January 2011 | The Pricing Puzzle What’s your strategy? January Download Now --- to see full --- Speaker Notes

January 2011 | The Pricing Puzzle 1% reduction in fixed costs improves profitability by 2.3% BUT 1% increase in pricing can boost profitability 11% 1 Did you know… Source: McKinsey & Company Impact study of 2,400 companies

January 2011 | The Pricing Puzzle Puzzled? How do you put the pieces together? 2

January 2011 | The Pricing Puzzle 3 The six strategies for pricing Puzzle Pieces Competition Based Loss Leader Penetration Strategy Premium/High End Cost-plus Predatory

January 2011 | The Pricing Puzzle 4 Striving to meet and or beat the prices your competitor is charging. Competition Based A competition based pricing strategy focuses solely on what the competition is charging. It is: challenging for a small business to maintain provides very narrow profit margins. Think of this strategy as rock-bottom pricing.

January 2011 | The Pricing Puzzle 5 Give it away to get more in the future Loss Leader Historically, printers have done “pro-bono work” to win customers. Make sure you look at the entire picture, before aligning yourself with a freebie client. Remember all of your competition has been asked to do the work for free also.

January 2011 | The Pricing Puzzle 6 Increasing the value to your customers, build loyalty and enter the market. Penetration Strategy Unless you are “blood brothers” with your customers, loyalty in the our business is a very difficult thing capture. Offering value-added services can help secure the relationship and build your brand loyalty – storefronts, fulfillment, promotional premiums or database management.

January 2011 | The Pricing Puzzle 7 Premium – High End Exceptional reputation, quality, and distinction. In order for you to implement this type of pricing strategy, you must have built your brand recognition to a high end, premium level. Image courtesy of Rosebrook MeyerRosebrook Meyer

January 2011 | The Pricing Puzzle Two types of “cost plus” pricing: Full cost pricing includes both variable and fixed costs and adds a % markup. Direct cost pricing uses the variable costs plus a % markup. Usually only used when competition is high as it usually leads to a loss over time. “Cost plus” strategy: Full cost and Direct cost Fixed costs Equipment Leases Your building Variable Paper Toner/ElectroInk 8

January 2011 | The Pricing Puzzle 9 Predatory A carnivorous cousin, Deinonychus, about the size of a man, leaped on its prey, wrapped its long arms and three-fingered hands around it, and kicked it to the death with sickle- shaped toenails.

January 2011 | The Pricing Puzzle 10 Pricing Market Environment Competition IncomeDemand Differentiate

January 2011 | The Pricing Puzzle 11 What is the important piece? A puzzle is not complete without all the parts. Be systematic and strategic in your decisions. Do not set the pricing and then just forget it. All pricing strategies can make sense one time or another (except predatory!), but none alone are always sufficient. Your goal must be to stay one step ahead of your competition.

January 2011 | The Pricing Puzzle 12 Market Strategy: No, not this type!

January 2011 | The Pricing Puzzle Mohawk MakeReady provides practical tools and actionable information for digital printers like you. 13 We can help… Visit: to browse content, request a meeting, or join the community.