What volume discounts do you use for digital?

[jwheeler]

I work for a county in-plant and we are in the process of setting up an online ordering system. This software gives us the ability to automatically give volume discount pricing at increments that we define. We are an all digital shop (no offset). We want to see if there is some consistency in the industry to follow, or if everyone makes up their own. The shop recently changed management, and the previous manager was here for 20+ years. He had only one discount which was at 5,000+ and it was only a 5% discount...seemed arbitrary. Here's my questions to everyone:

1. What volume(s) do you give discount breaks at, and what is the percentage of the discount?
2. How did you decide on what discounts to give?
3. Are your volume discounts different depending on the product (ie - Business cards get XX discounts, Brochures get XX discounts, etc)

Thanks in advance for the feedback!

 

[Stephen Marsh]

Do you know your costs?

Do you know what the market rates are?

Where do you sit in the market, being a "county in-plant" and how does this potentially change things?

 

[tngcas]

Volume discounts seem to make sense for offset because of the setup charges (burning plates etc). I’ve never run offset so I’m not super familiar with it.

They sortof make sense for digital in terms of setup costs but in reality… I don’t get a discount on paper volume or click charges even at higher quantities.

Customers have been trained to expect volume discounts because they assume we get better pricing on supplies at volume but that’s not really true for digital printing. Our shop has opted to just explain this to our customers and not offer volume discounts at all.

Do we potentially lose business to a shop that is willing to make up fake volume discounts… probably. The way I look at it though is that if I could do 10 jobs of 1000 flyers at $xxx price per sheet why should I use the same time/energy to do one job of 10000 flyers at $x price. I make more money per sheet on the 10 jobs of 1000 flyers and I have 10 customers instead of 1 so I’m more diversified and don’t have all my eggs in one basket.

I’m content to let another print shop chase the volume jobs.

 

[kslight]

Doesn’t really make a lot of sense to us to make large discounts when running digitally, but we have a minimum charge. In many cases, larger jobs are going to be more of a hassle to chase down lots of paper. Large jobs typically get outsourced.

 

[gregbatch]

True, clicks and paper don't change, so costs are flat for the run itself. But we do have set-up charges, which includes handling time before pushing the button, and possibly dialing in a Pantone color match. We also have set-ups or minimums for bindery operations, etc. When you factor that into the price it creates its own discounts for volume as the set-ups and minimums are amortized over the run quantity.

Example (numbers purely for simplicity):

Run: 1,000 @ $100 clicks/paper Set-up: $30 Folding Minimum: $20 Total: $150 Per 1000: $150
Run: 10,000 @ $1,000 clicks/paper Set-up: $30 Folding: $100 Total: $1,130 Per 1000: $113

 

[AP90]

I think there’s always a place for run discounts even in digital. We charge less per perfect bound book if we do 100 vs 10. It takes 45 mins for the perfect binder alone to warm up. But once we get going we can lower the cost. Our charge cost will always be lower per book on a run of 1000 vs a run of 100.

 

[gregbatch]

I think there’s always a place for run discounts even in digital. We charge less per perfect bound book if we do 100 vs 10. It takes 45 mins for the perfect binder alone to warm up. But once we get going we can lower the cost. Our charge cost will always be lower per book on a run of 1000 vs a run of 100.

That goes to what I said above. Your cost to bind book 1 is the same as book 1000. Technically your charge per book should be the same as well. Add in the charges to cover warmup and setup and the run discounts will happen naturally as those fees are applied across different quantities. If you calculate it that way you will never cheat yourself by discounting too much.

 

[jwheeler]

Thanks all for your feedback! I think we're in line with what @gregbatch and @AP90 are discussing with the discounts being naturally realized at the higher volumes due to the setup costs being divided out. Beyond that, the paper and click charges per sheet stay the same.

 

[AP90]

That goes to what I said above. Your cost to bind book 1 is the same as book 1000. Technically your charge per book should be the same as well. Add in the charges to cover warmup and setup and the run discounts will happen naturally as those fees are applied across different quantities. If you calculate it that way you will never cheat yourself by discounting too much.

I get what your saying but a lot of times we can make less margins on longer runs and still be very profitable. We might be happy to make a 20% margin on a run of 1000 novels but I wouldn’t want to only make 20% on a run of 10 novels. Our business card orders don’t double in cost per 500 either. So while the cost of it might be the same, the margin your willing to make might not be which is where you can offer up the discount.

 

[tngcas]

I get what your saying but a lot of times we can make less margins on longer runs and still be very profitable. We might be happy to make a 20% margin on a run of 1000 novels but I wouldn’t want to only make 20% on a run of 10 novels. Our business card orders don’t double in cost per 500 either. So while the cost of it might be the same, the margin your willing to make might not be which is where you can offer up the discount.

It depends on your mindset and your risk tolerance. I find the discount margins on larger runs to be more stressful.
For example:
A 60% margin on a small run is okay because if something goes wrong I can reprint the job and still be okay - I may not make as much money but I didn't lose money.
A 40% margin on a larger run is not okay because if something goes wrong and I have to reprint the job, I just lost a lot of money.

 

[gregbatch]

I get what your saying but a lot of times we can make less margins on longer runs and still be very profitable. We might be happy to make a 20% margin on a run of 1000 novels but I wouldn’t want to only make 20% on a run of 10 novels. Our business card orders don’t double in cost per 500 either. So while the cost of it might be the same, the margin your willing to make might not be which is where you can offer up the discount.

I would not be happy making less for a book or a sheet of paper because of quantity. Why would I cheat myself for the same amount of work for that book or sheet of paper? The only exception in pricing is trade work, but I don't take a lesser amount per unit. I take it off the front end charges which account for time estimating, writing the job, a certain amount of communication with the client to answer questions, preflight and correct art files, billing, and a factor for marketing. I can take a considerable amount off the front because the trade client has done the marketing, provided correct art, given clear and concise job specs, and in most cases will pick up the job. I can charge less because it costs less.

If you are not happy making that same margin on small jobs then you are already leaving something on the table. You are not getting paid for all of your time. Account for all of your time that goes into a job that is not directly related to production of the finished piece and charge accordingly.

(Piece Production Cost x Markup) + Setups + Front End Charges = Total Job Price

 

[AP90]

It depends on your mindset and your risk tolerance. I find the discount margins on larger runs to be more stressful.
For example:
A 60% margin on a small run is okay because if something goes wrong I can reprint the job and still be okay - I may not make as much money but I didn't lose money.
A 40% margin on a larger run is not okay because if something goes wrong and I have to reprint the job, I just lost a lot of money.

Sounds like you need to be better at printing! lol no im just joking around. I get that aspect of it. We luckily haven't had to eat any jobs that is crippling. We have ordered jobs that the company has begged us to not reprint at their expense but the mistakes were just too big to overlook and take a discount. But yes, I always build in a margin that will in general cover a reprint if necessary.