This 79-120% variance in the wage data is in the same ballpark as the 85-140% range of the meaningful cost of living range. The numbers aren’t exact, but my point is that costs and prices fall into a relative range, as opposed to printing prices, which I commonly see falling into a much wider variance of 50-250%.
Real World Applications
Now let’s get down to you and your competitor in your market. How big a variance in cost is there between the two of you in equipment? Of course, you are a better negotiator and get a better deal, but you’re not getting your equipment for half price and he’s not paying twice as much as you.
What about paper? Yes, paper cost varies mainly because of the transportation factor. However, since one brand of paper is almost a perfect substitute for another, the price of paper doesn’t include excess profit. Fact is, I priced a $10 per thousand paper from an early 1960s paper catalog and saw the price was about $5 then, or a jump of 100%. Then I went to the CPI Inflation Calculator at the Bureau of Labor Statistics site and found that $5 in 1961 equates to about $37 today, or a jump of 740%. (Surprise number three.) So, we can’t blame our paper merchant for our increased costs over the years. Fact is, paper is a real bargain!
My point is all printers located in that same area are faced with similar costs for paper and equipment.
Now, what about overhead? I doubt if the electric company or other utilities are giving you a break compared to your competitor. What about building rent? The price per square foot is typically similar in an area for similar space. And although that varies regionally, it doesn’t vary that much. The Moody’s/REAL commercial property index (CPPI) is a periodic same-property, round-trip investment price change index of U.S. commercial investment property. It was created for our friends the derivative traders to help them put a value on their investments.
This report compares regions which showed the West’s Industrial Properties Index at about 1.65 (most representative of our costs), the East at about 1.4, the South at 1.2. So, yes, there is variance in the cost of real estate which, in turn, translates into our cost of occupancy. But, again, it’s not double. Rather, this scale shows a 1.2 to a 1.65, or a range of 80-110%, when the middle is a 1.5.
Again, in printing it is not uncommon to see prices vary from 50-250% when all of the cost indicators would lead us to expect more like 85% to 120-140%. Hmm.
What’s a poor printer to do? Adopt a price strategy, stick with it and go sell something to someone. I have prepared an 18 minute video on the subject of “The Role Price Plays in Our Success” that explains price strategy more thoroughly. It is available at www.crouser.com or at www.MyPrintResource.com/media-center. In short, price isn’t a strategy by itself. Price has to be coupled with product differentiation and sales activities. In short, price, product, and sales activities make up your strategy; not just price.
As for the price part of the strategy, think of it this way. Line up all possible prices in the U.S. on a particular price point from lowest to highest. The first or lowest price would be zero and the absolute highest would be 100. Now, where do you put your price? If you are in a high price area, would you put it above the highest price? Probably not. So, if you’re in a low cost area, would you put it below the lowest price? Probably not there either.
What I shoot for in the Crouser Guides, which is a practice you may wish to adopt, is that a low price strategy should be about the 25th percentile, or where you could expect about 24 prices below and 75 above. A middle price then would about the 50th percentile, or 50 above us and 49 below. The high price would then be targeted at the 75th percentile, or 74 below and 25 above.
That’s a low, middle, or high price strategy. Your list price is like the sticker price at a car dealer. It’s a starting place and it can be low, middle, or high. Usually it corresponds to the amount of costs you have.
Yes, prices vary from region to region. However, there is as much, if not more, price variance within Georgia than there is between the Northeast region and the South. Take the Buckhead section of Atlanta and compare it with Charlton County, GA. A similar comparison may be made throughout the country.