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The Pricing Puzzle
 

The Pricing Puzzle

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From a pricing perspective, every single printed piece is an animal all its own. Sure there are standard formulas for labor and supplies. But think about it. Every single job is a custom product that ...

From a pricing perspective, every single printed piece is an animal all its own. Sure there are standard formulas for labor and supplies. But think about it. Every single job is a custom product that needs to be manufactured in a very short timeframe—and can be “messed up” at any point in the process. If you print, fold, score or trim it incorrectly, the customer won’t accept the product and you may have to start completely over—without any increase in budget. Pricing the project appropriately is critical to the bottom line success of your company.

Brought to you by Mohawk MakeReady, this presentation can be used by your printing business for internal training initiatives.

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  • From a pricing perspective, every single printed piece is an animal all its own. Sure there are standard formulas for labor and supplies. But think about it. Every single job is a custom product that needs to be manufactured in a very short timeframe—and can be “messed up” at any point in the process. If you print, fold, score or trim it incorrectly, the customer won’t accept the product and you may have to start completely over—without any increase in budget. Pricing the project appropriately is critical to the bottom line success of your company. Brought to you by Mohawk MakeReady, this presentation can be used by your printing business for internal training initiatives.
  • In tough economic times, it’s natural to wonder if you should cut prices. But what if we told you that if you were to increase your pricing by 1%, your profitability would skyrocket. Just 1%! Of course, before you even think about raising prices, you need to think sales. Do you have a sales force that can sell a 1% increase? What differentiates you from your competition? Does your shop sell on price? Do you do know how to cross sell? While we’re on the topic of sales, check out these other MakeReady presentations: Sensible Selling: http://www.mohawkpaper.com/makeready/2011/10/17/sensible-selling/ Identifying Cross Selling Opportunities: http://www.mohawkpaper.com/makeready/2011/10/31/identifying-cross-selling-opportunities/
  • How have you determined your pricing strategy? Can you define it? Or is it like looking into a crystal ball hoping the answer will become clear? Developing your product or service offering requires detailed thought and planning. A critical piece of that planning is deciding how you should price your products and services. The pricing strategy you choose can dramatically impact the profit margins of your business. What equipment do you have, what are your capabilities, what do you pay for the equipment and what do you pay your employees. Are you too high, too low, what does the competition look like? Have all the hundreds of variables been accounted for?
  • Pricing is the only part of the marketing mix that is revenue generating. What’s the right approach for your product? Here are six different pricing strategies. Does your company embrace one of these or multiple? Oftentimes, the product or service you’re offering will determine which strategy you use.
  • This can be a slippery slope in our business. It is challenging to for a small business to maintain because it provides very narrow profit margins that make it hard for the business to achieve enough momentum to grow. Think of this strategy as rock-bottom pricing.
  • Historically, printers have done “pro-bono work” to win customers. Make sure you look at the entire picture, before aligning yourself with a freebie client. Remember all of your competition has been asked to do the work for free also.
  • What else can you offer your customer? Value-added services can help secure the relationship and build your brand loyalty – think storefronts, fulfillment, promotional premiums and database management.
  • Having buyers know that your expensive product or service warrants the additional cost associated can be accomplished, but takes time and lots of marketing.
  • The “cost plus” pricing strategy basically takes your costs and adds an amount of markup to it. There are two types of “cost plus” pricing: full cost pricing and direct cost pricing.
  • Can you tell by this image what we at Mohawk MakeReady think about predatory pricing? Very simply, predatory pricing is just not a good position to sell from. Is this the way you want your competition, the customer and prospects to see you? No! Stay above the fray, be ethical, honest and fair. Remember working hard, working smart does create results.
  • When tailoring the strategy you choose, keep in mind all of these the influences that will affect your bottom line and pricing strategy. A lot of these circles can influence both each other as well as pricing.
  • Your pricing decision doesn’t have to be all of one type, none of the others. And, it should change and evolve over time, as your competition and market conditions change. The pricing of your products should be something you continually evaluate and regularly address.
  • Pricing is just one part of your total Market Strategy – and your Market Strategy is closely connected to how you price. Where are you geographically? How much competition for your product or service? What is unique about your particular company? Have you developed a defense strategy before potential threats arrive? The more prepared you are the better off you will be. Look for more detailed pricing strategies from MakeReady in the future.
  • Digital printing is changing…and fast. That’s why we created Mohawk MakeReady. A go-to place for guidance, insights and tools to keep you prepared for what’s next. There’s a reason we named this service MakeReady … a little irony, too. Taking a familiar industry term in a new direction, Mohawk MakeReady offers ways for you to make more efficient use of your time, material, people and entrepreneurial energy. To grow your digital printing business, you need to be prepared — with actionable information and tools — so your team can implement best business practices, craft effective sales strategies, and create opportunities to use and promote new high-value products. That’s what you’ll find here: an ever-expanding site , rich with content built on the experiences of digital printers like you. As a leading manufacturer of digital substrates, Mohawk brings you practical wisdom gained from our experience in sales, marketing, production, and operations. With how-to articles on marketing your business, videos on topics like precision sheeting, and PowerPoint presentations showcasing how to identify sales opportunities. All strategies you can put to work today. Talk to us. Let us know what’s on your mind. Mohawk MakeReady. Dedicated to making you ready for the exciting future ahead.

