ESTIMATING AND PRICING — RECOGNIZING THE DIFFERENCE
ESTIMATING AND pricing are the two most indispensable areas of the printing sales process, according to Gary Cone, vice president of Seattle-based commercial printer Litho Craft Inc., and author of the NAPL book “Price Doesn’t Count.” He notes, however, that although printers sometimes use the terms interchangeably, they are definitely not the same thing—and it’s critical for managers and salespeople to understand the difference.
“Estimating is a science—a mathematical calculation based on the job specifications and the variables and parameters of the production process,” he says. “It’s a repeatable process, yielding the same—or close to the same—results each time.
“Pricing, on the other hand, is an art,” Cone continues. “Pricing is determined after the estimate is calculated and requires the use of judgment and balance.”
Depending on a host of variables, including the printer’s competitive positioning, market conditions, its relationship and history with the particular customer, the kind of job, the customer’s schedule requirements and quality expectations, etc., the determined price may be higher or lower than the estimate.
Because of the huge impact pricing has on a company’s profit performance—for good or for bad, depending on the expertise of the individual determining it—pricing must be a management decision, Cone points out.
“For most commercial printers, pricing is not determined from a pre-defined, fixed grid. Placing pricing decisions in the hands of individuals who don’t understand the principles involved or who are more prone to discounting than to balancing the prices could result in several financial consequences for a printing company,” he adds.
“Conversely, when pricing is done correctly—and by that I mean charging for additional value when the situation warrants and using price as a profit-generating tool—it can be a real boon to a company’s financial performance.”
Cone points to an “intuitive element” in pricing that is not part of estimating. “Because estimating is a defined process based on repeatable scenarios, it has inherent stability and safety measures. If every job was sold at the estimated price, the company should, in theory, make a profit,” he notes. “Pricing, on the other hand, requires a judgment decision that, if not made wisely, erodes financial stability. Therefore, it’s a critical management function.”