Print-Plus: What Cross-Channel Retailers Need to Know When Getting Print Bids

I've learned a great deal over the years about obtaining print/paper bids. It's not a simple process. For example, if you base your printer selection on print manufacturing and paper costs only, you could be coming to the wrong conclusion. This column focuses on what's really driving costs and other factors you might not be considering when obtaining print bids.

Make certain you're obtaining bids from catalog printers. Who are catalog printers? They're printers that not only understand the distribution of catalogs but are able to co-mail. Even if a printer that's really not a catalog printer is competitive when it comes to print manufacturing and paper, its ability to obtain maximum postal savings is limited.

Understanding what comprises direct selling expenses is critical to understanding why you should only be dealing with catalog printers. Here's a typical breakdown of catalog print, paper and distribution costs (i.e., direct selling expenses for a total of 100 percent):

• printing and ink (20 percent);
• paper (30 percent);
• postage (45 percent);
• prospect lists (3 percent); and
• service bureau fees (2 percent).

Only 20 percent (approximately) of the total cost to print and mail a catalog is print manufacturing, 30 percent is paper and postage represents almost half the total cost. Therefore, a printer's ability to co-mail for maximum postal discounts is critical to the net amount you pay for postage. Prospect lists and merge/purge work (service bureau) represent approximately 5 percent of the total cost combined.

The printers you're obtaining bids from need to include a "net" postage estimate, including all fees. Looking at print manufacturing and paper prices only isn't enough. It falls short of the total amount you pay to print and mail catalogs. After all co-mail fees, the net savings should range from three cents to six cents per catalog. There's a fairly wide range of savings due to the quantity mailed. Some printers charge a flat per thousand amount for in-line co-mail services and a percentage of the savings for offline mailers. Also, some printers charge a per hundred weight fee for drop-ship separate from co-mail. Other printers often charge co-mail administrative fees or freight charges to get the catalogs to their co-mail facility. This can generate fuel surcharges and lengthen lead times.

From my experience in the print and production world, roughly 70 percent of printers co-mail offline, while the other 30 percent co-mail in-line. Obviously, those in-line co-mailing are mailing much larger quantities. A catalog marketer would only have up to six partners for an in-line co-mailing, while they can have up to 30 partners when they offline co-mail.

Another consideration in the entire print bid RFP involves lead times — i.e., when mail tapes are due to the printer. One printer I know requires all mail tapes 40 days prior to the mail date, which is basically 50 days before the catalogs are in-home. This policy reduces the use of "hotline" buyers by approximately 30 days. Mail tapes due 20 days prior to a mail date, however, is more common. One printer I work with requires mail tapes just 14 days in advance. When obtaining print bids, be sure to ask your printer when mail tapes are due. At the same time, also ask when creative files are due based on your given mail dates.

When I obtain print bids for clients, I spend the most time on distribution considerations. It's difficult for catalogers to understand the co-mail process. Often printers quote gross postal savings rather than net savings, for example. The main items to focus on are the actual postage amount plus any co-mail and distribution fees. Again, catalogers get caught up in the gross savings per thousand catalogs and/or the percentage of savings and neglect to look at the cost side of the equation. It's easy for a printer to manipulate a co-mail estimate to show a high savings per thousand catalogs while the net amount in your pocket will be less in the end. Have the printers you're considering process a recent mail tape in order to provide an accurate postage estimate net of all fees.

I think you'll find that most catalog printers are extremely competitive when it comes to print manufacturing and paper pricing. Print manufacturing prices have actually come down over the past few years and the margins printers once enjoyed have been squeezed. The difference between printers comes down to postage and distribution costs.

Stephen R. Lett is the president of Lett Direct, a catalog consulting firm specializing in circulation planning, forecasting and analysis. Stephen can be reached at steve@lettdirect.com.