What is the value of your offering?

January 30th, 2012 - Posted by Jamie Thomson, Managing Director

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Some useful tips on how to price a Web to Print solution

It is fair to say that most printers purchase a Web to Print system as a tool in increase margins in Business to Business print sales rather than attack the competitive low cost online Business to Consumer route. Of course both can provide increased profitability if done well. Providing the lowest cost option for a client or consumer can be very rewarding for those companies positioned to take advantage of mass volume with relatively small margins. Realistically very few businesses can be successful in providing the lowest cost product as it requires the ability to either produce or buy the product cheaper than anyone else. This is typically driven by the ability to leverage suppliers with mass volume purchase or innovative technology in house to produce in mass quantities. Is this really an option for your business?

The challenge for those of us that can’t offer the lowest cost is to view price as a tool to communicate the quality and value of our product or service offering in relation to that of our competitors. A more personal service providing a tailored solution to our clients. A solution that is uniquely our own. The customer is then left to value the proposition from how well it meets their own personal needs. Done right, this can be a powerful way to establish market presence and eliminate the need to compete on price alone. The RedTie product can be a useful tool to enable you to differentiate your offering from other competitors.

The facility for the client to personalise or version products represents a tailored solution that generally cannot be matched by the low cost provider. The customer will be left to place a value on this offering by how successfully you have created and sold the new solution.

What is the value of an express service?

The Web to Print solution allows people to transact quickly and easily. In the new world of 24/7 express service we are all used to paying a little more bit more for the convenience that speed provides. We would expect to pay a little more in a Tesco Express then we might pay in a regular Tesco supermarket for the convenience and speed it affords us. When negotiating and constructing your various pricing matrices for products available on your online “shop front” your should give consideration to where premiums might be appropriate. It is these items that might provide the increase in profitability you are seeking and support some items that are priced with lower margins. Prices can generally be increased where an item has a degree of personalisation or versioning.

Removing cost rather than reducing prices

When pricing items available within your client’s overall solution, you should also consider savings that you are affording the client in other areas. Removing cost of design/document creation, proofing, obsolescence, wastage, administration, as well as increased revenue that can be achieved by more targeted and personalised print. If you are able to adequately quantify these costs or at best put an estimate on the likely costs, then you will be more able to convince the client of the value of your overall online proposition. During the initial sales process and subsequent meetings with the client we should also be looking to highlight the costs savings or even potential benefits in sales revenue that our solution might provide. By focusing on the bigger picture we can remove the focus from the individual cost of each product.

One useful way of examining cost is to look at the lifecycle of a document and try to put some costs around this in terms of time or lost revenue. Here is a typical example which helps us to highlight that the client was spending substantial time and cost in the current document lifecycle.

1) Marketing manager writes the copy 9) Marketing manager approves
2) Marketing manager briefs the designer 10) Mailer printed
3) Designer produced a concept 11) Delivered to client
4) Marketing manager approves for artwork production 12) Client creates mailing list
5) Proof of artwork sent for approval 13) Send mailing list and blank mailers to mailing house
6) Marketing manager proof approves artwork 14) Mailing house overprints mail merge details
7) Artwork goes to printer 15) Posted
8) Printer produces proof for print 16) Prospect receives mailer and completes reverse and returns in the post.

By analysing the costs created in the various operation of a prospects document lifecycle, we can move the conversation away from purely the unit cost or print production costs. Costs of design and artwork (now replaced with template), proof approval costs and delays, moving the part manufactured components from supplier to supplier, administration and labour costs. All these areas previously contributed to the overall document cost. Other costs such as wastage and obsolescence can be estimated, if indeed the product was previously produced in higher volumes.

Finding new revenue streams

Your new Web to Print solution should also provide you with an opportunity to explore new revenue streams. Your online offering provides the opportunity to sell a range of products whether you manufacture, part manufacture or wholly outsource. You may have been reluctant to offer these due to the amount of additional administration created, moving you away from your core activity. Now you have the option to create a once only template and even re-route orders directly to suppliers with minimal intervention and administration. New revenue streams may also include the charges for artwork and creation of online templates which may have previously been handled by the client’s designer.

Pricing your online solution

How you choose to price your online solution will of course depend on your business model and each client relationship / opportunity. Some users will regard the online solution as an added value tool to help them win new business and retain existing business and will not directly charge for any aspect of the storefront creation and maintenance. They will build any costs for creation of templates, hostage and maintenance into the unit cost of each product.

Others users have been successful in charging significant fees for the creation and implementation of the client’s solution. This has included many thousands for the creation of a branded store front and product templates.

You will need to give careful consideration to how you can maximise revenue from your online solution. You will need to consider some of the following questions;

  • Do I charge for the creation and branding of a client site?
  • Do I charge a fee for product templates (per product - per page - per personalised page)?
  • Do I levy a monthly fee for maintenance and hosting?
  • Do I build the costs of my online offering into the unit cost of each product?
  • Do I charge a premium for any product that can be personalised by the client?
  • Do I use retrospective rebates schemes which will refund my client for set-up costs once he achieves a certain target spend?

Whichever way you choose to price your solution (which could indeed be different for each selling opportunity), I would advise that you always place a value on the creation of a client’s online solution. It is good practise that the client perceives a significant value in what you have built and will continue to host and maintain for them. The value you place on the client’s build should include the value of investment that you have spent in acquiring your Web to Print solution and the significant time you have invested in training, planning and implementation. This will then allow you to discuss this costs with the client and you may ultimately decide to waive this fee in return for the client’s business (in whatever form that might take – a sole supply agreement, print management contract, achieving a target spend, or rebating the fee back against a target spend etc). Pricing is, of course, a matter of negotiation by both parties.