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Little information is being shared on these hardships due to the top-line growth of digital printing. What is the problem? Where are all the great margins and huge profits? What is missing?
The issues are many, including sales and production familiarization. These are obvious. But take a look at a less obvious issue: unprofitable pricing.
It’s curious in this rush to expand services and replace core revenues that many providers are falling into the same trap that has plagued their legacy industries for years—commoditizing their offerings. Based on years of managing their legacy businesses, it is almost second nature to establish pricing based on commodity models.
Many people claim that pricing issues are because of predatory practices or competitive situations. This is not normally the case, yet with variable data printing (VDP), there just aren’t enough providers offering the same services to the extent that bidding is prevalent.
Then why is pricing for VDP being commoditized? Most providers do not start out with the idea of commoditizing their services. They can’t help it. They are using the methods that have been ingrained in their legacy businesses for years.
Pricing issues are due to little experience and lack of exposure to other pricing models that fit this emerging industry better. In fact, if most current providers understood their real exposure and the meager value they have placed on it, they would be even more disappointed in their results.
Many of new entrants have no experience in pricing their services based on the value they provide within the marketplace and the risk they are assuming by providing these services. In many cases, providers are under-pricing their offerings by at least 50 percent. Owners and managers of these businesses have little or no experience in establishing value for the most important element of VDP—the “V” (variable content).
Every successful VDP shop has to adhere to one simple edict: Variable targeted content leads to better results. Note that there is no designation about color versus black-and-white, about size and shape, about mailing—even nothing stated about the content being printed. The edict is the basis for all direct marketing, not just VDP. Variable targeted content leads to better results. Once the edict rules your strategy, everything else, including pricing, becomes execution of the strategy.
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