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Commentary & Analysis

Pricing: It's About Value

By Barbara Pellow October 4,

By WhatTheyThink Staff
Published: October 4, 2006

By Barbara Pellow October 4, 2006 -- One of the four major elements of the marketing mix is price. Too frequently, graphic communications service providers rely solely on price as the most critical element of their marketing mix and let it carry the weight versus leveraging "product," "place" and "promotion." In this highly competitive marketplace, it can be difficult to persuade customers to buy from you when you offer a similar product to your opposition but with a higher price tag. And trying to beat competitors on price alone is a cut-throat business, very risky and not recommended. It attracts bargain hunters ready to defect to competitors for a better deal. And it does a disservice to the industry as a whole. Today's print buyers are looking for a package of products and services delivered when and where they want them. Graphic communications service providers are beginning to understand that it is time to compete on the "value" of their offerings. Customers buy a product because of its value proposition and not its low price. As graphic communications service providers reach this realization, they are beginning to communicate what they are delivering in very different terms. They are talking to clients about the net benefits they will realize in terms of improved ROI, reduced inventory cost, brand protection in marketing materials and improved services to dealer channels when they complete the exchange. They are also learning that today's print buyers are looking for a package of products and services delivered when and where they want them. What is Value? Marketing guru Philip Kotler explains that the important concept in today's market is customer deliveredvalue. He defines it as follows: "Total customer value is the bundle of benefits customers expect from a given product or service. Total customer cost is the bundle of costs customers expect to incur in evaluating, obtaining and using the product or service. Customer delivered value is the difference between the total customer value and total customer cost." What graphic communications service providers are discovering is that they can maximize customer value by increasing the benefits or reducing the overall costs. There is no reason to get hung up on just the cost (price) aspect of the equation. Maximize customer value by increasing the benefits or reducing the overall costs. This is why we see limitless variations on some of the products we buy. The variations are an attempt to avoid price competition by offering differentiated value add. Robin Johnson, in an article titled Make Sure the Price is Right, said, "You can get a briefcase from Wal-Mart for less than $50, but if you want a genuine Samsonite hard-sided case with special hinges to prevent it from opening while it's upside down, you are going to have to ante up and pay the price. Those features cost more." Karen Keenan, Director of Marketing for Wilmington, Delaware based Associates Graphic Services (AGS) highlighted the importance of an improved feature set applied to a higher education institution client of the firm in an article I wrote about them recently. According to Keenan, "The statistics tell us that for every $1 a customer spends on print, they spend another $6 on content and fulfillment. Our goal at AGS is to align our pricing to address all the ancillary services we perform in the production of customer projects. Our experience tells us customers won't pay more for printing of any kind. What they will pay for is the services performed when you attach a dollar value to the individual service. Results from services such as data mining, response tracking, mailing, fulfillment, etc., can all be tracked. Clients come to AGS because they know we've got the knowledge and experience to deliver the entire package when and where they want it. That's what they're paying for." What AGS has done is deliver an improved feature set to customers that enhances the overall benefit of the package. Similarly, customers are willing to pay more for a product that is available where they need it. Food vendors in airports are aware that we are willing to pay more for a sandwich at O'Hare airport than we would in a deli in downtown Chicago. While we might complain as we pull out our wallets, we must admit that the value of having food where we need it and when we are hungry is worth the extra dollar or two. Similarly, in the world of graphic communications, the concepts of Internet services and Web-to-print can be directly linked to making high quality graphic communications services available when and where people need them with the added benefit of protection of the brand identity. To that end, Cleveland based Great Lakes Integrated offers a system called AKSESS. Customers won't pay more for printing but they will pay for services when you attach a dollar value to the individual service. AKSESS is designed to answer the "what, where and when" of creating and managing marketing and branding resources. AKSESS develops & delivers Web-based marketing communications tools to track digital and material resources. With AKSESS, the digital files that users need to create ads, marketing materials, data sheets, documents, and ad presentations, are available on their desktops, 24/7, anywhere in the world. Equally important, AKSESS gives customers control over the company's inventory of printed and other collateral materials. Extensive report functionality lets them take a virtual look into the warehouse. Users can retrieve digital assets, create materials on screen, order from and check inventory, and issue requests for reprints anytime, from anywhere via the Internet. According to Executive VP of Sales Kostika Radivoj, "In today's market, you need to give customers a compelling reason to do business with you. Differentiation means helping customers become more efficient and profitable. Great Lakes Integrated is leveraging the 'value of availability' and making content available when and where clients want it. The benefits of AKSESS in terms of saved time, cost, and frustration are immeasurable as is the value generated by the ability to create and convey a consistent brand identity around the globe." Getting to the Right Buyer The other key element that successful graphic communications service providers emphasize is that value needs to be sold to the right person in the organization. The purchasing department is interested in a transaction sale and focuses on price. President and CEO of Cleveland based Printone Digital, Don Raimondo, said, "The new value in graphic communications is response rate. We take our customers through the entire campaign management process from idea creation to delivery and tracking results. We are delivering techniques to help them grow their businesses. This type of offering has to be sold to the marketing executive or senior management." In today's market, you must have a dynamic salesperson who works to understand the customer's source of pain and brings the right solution to the table. Radivoj added, "In today's market, having a quality product that is delivered on time isn't enough. You have to have a dynamic salesperson who works to understand the customer's source of pain and brings the right solution to the table. This means that you need to be calling at the right level in the organization." Effective Promotion Still Plays an Important Role Promotional efforts still play an important role in establishing value. Through the promotional mix, firms can subtly or not so subtly communicate that one product-service offering has greater value than another. People pay more for Absolut Vodka than they do for Smirnoff. Is a shirt made by Ralph Lauren really better than one from Land's End? Somehow these firms have convinced the public that their product has additional value, and they can and do charge more. They have achieved this through effective marketing communications and promotion of their respective brands. It's Usually Not the Price Graphic communications service providers need to understand that price problems are rarely pricing problems! Although many companies face demands for lower price, this does not always mean prices are too high. Demands for lower price may be caused by inadequate competitive differentiation, bad negotiating policy, failure to communicate value, and even by neglecting to ask for higher prices. Companies who grant price reductions in the face of aggressive customer buying behavior train their customers to seek even more price concessions. Companies who grant price reductions to aggressive customers train those customers to seek more price concessions. Companies like AGS, Great Lakes Integrated, and Printone Digital have learned that it is important to: * Clearly target customers where differentiation can be achieved at competitive advantage and ensure that you are calling at the right level * Understand that print alone is a commodity and it needs to be embedded in a value-based solutions offering that customers understand * Sell the concept of customer delivered value which equates to improved ROI for marketing, reduced inventory cost, brand integrity in marketing materials and improved services to dealer channels * Focus the entire organization on the creation and delivery of value to its target customers And these companies are not selling on price alone.



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