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Curbing Price Quote Chaos —Morgan

May 2008
I’VE LONG held the belief that print buyers send their print projects out to bid too frequently. A seasoned print buyer typically knows which of his or her suppliers is best for a particular job, so why do many buyers bid out each of their print projects to an average of three printers?

Our team at Print Buyers Online.com decided to get to the bottom of this by reviewing data generated from our popular Quick Polls. Here is what we learned from the people who provided both qualitative and quantitative data in our popular surveys.

Printers Lower Their Prices: In a Quick Poll in March, we asked, “When bidding a print job to several suppliers, how often do you ask your printers to lower their quoted prices?” Thirty-three percent of print buyers said, “Almost never. If we are bidding a job to several suppliers, they should give us their best price the first time. Unless we suspect that a printer has made a mistake with the estimate, we don’t ask them to requote or to lower their price. It’s not fair to request that of our print suppliers.”

Another 48 percent of print buyers said they only ask printers to lower the initial price quote occasionally. “If I bid out a job to several suppliers, and Printer A has the best price, I may decide to request that Printer B match A’s price. There are several reasons why I might do this. For example, perhaps I haven’t given work to Printer B in a while.”

As one of the 92 survey respondents volunteered, “I expect my suppliers to give their absolute best price the first time.” Another stated, “I don’t accept bids that are ‘low-ball’ just to get the work—no supplier can afford to maintain that kind of pricing.”

We asked a similar question to our suppliers: “How often, if ever, do you offer to lower your price when you find the initial price you quoted to a customer was too high?” Surprisingly, 70 percent of the print suppliers said they occasionally lower their price quotes if a customer asks them to do so. As one supplier stated, “If it is a good client and they need help to stay within a budget, we will lower our price. Or if a prospective client wants to use us, but can’t justify the higher price, we may adjust it, taking into account the potential benefits (potential volume, profitability, etc.).”

The inherent problem with this method is that buyers begin to believe that suppliers are taking this cut out of their profit. Which brings us to...

Profit Misconception: In January, we asked major print buyers, “How much net profit do you believe the average printing company makes?” Almost 80 percent of the polled respondents said they believe printers are making more than a 7 percent net profit.

Because print buyers assume printers are achieving much higher profit margins, they may take for granted that there is room for negotiation because it will just come out of the printer’s profit. This, in turn, generates the belief that the most important thing to a buyer is price.

It’s in the Details: Print buyers are generally very good about capturing the specifications for a print job (i.e., finished size, ink specifications, etc.), but rarely include the overall goals or expectations for the print projects (i.e., how the project will be used, the expected ROI on the piece, quality expectations, etc.). Buyers’ bid sheets are generally flawed because the overall expectations aren’t communicated.

As you are well aware, the more sparse the specs, the more room for interpretation. Each printer is likely to interpret the specs in entirely different ways, which will result in a larger variance between quotes.

It’s Not Yet Live: We’ve learned that 38 percent of buyers ask for a quote before a print job is even “live.” Buyers often need to get a ballpark price on projects that are being considered, but aren’t yet real.

Getting price quotes at this stage is important for a myriad of reasons. For instance, it allows advertising agencies to pitch proposed projects. It can help a corporate buyer to create budgets for marketing dollars.

As one print buyer stated, “We call it ‘menu pricing’ and use it with our major print vendors for on- going pieces such as letterhead, product inserts and envelopes.” Another said, “Often, on the first round of bidding, we are working from concepts and not the defined finished artwork. But the client is asking for print costs, so this is when I try to add everything but the ‘kitchen sink.’ ”

Consider how many of these types of speculative jobs tie up a printer’s estimating resources. A printer usually doesn’t know which bids are for live jobs and which are just testing the waters.

Bad Tracks: Some printers are generally very poor at tracking their price quotes. When asked to give a price on a project with the exact same specs as a job they quoted six months ago for the same client, the pricing often varies considerably.

While material costs such as paper will play a part in the month-to-month fluctuations, many printers will confess that they don’t check or even record historical quotations. This causes confusion for the buyer—or worse, distrust.

It’s Time to Talk: At the end of 2007, we asked our major print suppliers, “In general, how much of a price increase should print buyers be prepared for in 2008 compared to prices they are receiving in 2007?” Forty-one percent of print suppliers said print buyers should expect more than a 6 percent increase in costs in 2008.

We, at Print Buyers Online.com, have an even somber prediction: The cost of print projects will increase 7 percent to 10 percent in 2008 due to rising paper costs, postal rates, energy costs, etc. And, of course, most of these costs get passed on to the print buyer.

Astonishingly, when asked the same question, 40 percent of our surveyed print buyers said they expected costs of print projects to raise up to 3 percent at the most—or not at all! This tells us many buying companies are unprepared for how these costs will impact their budgets.

Given the pricing issues that already exist between buyers and their suppliers, it is more important than ever for buyers and suppliers to do a better job of communicating with each other. PI

Suzanne Morgan

About the Author
Suzanne Morgan is president of the annual Print Oasis Print Buyers Conference (www.printoasis.com) and Print Buyers Online.com, a free e-community for print buyers and suppliers (www.printbuyersonline.com). PBO, which has 11,0000 members who buy $13 billion a year in printing, conducts research on buying trends and teaches organizations how to work more effectively with print suppliers. Morgan can be reached at smorgan@printbuyersonline.com.
 

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