Art of the Deal Oct 1, 2004 12:00 PM
, By Margery Weinstein
JobZone
Search and post jobs for the Multichannel Merchant. Including jobs for brand & agency marketers, e-commerce, catalog marketers, ops & fulfillment, direct marketing and more.
Deciding on a printer or selecting a source of paper is more than a matter of soliciting and comparing multiple bids. Getting the best deal in any negotiation process requires creative thinking and strategizing. It's what differentiates getting the best value for your money from mere bargain hunting — and we all know that in the long run, bargains can sometimes end up costing rather than saving money. The following advice may help you negotiate the best printing and paper deals for your business.
TIP 1 KNOW YOUR NEEDS
Too many companies come to the bargaining table focused on how little they want to spend rather than on what they need, says Jim Treis, executive vice president, sales and marketing for Menomonee Falls, WI-based printer Arandell Corp. “Instead of coming in with costs in mind, they need to first decide on their marketing strategy.”
A common pitfall in signing with the printer that offers the lowest price is finding out that the printer doesn't have the capacity or capability to do what you need. When reviewing bids, Treis says, keep in mind the printer's flexibility with lead times, technical expertise, equipment, paper supply, and distribution options.
Westbury, NY-based gifts and home goods marketer 1-800-Flowers.com, whose catalogs include The Popcorn Factory, Plow & Hearth, and HearthSong, and Magic Cabin, makes a point of ensuring that a printer or a paper supplier can accommodate its volume before it considers pricing. The nearly $600 million company prints 100 million catalogs a year. “At our level, and with the quantity of paper needed, where 80% of what we need is lightweight gravure [printing], as well as some [web] offset, we look to see which vendors can handle our business,” says director of catalog production Timothy Gable. Along with its capacity needs, 1-800-Flowers.com considers the expectations of its creative team before beginning price negotiations.
“We wouldn't choose a paper with low opacity or lower on the brightness scale, even at the lowest price,” says Gable. “We want a mill partner that will provide a quality paper with the right price structure, and that can grasp the complexities of our programs, so that we are maximizing the dollar spend on the best paper for our purpose.”
TIP 2 EXPECT TO MAKE TRADEOFFS
Reader's Digest Association subsidiary Reiman Publications, which produces the World Wide Country Tours catalog, last summer decided to try to lower its paper costs. The Greendale, WI-based company kept its creative goals a priority while figuring out how much it would be able to compromise on paper selection to negotiate for a lower price with its mill, says vice president of production Mike Sloane. “You need to be able to go to the negotiation and say, This is where I need to be, and this is what I am and am not willing to do to get to that point.”
Reiman, which buys from Stamford, CT-based International Paper Co., switched from 50-lb. Influence, a coated #3 sheet, to 45-lb. Velocity, another coated #3 sheet. (Reiman uses 60-lb. Velocity for the catalog's cover.) Reiman's contract with International Paper includes price caps and stipulates the amount of tonnage Reiman will purchase from the manufacturer but allows the company to switch papers.
According to International Paper, Influence is two points brighter than Velocity. Printed on Velocity, the catalog is “a couple of shades grayer now,” Sloane says, “but the switch saved us about $2 million a year.”
TIP 3 BRUSH UP ON YOUR HISTORY
A company that knows exactly how much paper and what kinds of print output it will require is better suited to making detailed commitments in return for lower prices, says Mike Wade, a broker for Deerfield, IL-based paper merchant Wade Paper Corp.
“From a negotiation standpoint, gather up as much information as you can, including a history of tons [of paper] used,” says Wade. “A lot of times we say we don't know what we're going to need when, but the mills know to look for customers who have a good idea of need. They're looking for consistent and controllable customers. They want that predictability.”
