Proven Pricing Strategies
Used By Printing Industry Leaders

By Craig L. Press

President, Profectus Inc

Printing Industry Business Consultants

Devising an effective pricing strategy is one of the most critical elements for sustaining a successful printing business. After all, you cannot make a sale without first setting a price.

Nevertheless, most companies give little thought to formulating an appropriate pricing strategy. Many companies utilize simple pricing approaches predominantly to beat the competition, cover costs, and sustain the business.

The industry market leaders tend to implement more innovative pricing strategies that are designed to maximize revenue, cultivate growth, earn higher profits, and generate the highest shareholder value. These price-savvy companies typically apply numerous pricing tactics intended to address distinct short-term and long-term objectives.

The process of setting an adequate price is not an exact science. Here are a few of the many pricing strategies used in the printing industry.

Cost plus Markup Pricing Strategy This is the most common pricing strategy used by our industry. A sell price is determined by forecasting the cost to produce the order using estimating software, spreadsheets, or worksheets, and then a desired or tolerable profit markup is added to the estimated cost. It is often left up to the estimating department to set the price based on the estimated costs.

While cost is an important factor for determining price, this strategy has some serious flaws. Estimators are generally unfamiliar with the marketplace, product demand, perceived value, and the long-term value of winning the customer's business. It often restricts sales, leaves money on the table, and decreases a company's ability to compete and grow. In general, companies depending on a cost plus markup pricing strategy don't become market leaders; they are perpetually the underdogs.

Skimming Pricing A skimming pricing strategy is when a company charges the highest initial price that customers will pay for a new or innovative product that may not be easily assessable from the competition. As the demand of the first customers is satisfied, the company lowers the price to attract another, more price-sensitive segment. Eventually, the price drops as the product matures and competitors offer a similar product or service at lower prices. A good example of Skimming Pricing is when the early adopters of large format printing were able to charge higher prices before large format printing became more available and price competitive.

Gain Market Share Pricing With the gain market share strategy, prices are set low to gain market share against competitors. Lower prices will eat into your profits, but there are good reasons for this approach. A company may lower prices on digital printing orders to get new customers, knowing that later they'll be able to sell these customers other, more profitable services such as long-run offset printing or mailing services, once they get comfortable with your company. You don't make as much early, but you plan to make money later with "back end" sales.

Versioning Pricing
The versioning strategy is a very effective tactic that can be easily implemented. The idea is to quote the customer slightly different versions or alternatives of the product, for less money. For example, you can quote alternative prices for a more economical size, paper, binding, packing, etc. This strategy can also be used for up selling; i.e. only $79 for an additional 2,000 copies.

Versioning is often frowned upon by the estimating department because it creates more for work for them, but it's proven to win more quotes and customers. Taking the additional effort to present the customer with cost-savings alternatives demonstrates your will for their business and improves their trust in future pricing.

Customer Demand Pricing A customer demand pricing strategy is typically driven by an event, a new trend, niche, or the availability of similar products. For example, a company that specializes in political signage can increase prices during the Senate and Presidential elections, when demand is up. After the elections, demand for political signage will decrease and so will prices.

Perceived Value Pricing
Perceived value pricing is the valuation of a company's products or services according to how much the buyer is willing to pay for it. To price based on perceived value, the customer needs to be convinced of the tangible and intangible values they will receive by choosing your company (i.e. capabilities, on-time service, friendly staff, trust, quality, stress-free, ease of doing business, etc.) Some buyers will not take a company seriously if the prices are too low because they often associate low price with low quality or poor service. To price base on perceived value, consider the following questions:

Conclusion These pricing strategies are just a few of the many schemes used by companies. Other strategies include; value added pricing, product line pricing, promotional pricing, psychological pricing, differential pricing, bundle pricing, and volume pricing. To become a market leader, you need to have a good understanding of a number of different strategies and adopt the strategies that best fit your company's short-term and long-term objectives.

To learn more about developing and implementing an effective pricing strategy for your business, attend Craig Press' "Pricing Strategies for the New Economy" seminar:
- March 2, 2012, Graphics of the Americas Expo and Conference, Miami Beach Convention Center Graphics of the Americas Seminars Page

- April 17, 2012, Printing Industry Midwest, Ricoh Print Learning Center, Roseville, MN PIMPricing Strategies for the New Economy Workshop Registration Page

Improving Employee Performance In Your Printing Organization

It's a fact that the labor pool for skilled employees in the printing industry is shrinking. Motivating and retaining productive employees in today's economy is one of the most significant challenges for printing company managers.

