You must be prepared to deal with a slew of print shop pricing challenges as your print shop evolves and expands. In addition to deciding how to price a growing variety of products and services, you also need to know when to raise prices and how to communicate a price increase to your customers.
The subject of price increases is hot right now, because many printing companies have been hit with price hikes for both inks and coated papers. Ink manufacturers cite the rising cost of raw materials. Paper prices are affected by a reduction in the number of paper mills, higher energy costs, investments in greener manufacturing systems, shortages of truck drivers, global competition for raw materials, and the diversion of manufacturing capacity to more profitable paper types.
While it’s necessary to understand why suppliers are raising their prices, it’s equally important to determine what action to take next. Should you immediately pass along the price increase to new or loyal customers? Or should you take a more measured approach? Here are some steps to consider.
Determine if a price hike is needed. If you price your printed materials strictly as a markup on labor and materials costs, your profitability will decline if you don’t adjust prices with each rise in materials costs. Research whether your shop can purchase similar materials at lower prices from other suppliers.
If you have promoted yourself as a value-added provider of printing services, your customers already pay for more than the costs of ink and paper. To accommodate higher paper costs, you may be able to reduce costs elsewhere in the workflow. For example, examine ways to reduce prepress or finishing costs. Ask your sales team and production employees to suggest ways to avoid having to announce major price hikes to your best customers.
Give your customers advance notice. Give your customers enough time to place new orders under the existing price structure or consider alternatives.
Consider offering temporary discounts on other services your best customers buy. This will help soften the blow of the price hike, and show that you understand that their spending must fall within a predetermined budget.
Present a clear, consistent, and unapologetic message. Be straightforward in announcing the price hike. Emphasize how much you value your customer’s business and explain why the price increase is necessary. State that the new prices will enable your shop to deliver the same high level of quality, service, and innovations that they expect. Make sure everyone in your shop understands the reasons for the price increases and is delivering the same message.
Remind customers of the value-added services your shop provides. When your salespeople deliver the news to key customers, encourage them to discuss instances when your team has provided exceptional service.Talk about money-saving or sales-boosting solutions your shop has developed for that customer. Or, cite instances in which your team managed extremely time-sensitive or complicated projects.
Offer options.Suggest ways to mitigate the impact of the price hikes. Recommend a lower-cost, lighter-weight grade of paper or ways to accomplish the same level of impact with fewer printed pages or printed pieces in a particular mailing. Consider offering longer-term contracts that will offer customers fixed rates for a set period of time.
Schedule periodic price adjustments so customers know what to expect. Instead of announcing price hikes immediately, schedule your adjustments every January 1 and July 1. If you have to raise prices on some products, find a way to announce reductions on other products so the news is not constantly bad.
Continue to look for ways to help your customers reduce their overall costs and inefficiencies. Printing today is about much more than ink on paper. If you continuously suggest ways your clients can improve the efficiency of their overall marketing efforts, they are less likely to look elsewhere for cheaper prices on a specific printed product.
Improve workflow efficiencies in your own shop. Automating more of your workflow can reduce errors and waste and free up your employees to focus on higher-value work. With more automated workflows, you need to hire a fewer number of production employees to keep multiple devices operating.
With the reports that can be generated by a good Print MIS system such as Ordant, you can keep a close eye on the profitability of each job that flows through your shop. When it’s clear that the rising cost of materials is cutting into the profitability of certain types of jobs, you can take proactive steps to mitigate the effects. You can use the customer relationship management tool to make notes of jobs that helped your customers succeed.
The easy-to-customize pricing formulas in Ordant give you the flexibility to go beyond pricing strategies that are based on a simple markup of labor and materials costs. For a demonstration, visit www.ordant.com.
Unfortunately, raising prices is a challenge every print shop owner must face from time to time. When it becomes necessary to boost prices, assure customers that you have taken a number of steps to avoid having to do so. Remind them that you have taken steps to help them reduce costs in the past and you will continue to do so in the future.