There is no doubt that the vast majority of print shops are using some sort of estimating/MIS system. However, some printers still appear to be pulling prices out of the air despite this technology.
Two of QP’s columnists are particularly involved in the subject of pricing. Tom Crouser has been writing a series of articles over the past few months on the subject and also publishes a pricing guide. John Stewart has just published the 2010-2011 Quick Printing Industry Pricing Study. Both agree that many printers are, indeed, still pulling prices out of the air, even if they do have computerized pricing capabilities.
“I see about 80% of all printers with estimating software/MIS systems,” says Crouser. “However, I see a vast majority of all printers (with or without software) pulling the numbers out of thin air. The software, however, has allowed the pulling to be done faster than manually.”
“Even with sophisticated estimating and MIS software, I strongly believe many owners end up casting the dice and hoping for the best; sometimes being totally oblivious to what the numbers indicate,” says Stewart. “This is nothing new and has been going on since I got in the industry in the early 1970s. The estimating programs have simply increased the speed in which we can offer up screwy prices.”
This is not to say that estimating/MIS software is not an important technological tool, but to point out that some printers are not using that tool properly.
Says Crouser, “I’m specifically thinking of a number (of printers) who, when faced with pricing things they didn’t normally do, such as building websites, conclude that they should use one-half of their prepress hourly rate. Why? I assume it is because they were thinking they didn’t use any equipment or something. However, the real market number for such services is considerably above the normal rate, and that’s just one example.”
Way back in 1994, print estimating guru Philip Ruggles (recently retired) pointed out what he thought were the basic components of proper pricing in his book “Computer Dividends.” The subtitle was “Management Information Systems for the Graphic Arts” and it came out in the early days of computerized print estimating. He urged his readers to study the list and “consider those components that are definable and easy to quantify, as well as the numerous components that are established by the whim and subjectivity of the person establishing the price.”
Market demand for the product or service.
Estimated cost of the product, e.g.: cost of the product without profit.
Price charged by the competition.
Quality level of the product.
Services provided in conjunction with the product.
Volume of work in the company.
Customer’s ability to pay, willingness to pay, speed of payment.
Future possible business from the customer.
Defined amount of profit the company feels it must make.
Value added for the job.
Difficulty of the job.
Difficulty of the customer.
Ego satisfaction of the job, both from customer’s and printer’s standpoint.
The graphic arts company’s exclusive production capability.
Customer’s resale value of the product.
Geographic (physical) closeness of the customer.
Obviously, a couple of things on that list have changed in the nearly 20 years since it was compiled, but for the most part these components still can be part of the pricing process. Many, if not most, can also be integrated into an estimating/MIS system. So can information from pricing guides and pricing studies. As Stewart says, “I believe both (pricing guides and pricing studies) are needed and should be used in conjunction with estimating software to establish premium, regular, and discounted pricing.”
Of course, even the best studies, guides, and software won’t be able to prevent printers from pulling prices out of the air.