change their perception accordingly. Regardless of what people think about prices, there are still basic costs which must be covered in order to make money. Estimating a job correctly is the foundation on which successful printers have built their businesses. The further you choose to deviate from the prices set by your own estimates, the greater the risk of your business collapsing.
Next Month:
The Internal Price Killers.
If you have anycomments, solutions, or general input on this or other topics, please feel free to contact Johnathon at
johnathonanderson@graphicartsmag.com.