Consistent praise, recognition, and incentives are proven to be the best way to improve employee performance, as well as satisfaction. Incentives, Motivation and Workplace Performance, a study conducted by researchers for the International Society of Performance Improvement, found that properly designed and implemented incentive programs will increase performance from 25 to 44 percent.

Creating an incentive plan involves defining the goals, defining the objectives, defining the measurements or calculations, and defining the incentive rewards.

Incentive measurements or calculations can be based on numerous criteria such as employee efficiency (actual vs. standard), spoilage costs, down time hours, net good impressions, orders processed, number of customer complaints, employee absenteeism and tardiness, or number of incorrect job tickets.

Incentive benefits can be financial rewards based on a fixed dollar amount or based on a percentage of an employee's wages earned during the incentive period. Financial rewards can be subsidized using corporate credit card rebates, vendor rebates, local business sponsorships, or income from recycled materials.

Incentives do not have to be in the form of cash. You can also reward employees for their performance with tangible items such as lunch on the company, gift certificates, grocery store gift certificates, movie passes, merchandise, dinner for two, or weekend getaways.

Printing companies that provide exceptional incentive programs that motivate employees and appropriately reward them for their performance will realize the greatest financial gains.

Printing Business Seminar: Maximizing the Performance of Employees

By: Craig L Press,

The Printing Industries of Wisconsin (PIW), &

The Institute for Graphics and Imaging (IGI)

November 11, 2009

9:00 am - 3:00 pm

Performance is essential for maximizing efficiency, productivity, cost effectiveness, and the utilization of resources. This session will teach you how to improve the overall performance of your organization by motivating your administration and production employees, selling change, overcoming resistance, setting performance goals, creating performance benchmarks and scorecards, pinpointing areas of improvement, measuring results, and creating incentive programs.

What Attendees Will Learn?

- Maximize the performance of your most valuable assets, your people

- Developing a performance oriented culture

- Integrating lean practices and principle

- Why "Change Is Good"

- 10 Ways to sell change

- Proven techniques to motivate employees

- Retaining your best employees

- Improving employee morale and engagement

- Evaluating employee performance

- Setting realistic goals for your employees

- Creating employee key performance metrics and scorecards

- Effectively collecting and presenting data

- Designing employee incentive programs

- Using technology to improve performance

Who Should Attend?

Principles, managers, financial officers, human resource managers, or anyone wanting to improve company performance by engaging, motivating, retaining, and maximizing the capabilities of employees.

Click here for additional information or to register:

http://www.igi.org/events/IGI_CPress_BuildingPerf_F.pdf

Best Practices for Printing Estimating & Planning Seminar

By: Craig L Press and
The Printing Industry of Minnesota

October 20, 2009

9:00 am - 3:00 pm

Get Your Game On...

Sound estimating and pricing practices are essential to the success of all printing organizations. An estimate that accurately reflects actual costs plays a key role in making intelligent pricing decisions and determining your bottom line. The speed in which you can provide your customers with a price quote reflects your organization's ability to provide prompt service. An estimate is also critical for forecasting materials requirements, labor and equipment resources, production schedules, and costs. All successful print projects start with an accurate time, material, and cost estimate. This course is designed to improve your estimating planning, and pricing process by implementing industry best practices.

What you will learn:

- Best practices for Printing & Estimating & quoting prices

- Request for Estimates

- Feedback reports that can sharpen estimates

- Qualifications and responsibilities of the ultimate estimator

- Planning jobs for production

- Pricing Strategies, value added pricelists

- Improving the quality of information from customers to sales force

- Quotations and price proposals formats that benefit you and your customers

- Estimates as a sales tool verses a production tool

- Using budgeted hourly cost rates and production standards

- Over 100 calculations and formulas for estimating time, materials and costs

- Computerized estimating software and e-commerce

- Estimating prepress, press, digital printing, bindery, paper, ink and other materials

Who Should Attend:

Estimators, sales and customer service representatives, production planners, managers, print buyers, or anyone responsible for estimating, pricing, or planning print projects

Location:

Printing Industry of Minnesota, Inc.
Rosedale Tower

1700 Hwy 36 W Suite 510

Roseville, MN 55113
Phone: 651.789.5500

FAX 651.789.5520

Click here for additional information or to register:
http://www.pimn.org/classes/pim_classes_detail.aspx?id=217

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How E-Commerce Is Changing The Role of The Customer Service Representative

As more E-Commerce innovations become available to the printing industry, customers will become more empowered to place, track, and manage orders on their own. Many of the Customer Service Representative's daily responsibilities will become the customer's responsibilities. Rather then passing information from the customer to the CSR and back to the customer, the customer will be able to resolve questions at the click of a button at Internet speed.

