Pricing digital?

[jdr999]

I know I'm opening a nasty can of worms here and I've done it before but... I'm still struggling with pricing..

Is there a typical formula to use when pricing digital?

Such as:

(qty * (click charge * x)) + (qty * (paper price * y)) + press rate + makeready + waste + prepress + post press

If so, how much are people marking up click charges and paper?
And what about quantity discounts? The above formula doesn't offer any incentives in the way of discounts for larger runs...

And how does copy pricing differentiate from digital pricing? Do you charge more to print a 20 page PDF than a 20 page photocopy? If so, how much more and how do you explain it to the customer?

And Hal, yes I did pay for and am still using MF! I'm just struggling to dial in those numbers to get my pricing where it should be. Just too many choices!

Thanks,
Joe

 

[Morning Flight]

I'm glad you're still using Morning Flight, Joe, and I'm hoping forum members will respond to your questions. It would be especially helpful to any digital print service provider to learn how much other shops are marking up click charges and paper. Press rates are easier to arrive at internally if, as most printers do, you're using cost plus. But markups are more closely dependent on what the market will bear, and at what rate you're optimizing your profits.

Good luck!

 

[Keith]

"This is Celestial One responding to your distress call. Do you copy?" (And then my plane crashes because I have no dea what I'm doing.) Oh god, I'm such a dork. Anyway, seriously, do you study voodoo magic? Because that is what print pricing is. "...Where it should be..." depends upon your regional market, what a particular customer is willing to pay in a given situation, and workflow/costs. I am an MF user since 2008 and for quantity discounts I've created a 'cheap' press that has lower hourly rates than my normal press. It's a judgement call on when I use that cheap press rate - type of product, customer, and quantity.

Use your cell phone or ask a friend to call some local print shops and get some pricing. Talk to customers and see what they are paying for stuff you may not be printing for them. My copy pricing is different from my digital pricing (copy is higher than digital) and I use the copy pricing for jobs that are run off the glass and/or customers that walk in looking for non-business print jobs (meaning, they don't own a business).

Feel free to contact me if you need any help with MF.

 

[Brer]

So are most shops doing a click charge plus plus an hourly press rate for digital printing.

We are doing a click charge only that is adjusted according to the quantity. I was thinking click charge for copies, and click plus hourly for print would be the way to go.

We are using Printsmith which works great for our offset but we are off on our digital.

 

[arossetti]

We do a click charge an hourly rate for digital.

 

[Stephen Marsh]

Press rates are easier to arrive at internally if, as most printers do, you’re using cost plus.

Agreed Hal!

But markups are more closely dependent on what the market will bear, and at what rate you’re optimizing your profits.

Agreed 100% for a cost plus system.


Stephen Marsh

 

[arossetti]

I think the benefit of cost plus is that even if you need to adjust your pricing to market rate you have a solid understanding of your cost. The cost, is the cost, is the cost - price can be whatever you want it to be.

 

[Stephen Marsh]

I think the benefit of cost plus is that even if you need to adjust your pricing to market rate you have a solid understanding of your cost. The cost, is the cost, is the cost - price can be whatever you want it to be.

That is part of it, more here:

http://accuramis.com/cost-plus---the-accura-ethos-i-5056.php


Stephen Marsh

 

[jdr999]

I'm glad you're still using Morning Flight, Joe, and I'm hoping forum members will respond to your questions. It would be especially helpful to any digital print service provider to learn how much other shops are marking up click charges and paper. Press rates are easier to arrive at internally if, as most printers do, you're using cost plus. But markups are more closely dependent on what the market will bear, and at what rate you're optimizing your profits.

Good luck!

Hi Hal,

Yes, I agree. It's one thing to have set copy prices that account for clicks and paper. But trying to break them apart into MF can be confusing. I still have no idea how anyone is charging for, or marking up clicks. I'd love to have some idea of what's reasonable and fair.

I can set a high press rate and low clicks which prices smaller jobs too high, but gives more reasonable costs on larger runs.

I can also lower my press rate, waste, and startup while raising my click charge. This gives me lower prices on small jobs, but large runs are crazy high....

I won't even mention trying to make the math work for both copies AND digital... Cause it doesn't!

 

[Stephen Marsh]

Quote and MIS systems vary, I can only speak from my personal experience with the Accura MIS and other systems may not be as flexible. One varies the margin or markup method from % to unit or price list type matrix markup methods. Accura offers unlimited quantity bands within a markup, where the margin or fixed table matrix price can be shaped by both job type (business card, brochure, ncr pad etc) and by quantity. One does not change the cost of clicks, or the rate of the press or fudge any other costs or fake machine speeds that are different than what they actually are to achieve a sell rate. That is what markups are for. As stated by arossetti earlier in the topic thread - the cost is the cost.


