How Prices in the Crouser Digital Price Guide Were Developed
Cost or MarketAll the Crouser Guides use a two-pronged approach to suggested pricing: cost plus AND market value. We calculate the cost of manufacturing utilizing cost models we have developed* and apply base markups which yield an adequate return on investment and effort. This forms a floor under which the retail price should not fall. Then we compare the market value of the same item and allow the suggested price to rise to market assuming market exceeds cost plus. *Crouser & Associates consultants normally work with at least one hundred printing companies throughout the United States each year in establishing budgets. In so doing, we have developed certain ratios of costs that are used in modeling costs used in our Guides. No other firm maintains such an intimate relationship with costs in the printing industry. In the specific case of Digital Printing, we found printers using the cost plus method of pricing to be severely under pricing their work when compared to what others were obtaining. The typical direct costs for digital printing on digital copiers, digital duplicators and some digital presses tend to center around a production unit that is leased from a vendor for approximately $1,500 per month and a per meter click charge of up to $0.055 per image (regardless if imaging 8.5x11 or the maximum size which is approximately 12x18). These units are typified by the Konica-Minolta 6500/6501; Canon 600; Xerox 700 and like machines. These prices cannot assume to be reflective of digital presses such as the Indigo (HP), iGen (Xerox), Nexpress (Xerox).
Price Does Not Determine ProfitabilityHigh price x low units sold minus (direct materials + wages + overhead) = LOSS Low price x high units sold minus (direct materials + wages + overhead) = PROFIT
What Does
How We Determined Market Value?From that we were able to establish a consensus on various production factors. Among them were the typical run lengths on the equipment studied (usually less than 1,000 and rarely over 5,000); those things that effect prices such as RIP times (5,000 images of one original process faster than 50 images of 100 originals); and those things that effect running speed such as size of the substrate being imaged (8.5x11 vs. 11x17, for instance) and thickness (card/cover versus text/offset). We then opened up the study group to others and expanded to a total of 250 individual firms. With these we then studied various elements of price such as the typical price of 1,000 11x17 text/offset. But we did not just study the price point. We also gathered information on the cost of the paper stock being priced and developed a correlation between paper costs and price. It is from these that we were able to develop a variance on a price point based on the cost of paper (substrate) being processed. We also studied the outer limits of price so we could reliably predict price points between the outliers. Specifically we gathered prices at various points from 10 through 5,000. On these various price points, we used the percentile between the quartiles method which is a fancy name for a simple process. Example: take 100 pricing points and stack them up from the smallest to the largest. Count up from the bottom to the 25th price and that is the first quartile (25%). Continue up to find the 50th number (median or number in the middle). And then continue to the 75th number or the 75th percentile. The relevant range of this data range is from the 25th to the 75th percentile with the 50th being the more typical. It is possible from this to determine that a relevant range of a specific price could be something like $15 (25th percentile) to $50 (75th percentile) with the typical price being $35 (50th percentile or median). What about the average? If one has enough data to form a normal distribution; then there is a whole range of statistical methods available, one of which is the average along with standard deviations. However, without enough data to form the normal distribution, the average can be misleading (skewed high or low). Example: five price points are as follows:
$ 100 The average of these five numbers is $53 ($265 / 5 = $53). With the percentile approach, the 25th percentile number is $40, the 75th percentile number is $50 and the median or 50th percentile number is $45 which is more descriptive of the data set than the $53 average. In this case, the average would be considered to be slanted to the high side (high skew). Within the Crouser Guide, the X or low book would approximate the 25th percentile number, the Y or middle book would approximate the 50th percentile or median number and the Z or high book approximates the 75th percentile result.
Do Over Survey
Permanent Study Panel on Prices, Wages and Costs
Difference in Price Surveys and a Guide
Various Levels for Varying CostsAlmost all new products or processes start off at a higher price because the market will support a higher price for a new or innovative approach. When new, variable windshield wipers were only found on higher priced automobiles. As the production process produced cost savings and as demand increased; one or more of the producers begins selling for a lower price. Today, variable windshield wipers are found on even the least expensive of automobiles. This tendency has a bearing on printing. Offset printing is an older process and is available from many sources. As a result the main price driver in offset is the cost of production plus a markup. Digital printing, on the other hand, allows for lower total costs (for instance, you can buy 100 full color images today when not that long ago a practical minimum would be at least 5,000). However, the unit price of digital is much higher than offset. The customer looks at the total amount of cash they have to hand over for an item. So, offset will still continue to be a lower per unit cost. If you would like to discuss more boring information like this, please message me at tom@crouser.com. I enjoy chatting about it which obviously means I don’t have a real life. |