The False Economics of Labeling Costs

Most companies in the label printing industry have traditionally taken a very narrow view of what makes their particular offering more attractive than a competitor’s, and that key differentiator has often come down to one factor – the unit price of a single printed piece (whether it’s an envelope, a brochure, or a product label). In this desperate game to “beat the other guy”, getting a quote is often a difficult process and you need an advanced math degree to even make sense of the all “add-ons” buried in the fine print. Let’s explore why comparing offerings can actually be misleading and you may forget some significant factors when making this decision. In short, it’s critical to consider one concept that is very often overlooked – what we call “Total Cost of Ownership” (or TCO).

Sure, when you look at your product (say it’s a bottle of shampoo for instance) you need to consider many things – how much you can sell it for, how much it costs to make and ship it, what the bottle and packaging costs, and of course don’t forget the cost of printing labels. Assuming you’ve remembered all the costs, then you also need to make sure the profit margin is sufficient to make a healthy profit – otherwise you won’t be around long enough to be too concerned about the rest. Sadly, the labeling cost is something that is often forgotten until the last minute, and then the focus goes firmly onto “how much per label can I afford to pay and not break the formula?”. This is what we like to call the “False Economics of Product Labeling”.

Quantity Drives Price

In the print industry, economies of scale are the norm – i.e. the more you order the cheaper they get (per piece). This is largely due to the manufacturing process itself – it’s usually little extra work to print 20,000 of something than it is to print 10,000 once all the usual equipment setup etc is done. However, buying 20,000 when you only really anticipate needing 10,000 is the first kind of false economics we encounter. Yes, the unit price dropped – but what can go wrong with this thinking?

The Only Constant is Change

In business (and everything else in life), change is inevitable. The same principle also applies to your labels. It’s important to take potential regulatory changes into account when ordering large quantities of custom product labels. Certain product categories such as nutraceuticals and electronic cigarettes can be more prone to regulatory changes, but it is a good idea to be aware of labeling regulations regardless of which industry you operate in. Similarly, ingredients can often change with minimal warning, and you’re stuck with a bunch of unusable labels. In the end, trying to save a few pennies per label may not be worth it if you have to toss half of them in the dumpster when an unexpected change needs to be made.

Cash is King

Okay, you managed to negotiate your printer down to an acceptable unit price – but you had to order more than you need in the short term to achieve that. Congratulations – but you’re expected to pay for the whole truckload now, not later. If you’re swimming in cash this may make sense, but most businesses do not fit that description. So, while your per-label price is always going to be higher for smaller quantities, you should keep in mind that you’re only parting with a smaller pile of cash this month. Spreading your purchases across time is what the manufacturing industry refers to as “JIT inventory control” (which stands for Just In Time). Even huge companies have long ago worked out that it’s smarter to limit their exposure and control their cash flow by ordering more frequently – even if the unit cost is higher.

So, what’s the message here?

It’s quite simple really – you need to consider the Total Cost of Ownership when buying product labels (or anything else for that matter). If you base your choices on a single factor (unit price) and don’t take into account the various other ways your money is being consumed, it’s False Economics. Oh, and never let a sales person push you towards a higher quantity to achieve a better price – after all, they want the biggest order they can get. Fortunately, at Wizard Labels we don’t employ sales people – our staff literally live and breathe to get you the best deal for YOUR circumstances – after all, if we look after you we believe you’ll be around for a long time and we all win.