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Pricing by Competition

Update time:2016-03-30 16:51:27it count:326second
Using the prices charged by competing printers as a basis for estimating is fairly common in the printing industry. Such information is available from many sources-from published price lists, from customers who are checking around for the best price on th
Using the prices charged by competing printers as a basis for estimating is fairly common in the printing industry. Such information is available from many sources-from published price lists, from customers who are checking around for the best price on their job, from supply salespeople, from former emplyees of that business, or perhaps from table talk at a local association meeting. Once the information is obatined, it may be used to adjust or establish a price for a job under consideration.    Two major problems exist when pricing by competition. First, it is exceptionally difficult to verify if the obtained prices  are accurate for the described product and quantity. How can the accuracy be checked? Second, there may be little, if any, resemblance between the companies comparing prices. Each company may have entirely different types of equipment, different production techniques, and different types of personnel with verying levels of experiece. There may also the tremendously different accounting, costing, and estimating procedures. if the competitors have very little in common, then costs and prices will tend to fluctuate signficantly.    The advantage of pricing by competition is that it is a simple procedure once the information conceming the competitor's prices has been obtained. It is possible to undercut the competition's price and subsequently increase the volume of work by winning those jobs that normally would go elsewhere. Of course, while production may be up, costs to cover such production may not be recovered because they were cut to beat the competition. The net effect, should this happen, is bare bones survival or future dissolution of the company through bankruptcy. Consider this situaton: If each printing plant in the community priced work by comparison with the competition, a price-cutting cycle could easily begin. Those plants that refused to cut prices would lose business to the firms that were offering the best deal. Those plants that cut prices would be doing a tremendous volume of work, perhaps much of it at cost or below. The net effect of price cutting is a vicious cycle that can hurt the entire printing community.    It is safe to state that most estimators and sales representatives, at least once in a while, attempt ot meet or beat the competition's price on a job they consider important. In fact, it is reasonable to assume that some printing plants price their work as much as possible on competitors' bids and may even make money if the competitors know their costs and pricing structure well.
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