Rising Costs and Value

By Andrew Paparozzi
In March 25, 2008

As we mentioned in our previous posting, rising costs are putting pressure on businesses at the same time that demand is being restrained. Printers have been able to pass along some cost increases—over 59% of the NAPL Printing Business Panel reported higher prices for 2007—but clearly the increases haven’t been enough to keep margins from being squeezed.

According to preliminary data from the Bureau of Labor Statistics, producer prices in February showed the following increases year-over-year: paper, 4.0%; fuels and power, 24.2%; and printing ink, 4.5%. The BLS also reported that average hourly earnings of production workers in the printing industry were up 3.9% in February. Add on top of these other increases such as rising property taxes and you get picture—it’s not pretty. Finding productivity and efficiency gains to hold down unit costs is critical.

Keep in mind that reduced demand and narrower margins aren’t isolated to print; most likely many of your clients are operating in a similar environment. They’re apt to put up increasing resistance to higher prices, and will be examining value much more closely. Revisit your value proposition—what you’re doing to get and keep clients—it may need some adjustments.

Joseph V. Vincenzino

Andrew Paparozzi

Epicomm's Andrew Paparozzi, Vice President/Chief Economist, is well-known for his accurate and thoughtful discussions on the economy and US commercial printing industry. A foremost author and speaker on economic business trends in the printing industry, Paparozzi heads Epicomm's Printing Economic Research Center.

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