Pricing Discipline Remains Illusive

One of the common complaints heard during these challenging times is the lack of price/cost discipline found throughout the industry.  Our industry has been fraught with over-capacity for years and individuals who are willing to lower the price so they can “make it back in volume.”   A more recent occurrence are the charlatans who create on-line bid situations which guarantee their client a reduction in print costs, the intermediary a nice fee, and some poor schlemiel of a printer an opportunity to see how low a project can be priced.  The results are normally a shoddy product and an unhappy client — with new pricing expectations.  When will it all end?

Last month I had a conversation with a member who against his better judgment decided to accept an invitation to be part of an online bid.  A project which normally billed well north of $1,000,000 ended up being “won” with a $300,000 bid.  Where’s the sanity in that?  In another conversation, this time with a well-established and well run inplant operation, their management was challenging their cost structure because more and more of their work was being underbid by the commercial market.  These symptoms of “dead printer walking” really concern me.

The assumption many of these “low-balling” (I’m using a nice phrase) firms have is that the economy will return to its pre 2008 hey-day and things will be great again.   My friends that’s not going to happen.  Today’s print market is at 2004 levels (per Dr. Joe Webb) and it will be many years before we see 2007 levels.  It’s time for our struggling brethren to REALLY look at their opportunities and realize that it may be time to hang up the spikes. 

For the health of the entire industry, companies can not continue to bid prices which just cover material, labor, and costs of their equipment debt.  Suppliers can not continue to extend credit to “at-risk” firms.  This not only jeopardizes their existence but creates tremors felt by the entire industry.  Manufacturers can not sell equipment based on making “the numbers” for the quarter.  And as hard as it may be, companies are going to have to walk away from business regardless how much they’re asked to meet the “low-ball” price.  Meeting that price is not a short-term win – it’s a long term loss.  What makes us think that customers are going to let the industry “reset” their pricing once “good times” are back again?  It’s a no-win situation.

The future of print is very viable if print providers have the profit margins which will allow them to re-invest in new technologies and create new business models.  That can not happen if dying firms are setting the price levels.  It’s time to break the chain.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s