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Stick to your guns on pricing – Print21 magazine feature

Monday, 05 March 2012
By Print21

Printers complain long and hard that prices are too low but are often unwilling to stand up and do anything about it. It’s no use blaming the customer – they know no better. Right now says Harry Brelsford, it’s time for printers to discover some intestinal fortitude, man the barricades and repel these never-ending attacks on profitability. It’s do or die.

The selling price of printing has been suppressed for so long that we now think unprofitable prices are the norm. But the dust is settling in the shorter run and digital end of the market and selling prices simply have to go up in order for our industry to continue into a sustainable future. The high volume sheetfed market is still shaking out but pricing, to my mind, is the most crucial issue facing us as we head into 2012.

The general decline in the demand for printing has been the chief culprit and its effects were being felt long before the GFC which then added to the pressures. Some believe it is not yet over and there are still more hard times to come due to economic woes in other countries.

I am more positive and not too concerned about any major collapse, but any doubt makes us hesitant about our own future growth decisions. Remember, the problems in Europe were not caused by the private sector; they have been caused by the overspending of governments. Whilst effected, my understanding is that the free enterprise sector is still in reasonable shape. Back home we will be fine for as long as China and India keep buying what we keep digging out of the ground.

Our real concern is how much printing and related work will be available to our businesses and what portion of it we can claim as our own. The fact is there is less printing being done now than five and ten years ago, but now there are also fewer printers going after it. Assuming we are going to get our fair share of the available market, we still come back to pricing. There is no point taking on the work if it is not going to be profitable. In order to ensure that we are profitable we need to raise prices. The question is, why don’t we? I believe it is mainly fear and our acceptance that low prices are the norm.

Making the price right

We are afraid to raise prices because our customers tell us they can get it cheaper down the road, and we tend to believe them. We are afraid to raise prices because we see other printers shutting up shop, we are afraid to raise prices because everybody is talking about a price-driven market, price shoppers and customers who lack any semblance of loyalty. Our focus on low prices is now totally entrenched in our psyche, we are obsessed with them and it is amazing how we normally end up with what we keep thinking about—low prices.

I believe it is now time to re-focus on raising our prices, selling our products and services at rates that give us a suitable reward for our efforts and our risk of putting just about everything on the line to be in this business. Time to think constantly about charging the right prices to ensure our sustainability into the future. Time to think about being profitable once again just like all the other businesses to whom we provide our services, the same as our customers.

We may even be afraid to raise prices because we don’t want to be seen as greedy, with corporate greed emphasised by the publicity given to recent anti-capitalist protests around the world. We may even think that profit is a dirty word. Remember though that we live and run our businesses in a free enterprise system where profit is essential to our continued existence. Capitalism may not always appear to be the best system but the alternative does not have a good track record and always seems to end badly.

Being profitable is nothing to be ashamed of. Sir Winston Churchill once commented on a speech by an opposition spokesman saying, “The substance of the eminent Socialist gentlemen’s speech is that making a profit is a sin. It is my belief that the real sin is taking a loss!”

Think about the public resentment towards large corporations, especially the banks and their massive profits, contributed by not only the interest charged but also by fees levied on our accounts, and the obscene executive salaries they hand out. Then there are the oil companies that the public and the media tend to resent mainly because of their high profits while we are paying through the nose at the petrol pump.

Exxon Mobil was, until recently, the largest, most capitalised company in the world but they have been knocked off the top perch by a relative newcomer with even more money in the bank and billions and billions in profit. In order to get to the number one spot globally you have to be selling a lot of stuff at highly profitable prices, meaning the consumer is probably paying more than they feel they should in contributing to that profit. Yet there is almost no resentment to this newcomer—Apple Computer.

The graphic arts industry is a major supporter of Apple and has been since they introduced that first Macintosh. We consistently buy their computers, often at higher prices than equivalent Windows machines, we cherish their iPhones, some of us have iPads and our kids listen to their iPods and download their music at around $2.50 per song. Yet we don’t hear anybody saying Apple is ripping us off; we show off our iMacs and iPhones and think the company is cool. We do this yet they are making exorbitant profits.

