How to create better print profit margins
Part 3 of 6 lessons about selling print learned from a visit to the pub
Have you heard of a beer bat?
A beer bat is a small wooden plank with three holes in it. Each of the holes holds a small glass of beer – usually one third of a pint. The idea is that, instead of having a large glass of a single beer, you get to taste three different beers.
I like to try lots of different types of beer. So when I went to the bar I was delighted to see that this pub offered beer bats. I ordered one and was surprised but pleased to find that it cost exactly the same as a pint of beer.
I think the beer bat was under-priced
The bar staff had to pour three different beers and write their names on the beer bat. All this takes longer, when they could be serving customers with simpler needs. And there is more washing up as well!
I would have happily paid a little bit more in order to try three different beers rather than having a single pint. Most people who purchase a beer bat would feel the same way. After all, it is beer enthusiasts who go for this option. These are people who will typically pay a premium for their beer (as you will find out in a future article). Yet this pub was reducing their profit margins for precisely this audience.
What can you do to improve profit margins?
Printing companies often under-price their services
This pub seemed to be working on a standard mark up for the beer they sold. Whether they sell a pint glass or a beer bat, the cost of the beer is the same. Many printing companies work on the same basis. All their work is on a standard mark-up, no matter how difficult the customer or how complicated the job.
However, the impact of different jobs on a company can be huge. Think about how long it takes to deal with an organised efficient customer, compared to a disorganised customer that likes to query every detail! Shouldn’t you apply a higher mark-up to the disorganised customer, simply to cover your costs?
It’s the same with different types of job. Some work will be easier for you to deal with. Other work involves substrates that are more difficult to run, or more set up time or having to oversee the outsourcing of work.
Naturally, some printing companies don’t see things this way.
Surely you have to sell cheap to win work these days?
Think about the work you really want to win. There is still enough demand for printing that you don’t have to deal with everyone who comes knocking at your door.
Consider if you really want the job that is 50% outwork. Or if you want the customer who makes you jump through loads of hoops and then becomes your slowest payer.
So how do you put all this into practice?
This week’s action point is a little more complicated. It is worth looking at both the work you sell and the type of customers that you deal with. You will typically find that you already have a group of customers who pay you a better profit margin for the work you do. You may be charging higher prices, their work may run more efficiently or they may simply be quicker to deal with. These are the type of customer that you want to target more of when you sell.
The next band of customer is not a premium profit margin customer. However, they still create a reasonable profit for you. They are worth dealing with. You may not go out of your way to target more of them, but you want to look after the ones that you have.
The final band of customer is the demanding and unprofitable customer. They expect the cheapest prices. They can be a nightmare to deal with. Nobody really likes them and yet you have often been dealing with them for many years. You should seriously consider raising price for these customers. If they go, they will be no major loss for your company. If they stay, at least you will be making more money from them!
Carry out this same exercise with the products you produce. Create three bands of product. It will help focus your sales efforts for new work. It will also help you consider what profit margin you should be putting into place on different types of work for the same customer.
“Printing companies often under-price their services” https://t.co/Xo3yZSKERk
— Matthew Parker (@PrintChampion) February 6, 2017
I like beer bats
I’m happy to pay more to drink my beer this way. So it’s easy for a pub to make a fair profit prom me. However, if there are customers that will not pay extra, they may be better off purchasing pints or going elsewhere.
Equally, not every pub wants to sell beer bats. Some are set up to deal with this sort of customer. Others just want to sell as many drinks as quickly as possible. But they spend less time doing this so they still make affair profit margin.
Are you the type of printer that prefers to sell beer bats or pints?
Whatever the answer you also need to attract the right customers. We’re going to cover this in next week’s article “Do you do enough to entice your customers?”
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