Written by Matthew Parker
Print Industry Consultant
Do you know the true cost of the pizza you buy from your local supermarket?
I have no idea how much it costs to make one. I couldn’t tell you the trade cost of the raw ingredients. Even if I knew that, I would need to know the price of the labour and the cooking and the packaging, as well as the transport to the store.
The true cost of making a pizza is almost certainly only known by the manufacturers themselves. And the very same situation applies in print.
No print buyer will know the true cost of manufacturing a printed item.
These days, many buyers know little about print. They may not even be aware of the different press sizes, let alone the more complex areas of costing.
A few buyers may be able to guess at the cost of paper. But they won’t know the cost of running your machines. They won’t know what you are paying in click charges or labour.
Why does this matter for printing companies?
This lack of knowledge means that buyers do not know your profit margins. They cannot demand an “open-book” pricing policy.
Printing companies that remember this have the opportunity to increase their profit margins. Within reason, you can be free to set the profit margin that you want.
Some printing companies forget how hard it is for buyers to accurately cost print. They risk remaining with a mind-set that is focussed on making prices as cheap as possible. This means that they will struggle to control their profit margins and achieve the results they desire.
How can I choose my profit margins when the market is forcing prices down?
If you choose the right sales strategy, it is possible to keep a reasonable margin. Some printing companies are able to maintain high margins on specific types of work.
However, to achieve reasonable margins, you have to have the right sales strategy. If you stick with simply selling ink on paper, it is easy for the buyer to commoditise your product. You enter the likelihood of price wars with your competitors.
If you sell something of value to the buyer, your printing stops being a commodity.
You start being able to achieve higher profit margins. I’m going to cover the idea of value more in my next piece.
However, you can start preparing for change straight away. Here’s how:
Start by segmenting your buyers. Group them into the following categories:
- High technical knowledge
- Less knowledge about print but hard-nosed buyers
- Less knowledge about print and reasonable to deal with
- No print knowledge and not much buying skill either!
You can use this segmentation to apply different profit margins, according to the buyer’s knowledge.
Just make sure you remember that it’s as hard for your clients to cost print as it is for you to cost those frozen pizzas at your local grocer.
Editor’s Note: This post is part of a larger series on creating value:
- How Pizza can Teach us a Valuable Lesson about Buyers…and Help to Improve your Profit Margins
- The Cheese Principle: How to Add Profit to Commodity Print
- Six Ways to Add Value to your Print Sales
- Why Some Customers May Not Value Your Services – And Why Others Will Pay Handsomely For Them
Matthew Parker has been buying print for over 20 years. He’s had over 1,400 sales pitches from printers. Now he’s using that experience to help printing companies engage with their customers and sell print more profitably. Find out more about Matthew on his site. Download his e-book “Ten Common Print Selling Errors And What To Do About Them” for free here.