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Dickeson--Don't Play "Printers' Roulette"

February 1999
Does your company have a clearly defined pricing policy? Is it written down? If it is written, how do you monitor whether or not, and how well, it's being executed? Even if your policy isn't in writing, how do you control and measure it in operation?

Experience indicates that 90 percent or more of printing companies don't have written policies for setting prices. Pricing at most printers is like the common law system of jurisprudence: We make it up as we go along, on a job-by-job basis. Then we try, as best we can, to make a decision based on precedent modified by circumstances.

But we don't have a written body of those cases, indexed and bound on a bookshelf, as lawyers do, to pull down an appropriate precedent to use as the basis for a pricing decision. So how do we set prices? They are far and away the most constant and important decisions we must continuously make that affect the survivability of our firms.

Most often our systematic approach to pricing is to first look inward, to predict our costs. Yet the results of setting a price are external, with the customer who neither knows nor cares what our costs are. Don't we have it all backwards?

In setting a price for a job, we must look first to the customer—look outside the business. Shouldn't the first questions always be: For what is the customer paying us? What value does the customer perceive we're adding to the raw paper and inks we convert to printed pieces? What are the results, the benefits, the "bennies," the customer expects to gain from our conversion services? What are the customer's alternatives for achieving those bennies? What makes our conversion service better or different from others? What do we add to perceived customer value that is special—that adds bennies—not available from other media or direct competitors?

Considering cost first in establishing a job, price has become a misplaced fixation among printers. We think the "customer-sun" revolves around the planet of our estimated conversion costs, don't we? Surprise, surprise. Our "cost-planet" revolves around the sun of customers. Results happen outside the business. Inside the business are only costs, to paraphrase Peter Drucker.

If we're selling a shelf item like business forms or over-the-counter repro services, then we price from a prepared list. Even then, that list must bear a relationship to perceived customer benefits constrained by competitive alternatives. Do we make up the price list by examining our costs and then marking them up, like a merchant selling shelf goods? No way!
 

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