Announce a Price Increase…Why?

I have written before on the importance of intelligent pricing and its impact on profitability. A question I often get is, “Should I announce a price increase?” My answer is, “No.”

Why would you want to? Why call attention to a price increase and invite questions or shopping around by clients?

Don’t get me wrong, I am not suggesting that you need to apologize or hide the fact that you must increase prices to keep up with inflation. On the other hand, you don’t need to raise the “red flag” either. Certainly, if you have a fixed or contract pricing with a customer, you would be required to inform that buyer, but that does not apply to the bulk of business for most of us.

I have always believed in two principles for pricing:

  • Set up your estimating/order entry system properly, and make sure all cost and mark-up parameters are correct. If you don’t feel competent to do it yourself, ask for help. (At Allegra Network, this is a service we provide to our franchise members.)
  • Annually or semi-annually adjust all pricing parameters to account for inflation. If inflation is running at 3 percent, take a global 3 percent increase on January 1, or 1.5 percent on January 1 and another 1.5 percent on July 1.

    You can follow the Consumer Price Index; or better yet, you should do your own calculation on your variable costs in rent, labor, etc. and take the increase that you are going to experience in your cost structure. In most estimating systems, you should be changing paper pricing as you get updates from your supplier throughout the year.

I prefer making a smaller percent increase two or more times during the year. Either way, your customers will rarely notice because very few jobs are exact repeats in quantity or parameters unless the work is contractual, as noted above. And, if you have contract pricing, you should negotiate inflationary increases into the contract or you will eventually erode your margins.

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Carl Gerhardt is the chairman of Alliance Franchise Brands LLC, the parent company of Allegra Network LLC and Sign & Graphics Operations LCC, and a world leader in marketing, visual and graphics communications, linking more than 600 locations in the United States, Canada and United Kingdom. The company’s Marketing & Print Division, headquartered in Plymouth, MI, is comprised of Allegra, American Speedy Printing, Insty-Prints, Speedy Printing and Zippy Print brands of marketing, printing, mailing and Web services providers. Its Sign & Graphics Division, headquartered in Columbia, MD, is comprised of Image360, Signs By Tomorrow and Signs Now brands of sign and graphics communications providers.

Carl and his wife, Judy, owned and operated their own successful Allegra franchise for nearly 20 years before selling the $2.3 million operation in 2003. He is a PrintImage International/NAQP Honorary Lifetime Member and was inducted into NAPL’s prestigious Soderstrom Society in 2010 in recognition of his contribution to the industry.

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Comments
  • Roger Buck

    Carl,
    Spot on! It’s ultimately up to the owner of the printing company but the key take away is to have a plan in place as part of your busines plan as to how you will manage price increase. Then work the plan.

  • Richard Phelps

    Based upon the title, I thought I would disagree with you. But I do not. I agree if we’re in a contract situation with a customer, then notification is certainly proper and wise.
    We do pass along any material increases as we receive them. In the distant past, we used to accumulate them with intentions of playing catch-up later on. Salespeople liked it when we did this. But "later on" never occurred and we got hurt. No more. We pass them along as we receive them but we do resist receiving price increases as best we can.
    We’re not yet building an inflationary factor into our semi-annual pricing. It may not be far off though.
    Good topic.