Quantifying the Business Problem
Industry research indicates that pricing is the number one barrier hindering the use of color in construction documents. If the reprographic industry hopes to convert bid-phase and construction-phase black and white print volumes to color, reprographic printing firms must address their color pricing system.
Across the country prices for wide format color prints rang from as little as 25 cents per square foot to as much as $6 per square foot. Black and white prices range from as little as 4 cents per foot to as much as 75 cents per foot. Research conducted by Océ reveals that reprographers, on average, charge $2.87 per square foot for the lowest-priced category of wide format color prints.
The architectural, engineering and construction behavioral patterns set by price are similar to those surrounding the current organic food trend. For example, consumers who value organic food are prepared to pay a premium for it. If a consumer is likely to spend $1 on a regular banana, a consumer that values organics may be willing to spend $1.30 on a similar organic banana. The shopper has determined that the 30% price premium is worth the investment. However, there is a threshold. No matter how phenomenal a banana is, the average consumer will not likely pay $30 for it. For that same reason, stakeholders in the construction industry will not likely pay an average of $2.87 per foot for color prints when they can pay 10 cents per square foot for simple black and white prints.
There are several reasons why wide format color printing prices are so high. First, color print pricing guidelines, in many cases, were established for use within the display graphics business, which commands higher dollars and higher output quality. Second, color wide format print production was originally very labor intensive and required extensive color correction. Third, in the past, the cost of a color print impossible to calculate, so pricing was often established based on the worst case scenario.
Though wide format color printing practices have dramatically improved, reprographers are hesitant to lower their current color print prices for several reasons:
- The price war for black and white market share in the US left reprography firms with very low profit margins.
- The weak economy and the move to digital workflows have left reprographers with lower print volumes.
- Reprography firms hope that color printing revenues will make up for the lost revenues that were incurred as a result of strong competition.
Consider reprographic printing costs and profit margins and it's evident why printing firms are hesitant to reduce color printing prices. Suppose a reprography firm's initial cost to print in black and white is 5 cents per square foot and the firm charges 10 cents per square foot. The result is a 50% gross margin, but only 5 cents of actual profit per square foot. Concurrently, suppose initial color printing cost is 15 cents per square foot and the reprography firm charges the client 60 cents per square foot. The result is a 75% gross margin; however, the firm is now making 45 cents of actual profit per square foot. That's a 50% increase in gross margin but a 900% increase in gross profit. While 60 cents a square foot for color printing services may sound low, a printing firm would have to print nine times the black and white copies to make the same margin of profit.
When presented with this information, reprographers often think that implementing these concepts will lower current color print revenues. However, reprography firms should not convert $3 per square foot color work to 60 cents per square foot color. Instead, they should collectively convert 10 cents per square foot black and white work to 60 cents per square foot color.
Taking advantage of this pricing plan usually means adding a new price category for prints with lightweight color coverage such as lines-and-text or red-line mark-ups. This kind of work must be differentiated from 3D renderings and other higher-coverage color prints. Below is a four-tier price category concept that reprographers may find useful:
If the reprographic industry does an effective job of pricing, firms will only be required to convert a small percentage of black and white work to color in order to make up for a lot of lost revenues. Reprographers must consider pricing variables and local market conditions to optimize their own pricing systems.
By optimizing the pricing standards of the reprographic printing industry, the architecture, engineering and construction industries as well as the reprographic industry can both benefit from capitalizing on color construction documents.
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