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Commentary & Analysis

So, You Like Being the Lowest Cost Provider?

By John Giles August 30,

By WhatTheyThink Staff
Published: August 31, 2005

By John Giles August 30, 2005 -- There's an old joke that goes, "What's the different between a business card done by a freelance graphic designer and one done by a printer?" The answer: "About $500." That's far truer than many would like to admit. Which makes me worry that some quick and small commercial printers will turn VDP's added value into a commodity service and shave away most of the profits. It isn't smart to cut the selling price just because the work can be done cheaper. Printers constantly have new opportunities available to them. The latest is variable data printing with emphasis on personalization. More than just a mail merge, VDP allows printers to combine text and graphics based on a variety of information into a personalized printed piece that has a far greater impact on the receiver than just a name inserted into text. When small commercial and quick printers embraced desktop-based typesetting and design, they immediately undercut the prices charged by larger printers using high-end typesetting systems. While it was logical to have a lower hourly rate because the dramatic difference in equipment prices, it wasn't smart just to cut the selling price because it could be done cheaper. What the printer forgot was that the value of the work, in the customer's mind, didn't drop because of a change in equipment. There was a market value for typesetting and design and some printers began selling those services under the market value. This helped drive down the profits for printers in typesetting and design. Small commercial and quick printers focus on the time it takes to produce a job rather than the market value of the job. Freelance graphic designers, ad agencies, large commercial printers and other graphic design service providers held their prices at a higher level. Today everyone uses the same type of equipment and software to produce typesetting and design work, but small commercial and quick printers charge much less for the same type of work as others in the printing industry. Small commercial and quick printers focus on the time it takes to produce a job rather than the market value of the job. It was this approach that gave customers the idea that a printer was the low-cost provider for desktop publishing and design services. Now customers think if you want "real" design you must go to someone else in the graphic arts industry. Do You Know the Value of VDP Services? The same thing could happen to VDP services. Many small commercial and quick printers have most of the technology they need to get into VDP. They have the computers, output devices and the mailing service. Some have even invested in high-end variable data software. They expect to advertise the service and customers will beat a path to their door. What most of these printers don't have is the understanding of the marketing value of VDP services. Too many of the printers with whom I've discussed VDP talk about the time it takes to actually produce the order rather than how much it is worth. Too often a printer tells me that the reason he is getting into VDP is because he can produce and sell it cheaper than his competitors. They believe if they have the cheapest price, the customer will find them. Too often a printer tells me that the reason he is getting into VDP is because he can produce and sell it cheaper than his competitors. What these printers don't realize is that the profitable VDP providers are producing the work economically. Customers with VDP projects aren't going and looking for printers. Advertising agencies and marketing companies are finding customers with the need for VDP services and bringing them to printers with the equipment. The advertising agencies and marketing companies are determining the selling prices based on the value to the customer. They understand the value and are setting the prices high. Customers with VDP projects aren't going and looking for printers. If printers expect to be successful in VDP services, they will have to understand marketing. They will have to be able to help someone sell something to somebody. They can't just react to a customer's VDP needs. The successful printer will have to be able to help a customer understand the value of VDP, how it will increase sales, and provide the measurements to show it works. The printing industry is excited about VDP being the latest opportunity to increase sales and make money. I just hope it doesn't become another opportunity to work hard at losing money and become the new "black hole" for the printing industry.

 

 

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