By Ed Avis
IRgA members and others in the reprographics community have reacted to Paul Fridrich’s article about changing from a per-square-foot to a per-sheet pricing standard swiftly and nearly unanimously – almost everyone responding so far is in favor of the switch.
“Makes a ton of business sense,” wrote John Lipari, president of Plan & Print Systems in Syracuse, New York, in a comment following Fridrich’s article (click here to read Fridrich’s article and all of the comments that follow.)
Discussion of the topic has not been limited to IRgA members. ReproMAX originally discussed the issue at its meeting in Las Vegas on October 23-24.
“The ReproMAX Board of Directors had raised this issue for the past several months,” says ReproMAX President Rick Bosworth. “The profitability in AEC printing has waned, and to some degree it’s due to the fact that the business model has changed and we as an industry haven’t changed to match it.”
The basic idea behind the proposed new pricing model is that reprographics printing should be priced by the sheet rather than the square foot. This would conceivably reduce the perception that AEC printing is a commodity and allow reprographers to charge prices that more accurately reflect the sophistication involved in the work. Bosworth notes that other business categories of printing – such as offset – do not charge by the square foot.
“Square footage pricing is a linear model. It commoditizes the product,” Bosworth says. “There’s a high level of sophistication in printing these days, and that is much better reflected in sheet size. We were a commodity ten years ago – we are no longer a commodity.”
Fridrich’s article included a link to a survey about current pricing policies. The survey, which was answered by 33 reprographics firms, confirmed that square-foot pricing still dominates the industry.
More than 75 percent of respondents reported that they charge by the square foot, compared to only 12 percent that charge by the sheet. The remaining respondents reported that they charge by some combination of sheet and square footage.
Color CAD, Too
Respondents to Fridrich’s article also suggest that sheet pricing should be applied to color CAD printing as well. The idea is that if square-foot pricing takes hold in color CAD, it too will be considered a commodity, just as volumes of color CAD are poised to grow.
A side debate has emerged about the overall pricing of color CAD versus monochrome prints – if it costs about the same to print color CAD, which new technology offers, should we charge the same or keep charging more?
Color CAD is often priced at 10x the cost of monochrome in North America, and some believe that spread should be maintained as long as possible to capitalize on the perception that color is more valuable.
“Color CAD is a growing, very profitable business for us now,” says Tony Militano, an IRgA board member and owner of Carbon Copy Digital in Calgary, Alberta. “However new technologies, such as HP PageWide (click here to read more about HP’s PageWide), will change the whole landscape in the next couple of years. The margin is definitely going to decrease a bit, especially as the gap between CAD color and black and white closes.”
Others say reprographers should quickly make the price of color CAD printing closer to monochrome to increase the overall market size and to prevent clients from printing their color documents in their own offices. This idea, however, is predicated on an increase in the price of monochrome prints to a more profitable level (there’s no sense in making a tiny margin in both monochrome and color). The per-sheet pricing model would make a price increase in monochrome more feasible.
“Your customers are bright people,” Bosworth notes. “They’ll figure out the cost of color printing. If they can print internally better and cheaper than by sending it out, it significantly impacts centralized print.”
In Europe the gap between color and monochrome print prices is much closer, though their monochrome print prices are generally higher than in the United States. And color CAD is a much larger part of the market in Europe, partly because municipalities more frequently require color prints, and probably also because the price differential is smaller.
“If you look at the European model, the price gap between color and monochrome is considerably less than in North America,” Bosworth says. “And their color business in AEC has expanded significantly.”
Other Countries Ahead
Many reprographers in other parts of the world have already adopted the sheet pricing strategy, so there is precedence for its success.
Achim Carius, executive director of Motio, the German reprographics organization, explains that many of his member companies have long priced by the sheet, and they bump non-standard size drawings to the next larger size.
“This is called a ‘wild’ size,” Carius says. Adopting the “wild” size concept respects the client’s preference for size but also ensures that reprographers profit a little more when they accommodate those sizes.
Sheet pricing is not limited to Europe. Rob Macdougall, owner of Macdougall Reprographics in Perth, Australia, commented after Fridrich’s article that Australia is a quarter century ahead of North America in this practice. “We have just charged on print sizes over here from my last 25 years in the industry. Is it true that you charge per sqr (square) foot?”
Charging for Everything
Another issue raised in Fridrich’s article is that reprographics shops should begin charging for more of the services they provide – such as file preparation, quality control, etc. – since those services add value.
The IRgA survey showed that many members do charge for a variety of services these days. For example, 70 percent of respondents to the survey charge for scanning originals, file manipulation, and indexing.
But some services are not as commonly charged for. Only about 45 percent of respondents charge for file preparation or OCR services, and only one respondent charges for quality control services.
Another pricing issue that has been discussed recently is the idea of creating summary invoices for clients, rather than spelling out each detail. The idea is similar to the concept of sheet pricing – if customers are comfortable with one summary price for a project, why give them all sorts of details they can use to nickel-and-dime you in negotiations?
Militano says his firm has been moving towards summary invoicing over the past couple of years. Carbon Copy does a lot of corporate work, such as manuals and presentations, and corporations were already accustomed to receiving straight-forward invoices that did not spell out every detail. About a year ago he decided to move in that direction for his AEC customers, too.
“Ninety-five percent of our invoicing is summary invoicing now, and we’ve had very little pushback” he says. “And we’re refining them all of the time. Ideally I’d like them to simply read, ‘25 originals, 15 sets, 300 dollars.’ That’s it.”
The IRgA survey showed that Militano is among the pioneers in summary invoicing. Only 12 percent of reprographers use summary invoices, according to the survey, while nearly half still spell out every charge. The remainder use some combination of summary and detail.
Militano says some customers occasionally still ask for a more detailed invoice, and he accommodates those as much as he needs to. But even in those cases he has trained his sales people to offer a summary price whenever possible. “The rationale is that the customer says, ‘This sounds fair.' Then they’re not asking for a breakdown.”
Not only does the summary invoice reduce the temptation for clients to negotiate, it also allows the reprographer to more easily raise prices when necessary.
“One of the advantages of summary invoicing is that if you do a price increase, which we’ve done recently, you get very little pushback because you don’t have to explain all the individual prices,” Militano says.
So what comes next? The key to successfully transitioning the industry to a new pricing model is persuading enough reprographers to switch to the model that it becomes the industry standard. Some jobs may always be square-foot bids, but if the majority of the industry accepts sheet pricing, clients will go along with it and everyone will benefit.
“It won’t be an easy transition, though, for customer education will need to be involved to smooth the transition,” wrote reprographics consultant Joel Salus in a comment after Fridrich’s article. “And, without an early-on buy-in from a substantial majority of reprographers, it could be messy, at least for a while.”
The early buy-in among reprographers calls for an education campaign, the IRgA board has concluded. The board is considering how the association could lead this campaign, which would most likely include written standards and educational events. Stay tuned for more information on this.
In the meantime, please continue this debate by adding your own comments and experiences in the Comment box below.