Base Pricing on Value, Not Cost

The current economic conditions are putting pressure on everyone to drop prices in order to get the work. As always, the prepress department is becoming a black hole as printers use it as a loss leader, thinking a low price will get them the job.

Pricing is always an issue, no matter what the economic conditions. Usually, print owners are more concerned about the price than customers are and they make assumptions that shrink their margins. In reality, for customers it is always about price and another issue. The lowest price might not be the best if the job isn't delivered on time or isn't the expected quality. Printers tend to think buying decisions are made only on price. There are always other factors that affect the price. The printer has to find out what the other issue is.

Successful printers understand there isn't a "one size fits all" approach, and this means pricing has to be managed. Different prepress tasks have different values in the customer's mind. Printers must understand the differences and be able to identify them. No one strategy can cover all the pricing situations in prepress. Pricing strategies have to be in place for typesetting and design. Another strategy has to be in place for customer created files. Another pricing approach has to be used for pricing prepress functions.

Pricing Correctly

In my book "12 Secrets for Digital Success," I outline the effects of an organizational structure on managing pricing policies. Unless someone is responsible for production and focusing on pricing, work can be produced and the company can still lose money.

A production manager becomes the choke point for work. Everything goes through his hands before it enters into production to assure that the work can be completed on time and for the estimated price. To assure that prepress jobs are priced properly, there must be a pricing standard for the different tasks the prepress department performs. Printers must develop pricing standards for typesetting, design, customer created files, and prepress functions. Each function has a different value, so they should not be treated the same.

For instance, most prepress departments have someone who does typesetting and design. Typesetting is a basic function that generally is priced as a commodity. The prepress department usually has a sample of the work or a good framework of what is required. Often, the order is being created for a sample. The person creating the work knows what the customer wants and has little latitude in making changes.

Design work requires more creativity from the prepress staff. Usually the person creating the work has design experience and incorporates original ideas into the design. The creative component adds to the value.

Most printers make the mistake of treating typesetting and design the same. They assign an hourly rate to the work and measure only the time it takes to create the job. Not taking the value into consideration not only loses money for the prepress department, but lowers the perception of value in the customer's mind. The faster a typesetter or designer finishes a job, the lower the selling price.

Cost vs. Value

One way a printer can overcome this problem is to assign definitive prices to the types of work they do. Printers should have a list of the types of work they do and assign a price to each of those types of work. A form might have one price and a brochure would have another price. Work that is replicated from strict customer standards could be priced lower than work that allows the designer to be creative.

Most printers have low self esteem when it comes to design. It is as if they are embarrassed to charge the value price. Many printers have designers who are as good as any freelance commercial graphic designer or ad agency employee, but they don't feel comfortable putting the proper value on the job because they think they are "just a printer."

Some printers see Internet print providers as a threat, but you can use them as an example to see the perceived value of typesetting and design.