Bill Farquharson posed this question in a recent blog, The Big Questions I’d Like Answered.
“What percent of the time when a client says, ‘Your price is too high.’ are they telling the truth?”
It was an entertaining blog, and some of the questions would be fun to debate over a beer, but I’ll try to address just this one.
For starters, what does the client mean: “Your price is too high?” Does a competitor really have a lower price, or is the price just higher than they want to pay? And are they comparing apples with apples—same paper, same run length, same credit terms, same lead time, same print quality, same finishing?
But, even after you’ve gotten the answers to all those questions, I would still say that clients are telling the truth a lot less often than you’d think. I certainly suspected this when I was selling paper, but the only way to know for sure was to test the water—hold my price until I lost a few orders. Of course, when management is pushing for volume to avoid downtime, this can be difficult.
Talk to sales people. When they lose an order, most of the time they will blame price. But when they win an order, they rarely credit price. So what’s really happening out there?
We got a unique window into the market after an acquisition. We talked to our new sales people, slash former competitors. They asked us why we were always undercutting them on price. We thought they were always undercutting us. We were both being lied to a lot more than we realized. As I used to say, “If they lie to me at 3 p.m., then lie to you at 3:30, by 4 p.m. it’s the truth.”
This explains why paper prices were depressed for more than 20 years—from 1980 to the 2000s. Paper prices are up now. Consolidation and mill closures have brought supply and demand more into balance. With larger market shares, mills have more incentive to protect their price rather than the next order.
The print market is still more fragmented, with excess capacity, but even though its harder, printers also need to protect their prices and margins.