So there is no need to feel bad about raising your prices just so you can pay your staff’s wages or pay the bills to ensure that you are still there to serve your customers tomorrow.

Cover your costs

We are also afraid to raise prices because we hear that there is little or no inflation. Amazingly though, costs at work and at home have gone up quite considerably over the last few years. We should be passing these cost increases on but, in most cases, we have not done so. The cost of paper has gone up, the rental on our premises increases annually, petrol has gone up, electricity, water and the cost of the weekly groceries trolley have all gone up. These increases are offset by a drop in property values and transactions which helps to keep the overall inflation figure low, but our stock in trade is paper, not property.

We simply have to raise prices in order to cover our increased cost of goods if we want to continue in this industry. When our costs increase but we don’t pass the increases on it eats directly into our bottom line which, in a small business, also normally means less take home pay for the owner, often leading to increased personal debt. When faced with the facts, we don’t have a choice; our industry as a whole simply has to raise prices.

You could argue that we should cut costs and improve efficiency and maybe we can, to some degree, but after a number of years in a tough market there is really very little fat left to trim.

And don’t forget, our customers, the ones with whom we are afraid to raise prices, are normally operating in industries far more profitable than our own. So there is no reason to be concerned about whether they think we are charging too much or not. Their objective, the name of the game, is to pay as little as they can for their printing.

Many will do whatever they can to get your price down, lay guilt on you, complain about the last job, some may even lie about being able to get the same thing cheaper down the road. From our side it is up to us to charge them as much as the market will bear, that is how the game is played. You cannot allow your customers to dictate your price structure; you decide and then stick to your guns. You simply cannot sell at unprofitable prices for any extended period of time, it is not sustainable.

Let buyers beware

I have a colleague who used to be the buyer for a large retail chain and what I have gathered from his conversations is that every year they have a number of suppliers go broke on them. He has not said so but I suspect that this may even be an unrecognised measure of their performance, a measure that they are doing their job well. He now runs his own business and, as a trained buyer, he questions every detail of his printing order until he finds a cheaper way to produce it, having spent my time giving him the benefit of my experience in order that I get less for the job. It does not make sense. I respect him for this but refuse to do work for him in order that we can continue to enjoy our barbecues together.

When I stopped doing work for him some years ago, he moved on to a graphic designer who had once worked for me but was now running their own studio. He developed a close professional relationship with the designer, advising what they should be charging for the work and the mark-ups they should be adding to wholesale printing. A year or so later the designer went broke. You could safely say they were driven out of business by bowing to customer pressure. And many of us do the same thing every day. Time to stop bowing to customer pressure and reverse the situation.

Dan Kennedy is an American marketing expert known as ‘the millionaire maker’ as the result of helping other business owners create vast fortunes by using his marketing strategies. In his book, No B.S. Price Strategy, he says that although he is recognised as a marketing strategist he believes he has had more far-reaching impact on entrepreneurs by influencing their price decisions than with anything else he does. I think this illustrates the importance of charging the right price for your product or services.

He also goes on to state, “There are two chains that bind the product to price: one is in the customer’s mind, the other in yours. Both must be cut. It’s a near certainty that the chain in your mind is bigger than the one in the customer’s mind.” This simply means that we are more concerned about price than the customer. Time to change our attitude and think about the great value the customer is getting from our experience, quality products and service.

So why don’t we all simply raise prices tomorrow and get it over with?
Perhaps we have been battered and beaten so much over the last few years that we cower in fear of the thought. If that is the case we need to get a backbone, stand up and argue our case for simply charging what we should be charging. Arguing our case that we are not a greedy industry and, on top of that, we are one of the most environmentally sustainable and most technically advanced too. We can rightfully be proud of our industry.

So it is time to re-focus, to focus now with laser-like vision on selling our printing and related services at prices that make our businesses sustainable.

If we don’t raise prices we are not running viable businesses and our future demise is inevitable. If we really can’t raise prices, we have no future.

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