January 2011 | The Pricing Puzzle

What’s your strategy?

January 2012

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Speaker Notes

January 2011 | The Pricing Puzzle

1% reduction in fixed costs improves

profitability by 2.3%BUT

1% increase in pricing can boost profitability 11%

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Did you know…

Source: McKinsey & Company Impact study of 2,400 companies

January 2011 | The Pricing Puzzle

Puzzled?How do you put the pieces together?

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January 2011 | The Pricing Puzzle 4

The six strategies for pricing

Puzzle Pieces

• Competition Based

• Loss Leader

• Penetration Strategy

• Premium/High End

• Cost-plus

• Predatory

January 2011 | The Pricing Puzzle 5

Striving to meet and or beat the prices your competitor is charging.

Competition Based

A competition based pricing strategy focuses solely on what the

competition is charging. It is:

•challenging for a small business to maintain

•provides very narrow profit margins.

Think of this strategy as rock-bottom pricing.

January 2011 | The Pricing Puzzle 6

Give it away to get more in the future

Loss Leader

Historically, printers have done “pro-bono work” to win

customers. Make sure you look at the entire picture,

before aligning yourself with a freebie client. Remember

all of your competition has been asked to do the work for

free also.

January 2011 | The Pricing Puzzle 7

Increasing the value to your customers, build loyalty and enter the market.

Penetration Strategy

Unless you are “blood brothers” with your customers,

loyalty in the our business is a very difficult thing capture.

Offering value-added services can help secure the

relationship and build your brand loyalty – storefronts,

fulfillment, promotional premiums or database

management.

January 2011 | The Pricing Puzzle 8

Premium – High End

Exceptional reputation, quality, and

distinction. In order for you to

implement this type of pricing

strategy, you must have built your

brand recognition to a high end,

premium level.

Image courtesy of Rosebrook Meyer

January 2011 | The Pricing Puzzle

Two types of “cost plus” pricing:

Full cost pricing includes both

variable and fixed costs and adds a %

markup.

Direct cost pricing uses the variable

costs plus a % markup. Usually only

used when competition is high as it

usually leads to a loss over time.

“Cost plus” strategy: Full cost and Direct cost

Fixed costs

• Equipment Leases

• Your building

Variable

• Paper

• Toner/ElectroInk

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January 2011 | The Pricing Puzzle 10

Predatory

A carnivorous cousin, Deinonychus,

about the size of a man, leaped on its

prey, wrapped its long arms and

three-fingered hands around it, and

kicked it to the death with sickle-

shaped toenails.

January 2011 | The Pricing Puzzle 11

January 2011 | The Pricing Puzzle 12

What is the important piece?

A puzzle is not complete without all the parts. Be systematic and strategic in your decisions.

Do not set the pricing and then just forget it. All pricing strategies can make sense one time or another (except predatory!), but none alone are always sufficient.

Your goal must be to stay one step ahead of your competition.

January 2011 | The Pricing Puzzle 13

Market Strategy:No, not this type!

January 2011 | The Pricing Puzzle

Mohawk MakeReady provides practical tools

and actionable information for digital

printers like you.

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