Date: Sun, 25 Aug 1996 12:49:42 -0400
Subject: 2nd Side Pricing Costs Us MILLION$
Content-Length: 9347
X-UIDL: 840992321.000


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2nd Side Pricing Costs Us MILLION$
Transmitted from Colorado Springs, Colorado



While some computer software s second side pricing is  mathematically
logical, it doesn t make sense. . .



We, at Crouser & Associates, were pleased to co-sponsor the 1996 Quick
Printing Industry Pricing Survey. I was also pleased to be able to serve as
an NAQP member on the industry committee which assisted in planning the
project. Through the efforts of the committee and John Stewart of QP
Consulting, this survey was the first ever to obtain statistical validity
(95% confidence of a 3% overall margin of error) among small press printers
throughout the country which was not easy manner.

Generally, the survey and our price guide agreed. Sometimes it was even
scary. Here are some sample prices.

8.5x11 Bond
Quantity     Crouser     Survey
       500        $30            $30
     1000        $44            $45
     5000       $136          $151
    10000      $222          $268

8.5x11 67# Vellum Bristol
Quantity     Crouser     Survey
       500        $49            $47
     1000        $74            $74
     5000       $260          $265
    10000      $467          $485

11x17 60# Offset
Quantity     Crouser     Survey
       500        $53            $47
     1000        $76            $74
     5000       $242          $265
    10000      $453          $485

The chart illustrates The Crouser Guide s more competitive posture in longer
runs where the printer passes along some higher equipment usage benefits and
lower costs (using same equipment more hours resulting in a decreasing budget
hour rate) without sacrificing income. 

Where We Don t Agree: 2nd Side Pricing

One place the NAQP survey and The Crouser Guide doesn t agree is 2nd Side
pricing. Our guide consistently gets more for the second side than the NAQP
survey shows. How come? Well, 63% of the survey participants use computerized
estimating which results in a second side depression in pricing very typical
of the computer software on the market. But it doesn t make it a good price
policy.

For instance, let s go back to the study s findings for 1 color offset
printing charges on 20# White Bond. Here we found 1,000 8.5x11 White 20# Bond
sheets selling for $45 printed one side and $76 for two sides printed. That
yields a difference of $31 or the charge to print side two.

Now, paper is selling for an average of some $5.50 per 1,000 sheets. Assuming
a markup of paper of 50%, then the paper cost within the value is some $8.25.

So, how much should we be charging for printing the second side? Printers all
over the country, when given a similar example, tell me $36.75 ($45 - $8.25)
because that is what we charged to print the first side, minus paper. That s
how we did it for years without computers. That s how The Crouser Guide
prices. But, that s not how most computer programmers have written their
software packages.

They go back to ground zero and recalculate the second side which not only
leaves out the $8.25 of paper, but also the markup on that paper which is
part of the side one price. So, their second side price is $31 instead of the
$36.75 you expect.

What s the Big Deal? $36.75 versus $31 or 18.5% Less

I  talk to many printers who have very high direct material costs, yet tell
me their prices are in line with our book. Many are fearless advocates of
other computer systems. But, when we look at it, their additional pass
pricing is way too low. And most importantly, this flaw lowers prices
substantially on every one of the really complex jobs. . .the jobs where we
should be getting higher prices. 

Doesn t Lower 2nd Side Prices Mean More Business?

No, because the second side price still has to relate to the first regardless
of the first side being high or low. If I sold 1,000 for $40, paper was $10,
I would logically sell side two for $30. If I sell side two for $20, then I
should logically sell side one for $30 ($20 + $10). One or the other is low
in relation to the other.

Here s another reason. Most small press printers within the US sell from 50%
to 75% of all their total output to 25 customers!  Time and time again, I see
printers manipulating their prices into the wee hours thinking that this will
bring them business when they aren t even in the marketplace competing. All
they are doing is reducing their price to the customers they have now. Extend
that to the second side price and all I see happening is the small press
printer doing more complex work for less than they would for simple work.

While this computer generated artificially low second side pricing is
mathematically logical, it doesn t make sense. Either your first side price
is too high or your second side is too low. The fact remains that a logical
second pass price should be the same as the first pass excluding paper. You
don t have this problem if you use The Crouser Guide or Crouser software.

Anyway, that s why the second side pass in The Crouser Guide is higher than
what the survey shows and why. Don t look for us to change it because it is
not in your best interest.

However, We Are Making Changes in 1997

We were able to learn from the study, however, certain indicators which we
used to modify the price parameters for the forthcoming 1997 Crouser Guide.

We were able to raise prices on Drilling (set up and higher minimum charges)
along with increasing the set up charges on Folding, Numbering,  Scoring and
Perforating.

Carbonless sets and letterhead prices have seen increased price pressures
and, in turn, we have responded by reducing the premiums we are obtaining,
especially in the longer runs.

Also, we made adjustments in the pre-press  area.  Hourly rates and minimum
charges are being lowered because the availability, price and variety of
desktop systems have reduced the value of typesetting in the marketplace. The
adjustment, however, was not as much as one might think.

Other areas for the competitive make-over was coated offsets as well as two
color coated. This is an area of increased ability for many printers, thus we
have seen some price pressures.

However, we were able to make all competitive price adjustments by reducing
premiums passed along to the customer while at the same time passing along
increased costs. (We increased the budget hour rates and reduced some markups
to more normal as opposed to being in the premium range.)

Our Spiral and Velo Binding prices were reduced to reflect competition.
However, this is a prime reason for using a Guide to assist you in setting
your prices instead of relying just on surveys. Just because the average is
low doesn t mean you can make money selling it for that.

In The Crouser Guide, we look at both the market side as well as the cost
side. We then err on the side of cost. That s one of the prime reasons people
buy our book. . .we look at both sides for them and deliver some 206,000
individual pricing points.

1996 Quick Printing Industry Comments

There are two items of interest to those using the study to compare prices
with The Crouser Guide or your own price scheme. First, ink wash-ups are
included in the final study prices of color printing. So, in comparing with
your press run prices, you need to remove the ink charges from the study.
And, second, the carbonless printing prices do not include padding, while the
values in The Crouser Guide do. 

Also, of note, was the fact The Crouser Guide was published in December 1995
while the survey was completed in the first part of 1996.

Major Upcoming Changes to
The 1997 Crouser Guide:

3% Increase In Your Overhead Costs
More Competitive Carbonless and Coated Stock Prices
New Matching Letterhead Envelope Section
Increased Drill, Fold, Number and Score Prices
Color Connectivity and Color Copy Prices
High Speed Copy Price Grid
More Competitive Carbonless Set Values
and more. . .

To Reserve Your Copy of The Crouser Guide s 1997 Edition, send $203 ($195
plus $8 shipping) to Crouser & Associates, 235 Dutch Road, Charleston, WV
25302. Add $30 for Next Day Air delivery. Or telephone (304) 342-5100 or fax
(304) 342-5187 and use your MasterCard, Visa or American Express. We also
will ship C.O.D. Shipments will begin in December 1996.

See you soon.

Happy Trails,

Tom and Pamela Crouser in Colorado headed for Iowa
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