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    « The Dangers of Price per Copy Programs | Main | The Dangers of Price per Copy Programs (Part 3) »

    May 30, 2006

    The Dangers of Price per Copy Programs (Part 2)

    Somebody said recently, "We have run our internal costs and we know the price quoted for the price per copy program is lower than what we are paying today."  The key word here is "today".  The analysis may be true based on your current cost structure and your current volume, but these may change at any time in the future. The following items are fixed with a price per copy program:

    1. The cost structure
    2. A minimum commitment of volume
    3. Specific hardware devices
    4. A specific level of service from the hardware manufacture

    These restrictions are fixed over five to six years depending on the contract.  Below are some specific examples of how these restrictions can impair your business. 

    The Cost Structure

    • Toner and inks are high margin components for printer manufactures.  If a manufacture wants to be price competitive this is one of the best places to lower prices.
    • Third party toner manufactures, creates high quality toner at a significantly lower price.
    • Reprographers performing self service can perform service at a lower unit cost than the price per copy program.
    • Reprographers performing self service can operate on extended hours and effectively lower their unit cost through economies of scale.
    • Ink-jet technology evolves to the point where it can do production color and black and white at a lower cost and similar speed at LED technology.

    Minimum Volume Commitment

    • The AEC industry does less printing because printing is done on-demand instead of distributing multiple bid sets.
    • The AEC industry moves towards more 1/2 size printing as the manufacturing industry did .  This effectively lowers volume for the same amount of documents printed.
    • Customers want to print more on-demand when they need it in the office or on the construction site.
    • Success with your FM program causes customers to print on your FM devices (which by the way may be very profitable)
    • Downturn in the economy caused by a recession or an act of terrorism.
    • They cyclical feast or famine nature of the construction industry.
    • A large competitor decides to squeeze you by lowering the price and out spending you.

    Specific Hardware Devices

    • The use of color increases in production sets.  This takes volume off the committed machines.
    • 600DPI (or higher) becomes the standard and volume must be moved onto 600 DPI machines and taken off equipment on the cost per copy program.
    • Volume moves to FM's or new offices that are closer to the clients.  This equipment must be added to the program or it will detract from the monthly commitments.

    Specific Level of Service

    • The market moves to extended hours (multiple shifts) to lower costs and take advantage of economies of scale.  A company in a price per copy program will find this difficult due to lack of service options.
    • The option of self servicing equipment is restricted for the duration of the contract.

    These examples are to get you thinking of those things that could happen over the life of a contract.  Those offering price per copy programs may have creative ideas to minimize the risk of such events.  That would be great, but make sure that is in writing and doesn't contradict any contracts you will sign.  Once you sign a five to six year contract you have lost all negotiating power.

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