You can debate prices as much as you want. Yet in truth, it’s not the price of a print product that matters at all, but the value of the entire service! That’s what print companies ought to be selling.
There are events that you don’t even need to report on in the first place. Then there are events that wow people and those that leave you with the feeling of having to question one or two things once again. One such event was the Bundesverband Druck und Medien’s Pricing Convention in Frankfurt at the beginning of June.
That’s because the convention promised to highlight routes to finding a strategic, systematic pricing policy. Pricing is a form of leverage that allows companies to proactively influence their own profitability and it’s the number one driver of profits – even more so than optimizing costs structures or increasing sales volumes, Holger Busch, Verband Druck und Medien Bayern, explained to more than 200 delegates.
In other words, what can you actually do if the market is characterized by oversupply, price pressures and substitutability and if it, rather than the print companies, dictates prices? Because that is exactly the scenario that the findings of a survey in Germany, Austria and Switzerland show: 55% of the print companies surveyed state that they are fighting a price war. 47% therefore intend to increase their selling prices, while 53% don’t believe they are in a position to do so.
Highly specialized service providers
“This situation is alarming, because if businesses do not find ways of adding more value despite cost increases, their survival is threatened,” said Dr. Rainer Meckes, Executive Vice President of management consultancy Simon-Kucher & Partners that specializes in pricing issues.
He is right, of course. It is precisely this plight that is occupying minds at print companies. And they are only too well aware that it is a vicious circle. That’s why expectations of the convention’s content were so massively high. Yet what the management consultancy experts delivered on the subject of pricing was not really convincing. Yes, it is very interesting to hear about the mistakes that other businesses in other industries have made, yet the print industry does not happen to be readily comparable with other industries that produce “for stock”.
Print companies are highly specialized service providers that make capacity (including know-how) available that’s only then called off when the client delivers their own specific content to have it printed. Normally the client has a set budget for that purpose.
If the print company then increases its prices, the client will either adjust the print run or the paper quality – if they continue at all with their print contract – or they will walk away, because the postal charges for shipping their print products are just too high. Print companies are in any case struggling with decreasing print runs and generally declining demand. And it’s likely to be common knowledge that supply and demand determine the price. But clients have already been dictating these for some considerable time now.
A glorified marketing seminar
If printing is already a complex process, then pricing is likely to be exponentially more complex in light of the above, which means that you can’t make like-for-like comparisons with coffee roasters.
In that respect we felt that the section of the convention where the consultants appeared in their hordes was nothing more than a glorified marketing seminar focusing on pricing. Whether the 200 visitors really got anything out of it, is a question that only they can answer.
“A product with no price is not a product. And a low price for a product is not necessarily the right way to go either. What’s important is finding the right balance between the value of the service and the price.” – Bernd Zipper
Of course, it is right to say that each of a company’s sales executives need to internalize its binding price strategy. It’s also correct to say that that represents a challenge for the company’s management. But that is just as self-evident as Dr. Meckes’ advice that companies should take a self-confident approach to implementing price increases or the pointer that the sales team’s price negotiations skills play a key role, which is why regular training is an absolute must.
And when he then advises against getting caught up in a price war while trying to ensure printing press capacity utilization, then you can say that his advice is too late and that he hasn’t grasped the fact that the entire industry has been fighting a price war for some considerable time now.
Perhaps one or two delegates took away some wise suggestions about how to sound out their pricing options. In the light of brutal, price-dominated competition in the industry, these pieces of advice however seem too general, intangible and more like blunt weapons. To our minds it was all of too little substance.
Yet there was at least some food for thought. Not only should the competition and one’s own costs be factored into pricing, so too should the value and the benefits of the print product to the client.
That is a demand that we have always made of print companies (no matter what type of print provider they are) – the benefits and value of print must be clearly emphasized to clients and their agencies. Facts about the worth, the quality and (additional) benefits of print products and services must be highlighted much more boldly in pricing and price negotiations. Price reductions and discounts are not very expedient in that respect.
Do some serious marketing!
Pricing policy is a part of the marketing mix and deals with the analysis, setting and monitoring of prices – you can read that in any marketing manual. But we are thus faced with a general problem. Although many print companies nominally have a marketing function (and that increasingly applies to the manufacturer community as well), what status does it really have here? Not infrequently you find the wrong or inadequately qualified people in marketing departments. What hope have they got of specifying a marketing mix that makes business sense and getting it adopted by the company?
Yet other than that, print companies have managed in the last few years to optimize their internal processes, thus enabling them to achieve improved margins. But right now, they need to set about taking a professional approach to their marketing and organizing their pricing policy just as systematically as their production and logistics processes.
My take: Print companies will continue being unable to play with the price of the actual print product (the so-called anchor price) too much. But previously non-visible services related to this anchor price must be clearly highlighted and marketed: warehousing, distribution services (not just lettershop) or just-in-time add-ons. To put it in plain terms: the printed product must be detached from all the many minor things that you take for granted, but which you can’t actually take for granted at all. Additional services need to be given transparency and priced and the additional benefits of print championed more vigorously. That’s because the price of the print product is not what matters, but rather the value of the entire service! That’s what needs to be sold.