So, what will your CSRs be doing in 3-5 years? The Internet, email, preflight software, and smarter file creation software have already begun to change the role of the CSR. Today, CSRs are spending more of their day at the computer, communicating information to customers, suppliers, and intra-company staff via email and web forms.

The future CSR will be more of a sales consultant position. Responsibilities will include preserving personalized relationships with customers, creating new business opportunities, and troubleshooting jobs.

Customer phone calls to the CSR will change to technical questions about file preparation, production requirements, and billing questions. The customer will also be contacting the CSR when there is a problem with the order status, finished goods inventory counts, and other information viewable on the Web.

The same E-Commerce features available to the customer will help the CSR service customers. This also presents the opportunity for the CSRs to work from remote sales offices, telecommute from their home, or use wireless Internet devices while in the customer's office.

Perhaps E-Commerce may even combine the roles of the salesperson and the customer service representative into one position in the future.

Profectus, Inc, is a national consultancy that helps printing organizations implement best business practices and maximize the value of their information technology investments.

Powerful Ways to Manage People in Your Printing Organization

You're only as successful as the people who helped get you there. Managing takes a lot of patience. The more successful your relationship with employees, the further your career will go in business. Some managers take a stringent, stern approach, but this type of managerial style is slowly becoming archaic and ineffective. Powerful approaches to being a manager are less about giving orders than it is about reciprocal respect.

Acknowledgment and Humiliation
Old style management techniques fostered respect out of fear and bossy personalities. The new manager gains respect from employees by acknowledging ideas and developing relationships with the staff. When an employee's idea is implemented, overseeing its progress while acknowledging the employee's contributions to the company will further the success of the business and give credit where it's due.

If the idea is not feasible, continue to foster positive feedback, giving the employee motive for creativity. If the idea or process fails, positive reinforcement is a better way to correct mistakes. Humiliation cultivates anger and alienation of employees towards managers.

Friendliness while Managing
Although employees recognize the organizational ladder, friendliness eliminates lines of nervousness and hidden anxiety. Remember details and ask staff how their day is going. Some managers hide behind closed doors in small offices and never interact with their staff. The failed relationships with employees only hurt and reflect poorly on the manager. As employees feel more comfortable with a manager, ideas and cooperation are more prevalent than emotional obstacles. Ideas are created from group lunches and a friendly atmosphere discussing business development.

Open-Door Policy and Approachability

If you want to keep contact with employees and their performance, being approachable eliminates communication barriers. Managers with open-door policies make it easier for employees to notify you of obstacles, goals, and ideas to bring to the company. It opens the lines of communication between the manager and his staff, which is more beneficial for the company. Startup companies especially benefit from open communication since it helps identify growth issues and creative ideas.

Humility and Respect
Part of being a good manager is admitting faults and acknowledging wrongdoing. When employees see their boss is humble, it creates a higher amount of respect. Some managers see the acknowledgment of inaccuracies and mistakes as a sign of weakness. However, people have more respect for a manager who admits when he's made a mistake rather than hiding it.

Make Requests Clear and Concise
Finally, when asking for projects or performance from an employee, managers should make requests clear without ambiguities. Employees with unclear direction lead to mistakes and misunderstandings. Let your employees know exactly what you expect from their work ethic and performance. This eliminates confusion and frustrations in business organizations.

Although being a manager puts you in a position of power, treating employees with respect increases performance and business growth. Increased performance in a business organization makes the manager successful. Employees can make a manager successful, or they can make a job unbearable. Follow these few rules for a more enjoyable job and continued success.

By Lysis

Profectus, Inc, is a national consultancy that helps printing organizations implement best business practices and maximize the value of their information technology investments.