Legacy Pricing

By Dan Davis, PEiR Group Technology Consultant

Let’s face it; competition is not getting any easier. In order to stay competitive, you need to really keep an eye on costs, while you tweak pricing to ensure that you will still be in business tomorrow!

I spend a good deal of time working with different companies to migrate their price lists into PlanWell and EWO. I am constantly amazed at the variety of ways that our industry scales, twists and discounts pricing. Whenever I encounter a novel pricing scheme, I always ask were it came from. Frequently, I hear something like this: “Our price list was developed by the previous owner. We’ve just raised them from time to time.”

Back in the day, we ran Diazo prints. The first set through the machine was a test set, and we used special non-print pencils to speed code the originals for the paper that we were using. As we ran more sets through we would develop a bit of a rhythm and, as a result, we would get a bit more productive. Therefore, it made sense to have a pricing structure which fairly represented the labor involved in the process depending on the size of the order. Diazo price lists of five or more levels made a good deal of sense.

Today, however, those older schemes really don’t add up. Our machines are automated, different medias are fed on demand, and it takes just as long to print the 300th set as it takes to print the second set. True, there will be some economy of scale for a huge job but then again, how many huge jobs have you billed off of your price list lately?

If in fact you are dealing with a legacy price schedule, it may be a good time to crunch some numbers and see if it still makes sense. Reducing the number of tiers in your price list will make it easier to quote a job, and will give you the opportunity to generate a price increase by eliminating some of the upper tiers.

Another frequent answer is: “Our price list reflects the way our competitors charge.”

This may very well be true. But is it still true when you consider your walk-in or list price business? Your price list after all has very little impact on your negotiated accounts. When you close a deal with a new account, you may have to tweak things for competitive reasons, but it is very important that you have well thought out pricing structures for your other products that will allow you to remain profitable even with a few loss leaders.

So, if you are thinking about raising one or more of your prices in order to cover your increases in costs, you may find that simplifying your price list may be a good way to get started.