Know thy costs, know thy client

In a previous post, we briefly discussed what pricing on value is, and touched on why you should be pricing on value and not direct cost.

This post will dig down a little more into the 2 things you need to know before you start pricing on value.

The first is your cost of manufacture. It seems a bit counter-intuitive, and quite a few MIS and production software providers will tell you that super accurate costing in your quotes doesn’t matter. That’s because they either can’t do it, or they can’t do it at a price that works for a quick print shop. And you end up thinking –  “If I’m selling on value, then I’m going to be way above my costs anyway, so close enough is good enough”

The truth couldn’t be a starker contrast:

What if the client value is well below the actual cost of manufacture?

There are plenty of examples of this in the print world, and in fact in retail in general they abound. These things are called Loss-leaders. And selling something like business cards, as a loss leader is not necessarily a bad business strategy.

So where’s the problem?

Well , if you don’t know the actual and specific cost of everything that you aim to sell, ( ie all your jobs , in advance, before you even fire up the presses) then you run a huge risk of selling too many of your jobs as ‘loss-leaders’ and not enough ‘leaders’ to make up the profit.

How do you fix it?

Know your costs. Intimately. In the print world, this means having a fantastically accurate estimating and job-costing process. It may not necessarily be MIS or software based. But you should be on top of those costs on a daily basis.

Secondly, know your client.  This could mean knowing them personally, or knowing all about them.  Increasingly, doing business online means that a growing number of our clients belong in that ephemeral category: Online Consumer. Possibly you will never meet them.

So how do you get to know them, or know about them?

To get to know them, get thyself onto social media. Social media allows you to know things like the type of music people like, where they like to holiday, what food they eat, or even their favourite colours. Connect with people based on mutual interests.

But, there’s too many sites, where should I start?

Start small, pick one, and ease into it. Go where you know your clients are going already, it may be Facebook, it may be Twitter, and it may be neither. Instagram, and Pinterest are a gold mine for printing companies, because they are image based; you could post pictures of interesting and quirky jobs you did, the new press you have that can do new and funky things at twice the speed. And then converse with the people who respond, repost and comment.

So what if you’re no good at this ‘social advertising’ stuff?

That’s good, because social media is NOT advertising, and if your news feed reads like a ticker tape advertisement reel, you’ll get no followers, and then you’ll have no-one to talk to.

You should participate in discussions, act like a human being, and converse with others and only occasionally do an ‘advertorial/hard-sell’.

What if I just want to know ABOUT them, without knowing them personally?

Do some good old fashioned market research. If you have the budget, buy the information. If you don’t, put in some elbow grease to find out what you want to know.

Why should you know about them?

Knowing everything you can find out about the people around your business, and the people who are looking at you online, will allow you an enormous amount of flexibility in pricing your services. Because you will know what they value about their lives, and that will lead to insights about what they may value in your services.

People are always willing to pay for what they value. Regardless of what the market dictates, or what the product is actually worth from a cost-to-manufacture perspective.

If you doubt this, you should visit Comic-Con the next time there’s a convention near you. Photographs are only worth something to person in them, or the person taking them. Except when we’re talking about a famous person, who is going to autograph said photograph. Then it’s worth the upper limit of what a Trekkie willing to fork out. The numbers are astounding, the long queues of people waiting for an hour or more, even more so.

People will pay for what they value. And what they value is not always the cheapest price.

To recap, know your costs, and know your client. Know them well, and be comfortable with the limits of your pricing using these factors.