The Pricing Puzzle The Pricing Puzzle Presentation Transcript

  • What’s your strategy? January 2012 Download Now --- to see full --- Speaker Notes
  • 1% reduction in fixed costs improves profitability by 2.3% BUT 1% increase in pricing can boost profitability 11% Did you know… Source: McKinsey & Company Impact study of 2,400 companies
  • Puzzled? How do you put the pieces together?
  • Puzzle Pieces The six strategies for pricing
    • Competition Based
    • Loss Leader
    • Penetration Strategy
    • Premium/High End
    • Cost-plus
    • Predatory
  • Competition Based Striving to meet and or beat the prices your competitor is charging. A competition based pricing strategy focuses solely on what the competition is charging. It is: • challenging for a small business to maintain • provides very narrow profit margins. Think of this strategy as rock-bottom pricing.
  • Loss Leader Give it away to get more in the future
      • Historically, printers have done “pro-bono work” to win customers. Make sure you look at the entire picture, before aligning yourself with a freebie client. Remember all of your competition has been asked to do the work for free also.
  • Penetration Strategy Increasing the value to your customers, build loyalty and enter the market. Unless you are “blood brothers” with your customers, loyalty in the our business is a very difficult thing capture. Offering value-added services can help secure the relationship and build your brand loyalty – storefronts, fulfillment, promotional premiums or database management.
  • Premium – High End Exceptional reputation, quality, and distinction. In order for you to implement this type of pricing strategy, you must have built your brand recognition to a high end, premium level. Image courtesy of Rosebrook Meyer
  • “ Cost plus” strategy: Full cost and Direct cost Two types of “cost plus” pricing: Full cost pricing includes both variable and fixed costs and adds a % markup. Direct cost pricing uses the variable costs plus a % markup. Usually only used when competition is high as it usually leads to a loss over time.
    • Fixed costs
      • Equipment Leases
      • Your building
      • Variable
      • Paper
      • Toner/ElectroInk
  • Predatory A carnivorous cousin, Deinonychus, about the size of a man, leaped on its prey, wrapped its long arms and three-fingered hands around it, and kicked it to the death with sickle-shaped toenails.
  • What is the important piece? A puzzle is not complete without all the parts. Be systematic and strategic in your decisions. Do not set the pricing and then just forget it. All pricing strategies can make sense one time or another (except predatory!), but none alone are always sufficient. Your goal must be to stay one step ahead of your competition.
  • Market Strategy: No, not this type!
  • Mohawk MakeReady provides practical tools and actionable information for digital printers like you. We can help… Visit: www.MohawkMakeReady.com to browse content, request a meeting, or join the community.