Monday, September 1, 2008

The Money Train - Canvas August 2008

Some excerpts from an interesting article by Graham Garrison. I agree with alot that is said. And disagree with alot.

Here are some quotes:
Cone says that prints sales reps should look at estimating as a science and pricing as an art. Estimating is a repeatble process, a scientific process,"he said. Pricing is an art. Different customers may warrant different pricing in different situations p.22-23
My take is that what he says was spot on in the 20th century. But in the 21st, the sooner pricing gets to a science the better for everyone. I agree that different customers should get different pricing. But just as the craft of production is being replaced by standard processes, so the craft of pricing is moving in the same direction. As usual, the best way to get to a scientific process is to listen carefully what the best craftspeople have to say.

Here's what Donald LaClair of Intelligencer Printing has to say in Canvas.
"With knowledge of cost, pricing will be based on plant load (schedule), amount of value added (maufacturing less materials and outside purchases), history with client and the competition" . . . p.24 According to Cone. . . ."Different ways of pricing for different customers in different situation... p.24
Donald is undoubtedly an artist and a very effective pricer/salesperson. The problem is that artists are very hard to find. Plus it takes alot of time to get the attention of the artist in your company. As we all know, in sales/pricing timing is everything.

Rule one is that a price that is delivered later than expected is worse than not pricing at all. It can destroy your personal/company brand faster than almost anything you can do. Meanwhile, the number of estimates that turn into jobs is usually somewhere south of 50%. That's lots of time and effort for no return.

Then on page 26:
Sell the customer before you quote the price, not after.
In the hands of anyone but an artist, this one is really dangerous. Consider you've finally gotten a suspect to try out your firm and asks for an estimate. The cost of getting the customer to engage - by asking for a price - can be high. Actually the best case - as in the lowest cost - would be for someone you don't know at all to ask for a price.

They don't want to be "sold", they don't want to build a relationship. They don't want a solutions provider or a communications consultant. They don't want to know about what good person you are or what your company can do for them. They want a price.

They want it now or at some very specific time very close to now. Rule number one is: A price that is delivered later than expected is worse than not pricing at all.

Sometimes an artist can have the gut feeling of the highest price you can charge and still get the job. But, as I said above: artists are expensive, few and far between. A price is either too low - leaving money on the table, or too high which not only means that the job disappears, but that the suspect gets the idea in their head that your firm is too expensive to keep on their bid list.

Plus I've see many estimates sitting on either the boss's or the sales manager's desk for the "great discussion." Salesperson wants the lowest price to get the commission and the contact. The house wants the highest price to make a reasonable profit." Then you often get into "We'll make it up in the long run." 'We'll get them on the AA's." etc. etc. Or... "that guy just wants to give everything away" or "that sales person needs a killer instinct."
Lots of time consuming drama.

So what are some ways out. The easiest is the price list.; That seems to be the solution that and have decided on. It seems to be working pretty well for them. But they have a national audience, and production systems that are under control and make this work. They can make it up on volume because they have eliminated the estimating process and have a predictable, under control production system.

But that can't work for everyone. Especially if you are going after large projects. But I will leave that for another day.

Meanwhile, if you can't get the customer a good price in time without having to go through the drama of the pricing dance, you're better off passing. You can say something like, 'The plant is so busy that it will take a week or two weeks for that number. If you are ok with that, I will be happy to help. If that's too slow, make sure you cover yourself for now. if you have the time, I would be glad to stop by this afternoon to go over the details and get a real clear idea of the project and then see what I can do".

Tis better to have loved and lost, then to disappoint or drive yourself and your estimator nuts getting it done.

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