5 Pricing Mistakes that Apparel Decorators Make (and How to Avoid Them)
Cheap T-shirts turn customers into monsters. If you’ve worked in the industry for longer than a week, you’ve heard a customer complain about pricing: “So you’re telling me this thing that costs $5 at Wal-Mart is going to cost me $15 from you?”
But your prices determine your destiny. And somewhat counter-intuitively, the best clients won’t haggle over a few bucks here and there. So why is pricing so difficult? Why do the same mistakes pop up again and again?
From data collection to cash flow, pricing for consistent profit in this world is a tough situation, but it’s not impossible. Even small improvements can dramatically impact your bottom line. Most customers will not notice a $0.15 per shirt price increase. The person who really matters — your account — will notice the difference.
Mistake #1: Copying Another Price Sheet
The story goes something like this: Someone publishes their price sheet. The owner has not given these prices any thought. They’re just nice round numbers that correspond to case sizes.
A few months later, a competitor comes along and sees these prices. They decide to chop $0.50 off the price then publish that list. They steal all of the customers.
Five years pass. Both print shops have long since gone out of business. But for some reason their price lists have stuck around on local search results.
When you search for screen printing in that area, you notice everyone’s price lists look suspiciously similar. If you didn’t know any better, you’d think that every print shop in town based their pricing off some hare-brained list that a total joker cooked up in their basement one evening.
I wish this story was exaggerated. But it isn’t. It’s the reality for a lot of small towns and print shops … and even some big ones.
So what’s wrong with copying your competitor’s price sheet? Your shop’s overhead and fixed costs are unique. It takes your shop a unique amount of time to do one unique job. Another shop might be much slower or faster. Even a reprint of the same job could vary significantly. Your pricing needs to be focused on the financial and business niche that your shop is in.
More importantly, your prices reflect your values. Don’t like printing certain jobs? Raise the price. Love other jobs and clients? Lower their price. Prices can move your business forward.
Don’t let another shop do your homework for you. Some shops post bogus “sabotage” price matrices to confuse other businesses. Yes, really!
Mistake #2: Trying to be the Cheapest
Racing to the bottom on pricing is no way to compete. Do you want to work in a sweatshop? Probably not. That’s who your competition is when you race to the bottom.
People who have advanced degrees and tons of experience honing in on the most efficient process possible are your competition; think Nike halving its production time in 2017, not the shop down the road.
But you have control. Cultivating a customer base that will pull the trigger on your prices solely because they’re the lowest is a sure-fire way to attract a bunch of slimy characters and shady dealers, so avoid it.
Mistake #3: Overestimating Productivity
This is the utilization trap: Let’s think of a print shop that’s open eight hours a day. Some days they print almost the entire day. If we built a price matrix based on overhead, we might assume they print for eight hours a day. Uninterrupted. Every day.
In reality, they never do. So, what happens? The shop will price a job that takes three hours to print using their new matrix. Just divide overhead into working days, then over three hours. Right?
And that job, conveniently, takes three hours of capacity — leaving us with five whole hours to print that day! Boom — just price the job as three hours at the shop’s hourly rate. Easy peasy.
This calculation has missed one major thing: utilization.
It’s a very expensive mistake to assume eight hours of utilization every day. Most shops don’t reach 30% utilization. At Printavo, we think the industry average might be closer to 15% utilization. This isn’t bad. It’s just a reality in the shop. Another way to put this: Most print shops spend about 70% of their time doing things that aren’t printing.
Prices should reflect this. That three-hour job likely occupies the shop for 70%-plus more time than estimated. We’ll explain why in the next section.
Mistake #4: Forgetting Administrative Costs
Using overhead and time to estimate prices leads to a distorted picture. The hidden costs are found in administrative costs. Administrative costs are essentially a fixed cost for a print shop. For every X hours printing, you’ll need to spend Y hours administering jobs. Even if your system is very efficient, there’s administrative overhead associated with printing.
What is administrative overhead? Anything involved with administering a job:
- Quality Assurance
- Tagging and Bagging
- … and so on
These are activities that are necessary to get the job out the door. But they’re not charged directly to the customer. You probably won’t find them as a line item on the invoice. But there they are, lurking, paid for by someone whether you realize it or not.
Sure, that job only takes three hours to print. But it took the sales team three hours to land it. Approvals took another hour. Then ordering required nearly four hours of research to procure specialized garments and hats. And getting payment required haggling for 30 minutes over a last-minute detail.
The bottom line: that job was in the shop for a lot longer than three hours. This is why prices must include a comfortable and realistic estimate of the burden of administration. It’s the hidden factor that diminishes your utilization.
Mistake #5: Quantity-Based Price Breaks
Why do print shops offer price breaks on arbitrary quantities? Supposedly, the story goes like this: The price tiers incentivize customers to order larger and more profitable quantities. But what really happens is that customers don’t actually order more — and if they do, it doesn’t actually help your business.
They start thinking about the prices and find ways to order amounts that don’t really make sense. Some customers are overcharged, others are undercharged. Your profit margins are inconsistent.
Here’s our argument: There isn’t really a reason to offer arbitrary quantity-based discounts. Instead, use breakless pricing.
Every single quantity from one to one million gets its own unique price. Once you reach a certain quantity, your prices can only go so low. It varies from shop to shop (based on their costs), but this is a very real threshold. Don’t wind up losing money on the biggest job your shop has ever printed!
Still confused? Try Printavo’s free price matrix generator to see how pricing can work.