Stephen Marsh

 

[Morning Flight]

I'm gratified by the response you're getting from forum members, Joe. No concrete numbers yet, but don’t forget to check Staples and Vistaprint and the internet. Just don't be surprised by the "crazy" highs and lows a Goggle search will get you.

I can set a high press rate and low clicks which prices smaller jobs too high, but gives more reasonable costs on larger runs. I can also lower my press rate, waste, and startup while raising my click charge. This gives me lower prices on small jobs, but large runs are crazy high. I won't even mention trying to make the math work for both copies AND digital ... Cause it doesn't!

There’s an easy solution for that in Morning Flight. First, separate your hourly rate from your click charges. Hourly rates are the cornerstone of cost plus pricing. I’m no fan of cost plus for arriving at a final selling price, but if you remove the “plus” it more or less works for arriving at an hourly rate, at least for digital.

In a nutshell, add up how much your digital press costs you just sitting there (rent/heat/utilities based on the square footage the press occupies), then add any variable costs such as labor and electricity when the press is running (and actually manned by someone, not running unattended while the operator is busy doing bindery). Now add a markup. That's your hourly rate.

Second, create at least two “virtual” digital presses with the same specs and hourly rates as your base press. Remember that In Morning Flight, click charges include markup, they’re not what you’re paying your vendor. Add a standard markup to your vendor click costs for your base press, add a higher markup to your low-quantity press, and a lower markup to your high-quantity press. Select the appropriate press for the quantity you’re quoting. What that gives you is a mix of cost plus for your hourly rate, and what the market will bear for your click charges.

I feel your frustration, Joe, but completely agree with the recommendations made by Keith, especially about copies versus digital (check out the video in the Printfire Library). He's hit the nail on the head. When it comes to setting selling prices, there is no magic bullet. In essence, vendors like Stephen and I are selling apple trees. We can tell you where and how to plant and care for them. We can’t tell you how much you should charge for your apples.

Hal

 

[jdr999]

That is what markups are for. As stated by arossetti earlier in the topic thread - the cost is the cost.
Stephen Marsh

Ok, fair enough.

So my basic equation of:

(qty * (click charge * x)) + (qty * (paper price * y)) + press rate + makeready + waste + prepress + post press

determines my job cost. Marking up X & Y is not the ideal way to go..

So in a nutshell with cost plus I take that job cost and add a multiplier or markup to arrive at my final sale price?

Now there is still the issue of what the market will bear. So I'm assuming depending upon the product and my actual costs that multiplier is going to vary. For instance we still cut cards with a guillotine but business cards are generally priced very competitively..

Also, how does quantity affect cost plus? Is it better to scale down the markup on larger runs to encourage customers to buy more or should the markup stay static so they only purchase what they need?

And one final question.. What's the best way to determine industry averages? Calling around is pointless as there are so many products, prices vary so much, many small businesses already have discounted pricing, and almost anyone is willing to haggle if there's a lower quote... No one seems to pay posted retail prices anymore -- everything is a custom quote and it seems no two quotes are the same..?

By the way Stephen, I would love to get a full blown MIS system but it's not in the budget yet. So for now I've got to figure this out the hard way!

Thanks all!
Joe

 

[Morning Flight]

So in a nutshell with cost plus I take that job cost and add a multiplier or markup to arrive at my final sale price?
Joe

In really basic terms, the answer is yes. In real life it's a little more complicated than that. I know, not what you wanted to hear. The industry standard book is Philip K. Ruggles' "Printing Estimating." Pick up a cheap early printing and start with "General Procedure for Selling, Estimating, and Quoting Printed Work" on page 10 of the Third Edition ($20.98 new, 77 cents used at Amazon - doesn't get any cheaper than that).

I'm assuming depending upon the product and my actual costs, that multiplier is going to vary. For instance we still cut cards with a guillotine but business cards are generally priced very competitively. Also, how does quantity affect cost plus? Is it better to scale down the markup on larger runs to encourage customers to buy more or should the markup stay static so they only purchase what they need?

Yes, the multiplier should vary, and there's no way you will ever be competitive with the $9.99 business card offer from Vistaprint using a guillotine cutter. You'll get a bad "high-priced" rap just by trying. What's more, treating business cards as loss leaders to attract orders for stationery is a losing proposition in so many ways. Pick your battles, Joe.

