Faced with accelerated competition and economic growth challenges, profitability remains top of mind for all print shops around the world. From offset printers to flexible packagers, adaptable pricing strategies and estimate accuracy impact the bottom line and put pressure on printers to evolve.
The problem is, not all printers understand the costs they manage every single day. Without the right integrated print technology in place, many companies have no way to track job performance and struggle to see where they are making money—and where they are draining resources.
The bottom line is that your pricing is a direct reflection of value, and it influences the quotes you send to your customers, the estimates you create internally, and the final product you deliver. If your prices are too high or the quotes are too complex, you’ll scare away customers. Alternatively, if your prices are too low and your estimates are riddled with inconsistencies, it’s your production team and profit margin that suffers.
In sharing the importance of pricing and estimating in the print industry, we hope to shed some light on how to improve your pricing strategy and estimating process through modern print MIS and ERP technology.
The Power of Price
The process of setting a price is driven by the need to maximize revenue, cultivate growth, and earn higher profits. It’s not an exact science, especially for printers, and there are different pricing strategies that you can use.
Market or competitive pricing is based on the average pricing in the market. This is beneficial when you’re trying to capture a larger audience while still making a profit. Dynamic pricing is a model used to determine product prices according to demand. This approach requires frequent price changes but can lead to higher returns based on seasonality.
When determining the best pricing strategy for your print shop, you need an understanding of cost breakdowns to see which jobs are profitable and which ones are not. Unfortunately, many printers do not have full visibility into the total cost of a print job. Even though they do it every single day, they may not have the right systems or technology in place to track, manage, and optimize their pricing and estimates. To paint a better picture, here is a quick overview of all the costs included in an average print job:
- Fixed Costs
When a print job is first received, companies already know the fixed costs. These are the general business and production activities required for every single print job that comes in.
- Administration (i.e., rent, insurance, taxes, office, etc.)
- Sales and Marketing
- Production —Prepress and logistics
- Production labor
- Print Equipment Costs and Maintenance
- Cleaning Materials
- Variable Costs
Each print job differs in volume, materials, and requirements. Variable costs are those that respond proportionately to these changes.
- Raw materials
- Offset (i.e., ink, plates, and paper)
- Digital (i.e., service and supplies)
- Hourly production wages
- Packaging supplies
- Warehouse and shipping costs
- Finishing Costs
Once the printing cost has been calculated (fixed and variable), the job may still require finishing. This means companies will have to add the finishing costs.
- Finishing Equipment and Maintenance
- Labor Costs
Once a printer estimates all of the fixed and variable costs, the next step is to figure out how to measure the cost of each job. This can be done by either measuring hours of production (BHR) or the number of impressions, also known as the “click model.” BHR has been used for decades, whereas the click model was only introduced back in the 90s. To measure the total cost of a print job, printers can use one cost model or a combination of both.
What’s Devouring Your Profits?
Before technology advancements, increased demand, and heightened expectations came in to play, print estimates could take a week or more to produce. When a customer requested multiple quotes with pricing estimates for several different unit counts, it took a significant amount of time and energy for an estimator to track down all the information and final pricing required for the sale.
Today, the first estimate the customer receives is most likely going to be the one accepted—if it looks reasonable. In a recent blog, we talked about common print estimating mistakes that add up. Relying on outdated fixed pricing and not charging for unseen extras or overhead costs are costly repercussions for a print shop in the long term. These problems can all be solved with an integrated estimating solution or print management information system (MIS). But there’s more to the story than just estimates.
If you’re looking at the bigger picture, your profits are being destroyed by mistakes, errors, and inefficiencies from the initial sales call to the production floor to delivery. There are production inefficiencies when substrates are changed out several times a day. There is excess inventory that might never be used. All of these areas are causing you money during every single job, and you don’t have the operational visibility to see where the real problems are.
The more manual interaction you and your staff have with pricing and estimating, the more opportunity for error. And errors in the early stage of customer service can be disastrous, causing you to lose money on the job—or even worse, to lose the customer.
