The Price Is Right. Or Is It?

As conversations about outsourcing and managed print services increase, and in-plant managers spend more time thinking about ways to justify their existences, pricing is often one of the areas of concern that rises to the top of the list. That makes sense because one of the most frequent arguments for operating an in-plant is cost control and/or reduction, and the outsource vendors make claims that outsourcing will substantially reduce costs. However, while there may be some anecdotal value in knowing what other shops charge, that value is limited.

Price comparisons are a slippery slope. Why? Ideally an in-plant’s revenue should recover all of its costs, but in reality every organization measures costs in different ways. For example:

• Some print shops pay rent, either to an external landlord or the parent organization, while others don’t.
• Some pay utilities, others don’t.
• Some pay an HR or an IT fee, others don’t.
• Some return a percentage of sales to the organization, others don’t.

The list goes on an on. So even though two shops may both be “full cost recovery,” unless they count costs in exactly the same way, a price comparison is of limited value.

Here’s an example. One of our colleagues, Jean-Luc Devis, who was the Washington State Printer for several years, used to do an annual price benchmarking project. He would invite respondents to quote on a list of jobs, compare the prices and publish the results. He also collected descriptive data like number of employees, sales volume and whether the shop was expected to recover all costs. (If you are an ACUP member, Jean-Luc’s surveys are posted on ACUP's website.)

The real value of Jean-Luc’s survey, in my view, is that it gives a graphic example of the variable nature of print pricing. For example, one job in the survey is 10,000 pages, 8.5x11˝, 2/2 with bleeds, folded on sub 80# dull-coated book stock. The quoted prices range from as low as  $585 to as high as $3,438 for the same job. That’s a spread of over 480 percent!

Moreover, both the high-price and low-price shops claim to be self-supporting. Even if you treated the high bid as an outlier and used the second bid—$1,521—as the high quote, there is still a spread of nearly 300 percent from low to high. This is not unusual; in fact it’s common. And it’s not just in-plants. The major print professional organizations advise their commercial print members to avoid competing on price for the same reason.

In my experience, the only way to get meaningful price comparisons is to compare your in-plant’s prices with those charged by local shops on a job-by-job basis. Price lists are fine, but commercial shops don’t always charge published rates. There may be up charges for “additional” services or discounts for a variety of reasons.

If you really want to show savings from internal production, solicit quotes from local commercial printers for various “real” jobs and compare the results to what you would charge. If your prices are high, you may need to look at your pricing. If you are consistently low, you should share that information with your customers.