Printing Industry Best
Practices:
Increasing Revenues & Profits with Customer Changes
Most printing
jobs end up having some customer changes or author alterations (AAs).
Depending on how they are handled, AAs can either be a significant profit
source or a customer relations problem. Most printing companies have had the
unpleasant experience of negotiating away part of the profit when a customer
notices an unexpected dollar amount for AAs on an invoice. Even worse, many
companies don’t bill for all customer changes because they have inferior
tracking systems or because they are afraid to bill customers for additional
charges.
A best
practice is to determine a “market value” that the customer is willing to pay
for changes. The market value is often based on what the customer has paid for
similar changes in the past and takes into consideration out of pocket costs.
The concept is to put a price on all changes when the customer first brings
you the changes and before production. By the time the job gets to billing,
the price has already been determined.
This can be
accomplished by creating an internal price list in for common changes. If the
changes are outside the realm of the price list then the changes are estimated
by an estimator or planner.
In some cases,
the customer may elect not to follow through with the changes because of the
additional cost. For example, a customer may be willing to accept a color
build rather than spend additional money for a fifth color.
This best
practice for dealing with customer changes will eliminate many of the
after-the-fact price negotiations, speed up the billing process, improve the
consistency of change prices, and improve customer relations.
This approach
also enables you to incorporate higher profit margins on customer changes
ranging from 35% to 50% above costs. Considering the number of customer
changes on orders, this can increase a company’s revenues by as much as 5-10%.
By
Craig L. Press
President, Profectus, Inc.
craig.press@profectus.com
Phone: 888-868-8662 or 941-379-8700
Craig L. Press is president of Profectus, Inc, a national consultancy that helps printing organizations implement best business practices and maximize the value of their information technology investments.
www.profectus.com |
