The Economics of Printing

Even in these barren economic times, the cost of purchasing a new ink jet printer is amazingly low. Printer manufacturers often sell these printers below cost, which sounds like an awfully bad deal for printer manufacturers. Sounds like, but isn't. Believe it or not, this type of sales logic dates back over a hundred years to a man named King.

King C. Gillette, whose last name now adorns items in men's grooming kits around the world, stumbled upon the idea of the disposable razor when he was working as a traveling salesman in the late 1890s. His plan was to craft a razor handle of good quality, and to sell the handle at a small loss. Doing so would encourage users to keep buying replacement blades, which could be sold at a profit, in order to create customers who returned on a regular basis.

This type of sales strategy, sell a loss leader to promote regular, more profitable sales became known as the Razor and Blades business model, and has been employed numerous times since its inception. When Standard Oil wanted to move into China, they gave away 8 million kerosene lamps in order to create a market for the lamps' oil. Electronics manufacturer Apple has stated that it doesn't make much money from iPod sales, instead profits are derived from its iTunes Store. And, of course, there are printer companies, whose use of this tactic is notorious.

A brand new ink jet printer can be purchased from most big box stores for less than $50, setting an incredibly low bar for an average quality consumer color printer. However, replacing the cartridges for that printer will cost the consumer almost as much as the printer itself, and sometimes more.

And therein lies the rub. At consumer pricing, the ink for printers can cost up to $8000 per gallon, making it one of the most costly liquids known to man. This price scales down to make printing relatively affordable for small operations like home users and students. However, as business owners can quickly find out, when printing things like cheap color labels and business cards on anywhere near a regular basis, the cost of ink can really add up. This type of profit plan makes a do-it-yourself solution only feasible when printing is done infrequently at best.

The problem with the Razor and the Blades strategy is that scaling does not pass economic benefits to the consumer. During good economic times, the squeeze of the Razor and Blade business plans is tough, but during a recession, it can be brutal. The problem becomes not how to make the most in a loss leader economy, but rather how to escape it.

The obvious solution is to try and capitalize on a wholesale economy, where sellers lower their profit margins in exchange for a guarantee of more sales. With printer ink, there is obviously a great bit of space for the prices to fall. But to make the most of those savings, a printer has to buy in very large quantities, which puts a small business an economic position that is worse than the current one.

The solution is to allow someone else to shoulder the bulk of the wholesale burden by relying on a third party for printing. The thought of making use of an outside printer might seem foreign, but it provides a great deal of advantages. Offloading your printing means that you're only going to be paying for the ink you use, and thus you'll be saving some money.

Moving some of your printing to a third party means that you'll need to consider what you'll print, as you can't simply offload everything. Here is where a little knowledge of knowing your printing habits comes in handy. By identifying what you print over and over again on regular basis, things like business cards, labels, and forms, allows you to outsource those printing jobs. True, you'll still need to do some printing on your own, but with careful planning and working with a the printer, you can hopefully drop the total amount of printing you do on your own to a manageable level and land in a more comfortable section of the Razor and Blade business model.