Establishing profitable, predictable and repeatable business is a common business goal. The more creative and influential you are at solving customer's problems, the more likely you'll achieve that goal. But no matter what you sell and how successful you are at selling, pricing and positioning your goods and services can be a challenge. Structure and simplicity are needed to help overcome the pricing challenge. Most digital press owners use a grid system to automate pricing. An Excel spreadsheet program may be all that's needed. The key to creating pricing structure is to determine your direct costs. Once you can quantify your direct costs, then you can calculate the markups that will produce your desired profit margin. Your direct costs can be divided into fixed, variable and indirect costs such as rent, heat, insurance, etc.

Become a Market Leader

Studies have shown that the most profitable printing companies tend to price at, or above the industry average. The consensus is that the most profitable printers own highly productive equipment, employ skilled labour, incur less waste and buy paper and supplies at lower cost. These are the market leaders.

The term, market leader, should not imply that your competition would follow your "lead". In fact, so-called market leaders operate more like "lone wolfs" – they don't lead a pack. They are stealth-like. They are very protective of their customers, their pricing and their applications. Market leaders can charge market or above market prices because they:

• Sell the benefits of digital printing to maintain their margins.
• Specialize in niche products or markets.
• Invest in "web2print" capabilities such as online submission and ecommerce.
• Provide full services such as pre-press, database management, bindery and mailing.
• Have or seek out existing jobs that can be transferred from offset to digital printing.
• Know how to sell and market print solutions that will help their customers grow their businesses.
• Know how to handle digital files and offer technical advice.

On the other hand, low-price printers have trouble charging market price because they:

• Predominately sell to resellers such as print brokers and other printers.
• Depend on winning bids.
• Sell copies and not marketing solutions.
• May not be digitally proficient in handling customer files.

Low price printers tend to rely on ads and printing specials. Let's face it; this is not a long term marketing strategy for success. Certainly, in a buoyant economy, a rising tide lifts all ships. Yet, it is often the low price printers who are amongst the first to go out of business when the economy turns ugly. To be able to operate profitably by selling at low prices, you'll need to produce large volumes to lower your cost of goods. You also need to watch your direct costs with extreme care.

Digital print enables your company to provide unique creative solutions to customer problems. You have new capabilities to sell. The following provides a few scenarios that help digital press owners protect margins, win business and lock out competition.

Trade Printing and Retail

If someone approaches you with an application that calls for colour copies beware! These situations usually involve customers calling around for the cheapest quote. However, serving this market may be worthwhile if there is enough volume to justify lower margin. Better still, there may be times when you can win some of this business and charge 10-20% more "per piece" than a competitor.

Can you differentiate? Sometimes providing a unique solution is just a matter of listening to your customers. If an application calls for superior quality and registration, quick turn-around or a particularly challenging substrate, then brokers and purchasing managers may pay the premium to do business with you. By asking questions to uncover a prospect's business needs, you may be able to help with graphic design adaptations, variable data printing or with binding and fulfilment.

Low Volume Single-Sheet Document Printing

Let's say you are currently printing 4/4, full bleed, four-page brochures on 12 x 18 sheets for a customer. You use an offset press and can make decent money on runs from 1,000 and up. What happens when your customer wants 100, 300 or 500? Are you making money? Can the customer afford the premium? Are you at risk of losing that customer if you don't take in the work? With digital print, charge a premium! But the premium is a win/win for both parties. You make decent money and the customer feels that they got a good deal. What premium do you charge? What do you currently charge for 2,000 brochures? Perhaps you can charge the same price for a lower volume and make higher margins. Why not add a logo here and an address there? Offer personalization. Be different! If you don't do it, someone else will.

Low Volume Multiple-Sheet Document Printing

What happens when you have a colour application that contains multiple sheets? The break-even volume between a lithographic press and a digital press drops dramatically. The more sheets in the document, the lower the break-even. But what do you charge? What did you charge? Now you can be very price competitive while at the same time winning business, protecting margins and delivering a superior product.

Variable Data Printing

You can charge a premium for variable data. These premiums should be in addition to any up front charges for file preparation and RIPing. Basic personalization such as a letter, invitation or postcard that only varies the name and address will command about a 25% premium. Some printers simplify their pricing by adding a percentage increase to their normal rate per impression.

More complex variable data, such as adding information and images throughout the document, adding barcodes or consecutively numbering output, can command at least a 50% up-charge. If you perform bindery or mailing functions, the pieces must remain in the same sequence that they were produced. Moreover, if you are folding and inserting letters into envelopes that have bar-coded addresses for mailing, you can charge extra for maintaining that too.

Product Focus

Successful digital press owners also develop expertise in niche products and applications, which can be extended across vertical markets and customers. Focussing on a few good applications enables employees to become experts, easing equipment set-ups, speeding production and reducing turn-around-time. Developing a product focus avoids being too dependent on a handful of customers. This group also embraces online job submission, referred to as "web2print".   Going beyond just online bidding and quoting, it makes it easier for customers to do business while the printer gains workflow improvements by use of the full range of technology capability.

Value-Added Services

Print-on-demand lends itself to bringing prepress, press and post press under one roof. Providing value-added services introduces new revenue streams, builds customer loyalty and locks out the competition. The customer benefits by faster project turn-around, decreased cost, increased quality control and security of sensitive information. These are chargeable services – not give-aways – to win print jobs. Your intention is to solve customer problems while making money.

These services may include graphic design, digital photography, e-commerce, digital asset management, database, mailing and fulfilment and specialized bindery. For example, graphic services can enable updates and revisions without involving middlemen. In one instance, a digital press owner generates revenues by hosting customer websites. In turn, these customers rely on them for all of their printing needs that mostly originates from web-based transactions.

Conclusion

Positioning your digital press for profitability is a culmination of good market research, current customer strategies, a thorough understanding of your cost structure, and well… trial and error.

It has been my experience the best success comes when operating under the radar screen of the competition. These digital press owners tend to be the most creative at providing solutions for their customers. They do their best to ensure that there was no reason to go to bid, or "get three quotes". This point does not provide the answer to "how to price digital printing", but it does provide the short answer on how to position your company for profitability.