For what it's worth, my strategy when I operated a print shop was to specialize in products we were good at, forget those we sucked at, and then buy the best equipment we could afford to actively support that strategy. The idea was to first pick a niche and establish a product mix, then select the equipment to produce those products efficiently, not the other way around.

Worked well enough for the 37 years I owned the shop to finance my car collecting and sell one of those cars for $1.525 million in 2006 so I could go full time with Morning Flight. Our hidden advantage was that back in the offset days, printers were hardware junkies. They fell in love with a Heidelberg and went out and bought it, then said "Ok, what can we print with it?" I'm assuming that has changed. I can't see anybody falling in love with a digital duplicator.

How does quantity affect cost plus? By lowering your BHR, your Budgeted Hourly Rate around which everything in cost plus pricing revolves. The greater your utilization of equipment, the lower your rate. But that's not really the point. What matters most is that as the quantity goes up, the price your competitors will charge will go down. So yes, definitely reduce your paper markup which is easy to do in Morning Flight with carton-based pricing.

And one final question ... What's the best way to determine industry averages?

I can't vouch for it being the best way (if there even is a best way), but it's the best place to start: John Stewart's "2013 Industry Pricing Study." See the link.

 

[Stephen Marsh]

Ok, fair enough.

So my basic equation of:

(qty * (click charge * x)) + (qty * (paper price * y)) + press rate + makeready + waste + prepress + post press

determines my job cost. Marking up X & Y is not the ideal way to go..

You have to work within the limits of the software.

Yes, cost of quantity of paper including overs/waste and cost of quantity of clicks is correct. The press hourly rate time has to be factored with press run time impressions per hour (and makeready and washup and subsequent makeready times also have to be factored in too if litho). Yes, all other labour and materials also have to be factored in too. They are all building blocks to come to the total time/cost of the job.

One can of course markup paper, clicks, labour from any department (art, prepress, finishing etc) and materials. Or one can just markup the overall. Or one can markup each separate cost and also apply an overall markup over that (software permitting)… In the end it does not really matter where the markups are applied to the costs, you have to reach your sell price and how you do so may be a moot point at the end of the day if you are making a profit on the overall job.

So in a nutshell with cost plus I take that job cost and add a multiplier or markup to arrive at my final sale price?

Yes, that is basically it – however it can be very much dependent on the software options on how you do this. A flexible system will also you to vary the markup by job type (single sided CMYK business card, double sided CMYK business card, single sided 2 spot colour business card, letterhead, with compliments slips, ncr pad etc). A flexible system will additionally allow you to vary the markup by unlimited quantity band break points and allow steps/curves between points, or offer unit pricing per 1 or 1000, or allow a simple “price list” table matrix for pricing etc. No matter the method to reach sell price, a good cost plus system will always let you know or target the profit and whether you are making money.

Now there is still the issue of what the market will bear. So I'm assuming depending upon the product and my actual costs that multiplier is going to vary. For instance we still cut cards with a guillotine but business cards are generally priced very competitively..

Sure, but the cost is the cost. Cards are often printed 8up/10up/20up on a sheet. A stack in the guillotine may be N sheets high (at 20up). You may only put 2 stacks through the cutter. Then how many cuts are on the sheet, single or double… The point being that the trimming time may be not be that much, say 10 minutes of the hourly cost rate to run the guillotine from it’s budgeted hourly rate. This may not add a huge amount to the cost of the job.


Hope this helps,


Stephen Marsh

 

[kdw75]

I spend more time thinking about pricing, than anything else. Just when I think it is perfect, I find something that needs adjusting. I have found too that certain high maintenance clients will gladly pay a higher rate, than others, which just want a product. It also seems that other print shops vary their pricing by customer. Certain printers in our area have reputations for being the cheapest, or most expensive, but then you will see where they bid on a open contract job, and reverse roles.

 

[Shawnd]

Pricing also depends on how hungry you are, we see drastic swings in bids from other local companies depending on how busy they are.

 

[jdr999]

Feel free to contact me if you need any help with MF.

Hi Keith,

I did PM you a few weeks ago, but haven't heard back. Maybe you didn't notice the message....

Thanks,
Joe

 

[Keith]

Ooops. Sorry about that jdr999. Printplanet doesn't keep me logged in anymore so whenever I visit, I forget to log in and check messages. I'll reply now...

 

[PricelineNegotiator]

Just placed an order for 500,000 posters. Thanks Las Vegas Printing.

 

[craiglpress]

We just release our CostRatesAdvisor.com BHR rates study and cost comparisons feature which enables you to compare your digital printing cost and budgeted hourly cost rates to other companies. CostRatesAdvisor compares your labor, factory, and overhead costs rates to thousands of costs rates from other companies.

View attachment 290844