How an Integrated Print MIS Solution Manages Pricing and Estimates
So, what’s the solution to producing more accurate estimates and maximizing your profits? A properly configured MIS/ERP solution includes the flexibility and functionality you need to centralize information flow, support your pricing strategy, and analyze your profitability. If you have never heard of print MIS/ERP, get introduced to the technology here.
Consider this: instead of an estimator running around trying to source the latest pricing tables and talk to different departments, they have an integrated print MIS/ERP system that gives them instant access to all the necessary information to build a precise quote. The estimator creates an accurate estimate with up-to-date shipping preferences, agreed-upon pricing levels, inventory that might be on hand, previous work done for that customer, etc.—and the customer receives a well-informed quote promptly. You’re not only the first company in the door with a quote (so you get the business), but you’ve also structured your pricing so that you make a healthy profit margin on the job in question.
A cloud-based print MIS/ERP solution with backend functionality to support your financials can give you this control over your pricing and estimating. Without the worry of potential errors, your team can reallocate their energy towards increasing profit margins and expanding your business. Let’s dive deeper and explain 5 ways that an integrated print MIS system can specifically help you price print jobs to maximize profits:
- Easily track estimates that are converted to orders
With one click, your team has access to all of the pricing and other data required to make decisions and generate a quote that is fast and easy to read. Once the quote is accepted, the information associated with the estimate is automatically turned into an order and queued for production, eliminating the need to manually key information into a separate silo. This creates smarter workflows, better process efficiencies, faster order processing, happier customers, and more money in your pocket.
- Optimize costs with centralized pricing tables
While some standalone estimating solutions might include the ability to create pricing tables, they don’t integrate with the rest of your financials and operations. Where pricing tables should be used for more than just estimating, a print MIS/ERP system allows you to manage them in one place. The information flows where it needs to, and you only have to update it once.
- Price a substrate depending on how it will be used
Many substrates can be used with several different printing technologies. In order to provide a variety of options with healthy profit margins, the estimating system you use needs to have the flexibility to price a substrate differently depending on how it will be used. If you are printing on a sheet-fed offset or roll-fed media, a modern print MIS/ERP solution will give you the functionality to choose the best option for pricing, such as per-page number or square footage.
- Compare estimates to actuals
Unlike a standalone estimating system, a print MIS/ERP brings everything from financials to production together so you can track vital data and performance metrics. In terms of print job costs and profitability, comparing your estimates to actuals will help you immediately identify profit shortfalls once the job is completed and shipped. You can then make the necessary system modifications to prevent profit losses with similar jobs or correct setup entries causing the problem.
- Make decisions based on accurate real-time reporting
In a fast-moving, dog-eat-dog industry like print, the last thing you want to do is wait till the end of the month, or a week or two into the next month, to see how you did. Reporting and analytics are the key to understanding where you are losing money and what you need to do to maximize your profits. Having a centralized database where you can manage up-to-date pricing tables, create estimates, and track jobs means your data and the reports you generate are always accurate. From there, you are able to figure out exactly where you are losing money, quickly respond to changes, and make data-driven decisions that maximize your profits.
Transform Your Print Pricing and Estimating Approach
Growth can be hampered before it begins if your critical business operations systems aren’t supporting you. Separate systems that don’t work with each other will not help you in an industry that’s as competitive and innovative as print. If you’re noticing increasing delays or a drop in profits, now is the time to make a change.
Centralized print MIS/ERP software can significantly impact your print business and bottom line. By bringing together your print operations in one system and providing insight into your costs and performance, you can save time, reduce the potential for error, and experience a smoother overall operation. To learn more about the technology and the benefits of print MIS/ERP software, start reading our introductory whitepaper here:
You can also reach out to the Clients First Print Solutions team directly with any questions you may have. We’re here to help you assess your existing pricing and estimating processes and find strategic solutions to areas of your print business that need improvement.