Say you produce eight titles and know that in the middle of next August you'll likely want to use a 60-lb. #3 sheet rather than your usually 50-lb. for the cover of four of your catalogs. Providing the mill this level of specificity as you negotiate allows the mill to plan its operations more efficiently. “It gives the salespeople who sell for the mills the ability to go their bosses and say, This customer is going to use 200,000 lbs. of this paper this year,” Wade explains. “All salespeople have to come up with forecasts of how much [of the various kinds of paper] they need per quarter or per year.”
Likewise, if you're considering expanding your print run during the course of your contract, you need to keep that in mind. If you've historically printed 500,000-copy runs but plan to double the size of next year's holiday run, a printer that hasn't handled a million-copy run may not be your best bet. “You want to be able to show printers exactly what your plan is for the year, and then ask them if they've worked for other catalogers within that type of print run, and ask for references,” says Arandell's Treis.
TIP 4 ITEMIZE YOUR COSTS
If you're unhappy with the prices you've been quoted by prospective printers, itemize your production costs to see what you can whittle down, suggests Janie Downey, president of Cumberland, ME-based production consultancy PublishExperts.
Downey recommends separating out costs such as bindery and ink-jetting charges. Then you can review each item with each printer, asking why one will do one service for a lower price than the another is willing to. “Some catalogers just want to know the overall cost and how much paper is needed, because one overall manufacturing price is easier. But if you're bidding out, the more you know, the better off you'll be in negotiations,” Downey emphasizes.
Chippewa Falls, WI-based footwear mailer Mason Cos., whose eight titles include Wissota Trader, E.T. Wright, and Maryland Square, itemized its production expenses prior to seeking bids from printers a year and a half ago. “Looking at every line item and detail is a must,” says catalog production coordinator Lynn Zimmerman. “I reviewed everything and plotted it out on a grid to show each printer the different costs in there and to compare. I had a detailed list of all their equipment, presses, ink-jetting abilities, distribution and distribution tracking abilities, and even the technology they had that we didn't currently use but was there so that we could use it in the future.”
1-800-Flowers.com also creates a grid to compare itemized pricing for each of the printers that it is taking bids from. In addition, Gable asks each printer for a sample invoice so that it can be sure it is comparing like costs to like costs and isn't overlooking anything. “We would never just roll over the account without going out to the market for pricing updates,” Gable says.
TIP 5 ASK FOR TESTING FREEBIES
If or when printers and mills cannot lower their prices any further, they may offer extra services, such as print rollouts such that you can test how well differently designed catalogs and different choices of paper work for you. “I've had printers say, I'm not able to match the price you want me to match, but I have ways for you to build your bottom line by marketing better to your customers,” Downey says.
For instance, printers may be willing to help defray the costs of A/B split cover tests, in which a catalog with one cover is mailed to half the mailing list and a version with another cover is mailed to the other half, or tests of alternate versions to targeted segments of your housefile. “They might cover the set-up costs, and if it works well, you pay for it,” says Downey. “Smaller runs can be more expensive, so [reduced-rate or free testing] could be a possible bargaining point.”
1-800-Flowers.com has test-printed some of its catalogs with a super-calendered A (SCA) paper and a #4 paper with slight groundwood content without being charged. The mill provided a roll of paper that probably cost $1,000, Gable says. “We're frequently testing different weights, grades, and brightness to see how it prints and, ultimately, what it does to sales.”
Mason Cos., which prints nearly 100 million catalog copies annually, routinely mails alternative versions to different customer segments. Versions may include personalized messages on the front and back covers or sales on certain items that would appeal to the segment being mailed to, such as specials on workboots to customers who purchased similar footwear during the last year. “Our printers offer us a lot of capabilities for testing, and they're willing to work with us if we want to test something,” says Zimmerman. “They say, We'll reduce the price for you to see if the test works, and then the next time, you pay full price.”
“Printers are willing to help you improve your bottom-line business,” Downey notes. “You should work with them to come up with something that will work for you.”
It's in the printers' and paper suppliers' best interest to help your business grow, so that you can in turn purchase more products and services from them. The ideal negotiation ends with a deal that's best for both parties.
