Management Insight: Pricing for Profitability
“Pricing for Profitability,” Management Insight, Vol. 1, No. 1 (Winter 2005)
Pricing is unquestionably one of the most fundamental and significant responsibilities at any business enterprise. Yet, for all its importance, pricing is a function that many companies do not perform well. Few graphic communications companies have a well-conceived pricing strategy or use a pricing process that is designed to maximize profitability. Most managers of graphic communications companies set prices by applying a standard mark-up to estimated job costs. After prices are set on a cost-plus basis, they must withstand the forces of the competitive marketplace. More and more, managers find themselves competing with firms that pursue sales by focusing exclusively on low prices. And, managers must contend with customers who insist that they can obtain lower prices from competitors. In the face of these pressures, many managers simply give in and cut their prices to win the work. It should come as no surprise that this pricing “process” leads to low or non-existent profits. Cost-plus pricing causes companies to underprice some prospective opportunities and overprice others, and reducing prices in response to customer pressures rewards customers for negotiating price aggressively and encourages them to be more aggressive in future price negotiations.To win fair prices in a highly competitive marketplace, graphic communications companies must take a more strategic approach to pricing. They must reestablish the critical link between value delivered and price earned. “Pricing for Profitability” describes the power and importance of effective pricing to graphic communications companies. In this in-depth analysis, author G. David Dodd explains how printing company customers really determine the value of the services they purchase, and he describes a seven-step, value-based marketing and sales system that will enable graphic communications companies to win business-sustaining profits. A one percent price increase will double the profits of an average sheetfed printing company. “Pricing for Profitability” will give you a game plan for winning price increases that will dramatically boost your profits.