Pricing 3D printouts

Preamble

Looking to the 3D printing services market, as opposed to selling 3D printers, I was wondering how to cost the product.

I came across an excellent document on pricing of 3D printed objects. This answer was taken, verbatim, from How would you price objects made by a 3d printer, assuming you had an online 3d-printing business? This answer was provided by Dina Neishtadt, Product Manager, Industrial Product Designer and DIY Maker

How to price…

To give you an idea of my approach:

  1. I started by analyzing existing pricing models in the industry, primarily by studying the major online players websites.
  2. I then contacted a number of experts on the subject (via phone, email and Quora) and got their input.
  3. I also contacted specialists running local 3D printing businesses (and in some instances, their employees.)

The idea was to get as much information as possible from multiple angles, to capture the technical nuances and the human aspects of running a profitable 3D printing business.

Next, I applied my findings to the by volume pricing model (the simplest of them all and the one used by Shapeways), with the goal of bringing more value to the customers while increasing the company profit margins.

Most of the analysis is focused on the process of uploading a design and ordering a 3D print. Marketplaces for ready-made designs is addressed separately at the end.

Many considerations revolve around the inherent tension between the complexity behind an accurate estimate of cost, and the value of simplicity and transparency in pricing from a marketing perspective. I chose to focus primarily on communicating complexity to the customer. This is where I felt my perspective could add the most value, given the information available to me. My analysis around the parameters directly driving cost is more speculative, due to lack of access to the actual manufacturing process.

If I were conducting this analysis as a member of one of the major player’s team, I would also incorporate every resource available internally, including:

  1. Past purchase info across all relevant product lines
  2. Specific data on manufacturing times and costs for those lines
  3. P&L stats on the above
  4. In-person interviews with managers and workers at the Factory
  5. Any existing documentation evaluating past strategies
  6. Current thinking of all stakeholders

Given more time, I would dive deeper into how the proposed changes would translate into a product roadmap, including rollout projections with clearly defined milestones.

I’ve organized my thoughts below:

Background and market summary
It can be useful to categorize the current 3D printing landscape, if only to have a framework for more in-depth discussion.

Active businesses generally break down into 3 categories:

  • Online vendors with global reach, comparable to Shapeways, such as iMaterialise, Ponoko, Sculpteo, Kraftwurx (as well as a number of smaller players).
  • Smaller printing services, operating mainly in local markets, such as 3dprint-uk.
  • 3D printer sharing hubs, like makexyz and 3dhubs.

Small local printing services
Most do not publish prices online. The downside of this approach is that it repels customers due to lack of transparency. Consumers are now accustomed to automated, frictionless transactions in most spheres. Having to contact the vendor for a quote is instinctually associated with complications. Many will not bother to inquire. Face-to-face contact—physically showing up—is a dealbreaker to most. However, those who make the effort to establish such a contact with the business can often receive more than a print. They can receive professional guidance tailored to their needs.

These businesses typically separate post-processing labor costs from the 3D printing costs, thereby making it very clear to the customer what drives overall cost. This helps set expectations for price, and would be beneficial for larger, global vendors, to the extent that it’s possible to implement at scale.

Funneling customers into face-to-face interaction allows the small business an opportunity to upsell other services, like 3D design, finishing, or mold making. It’s also an opportunity to potentially offer other manufacturing techniques, using their expertise to achieve better marginal revenues. For these businesses, optimizing around machine capacity (if relevant to the technology used) is relatively simple. They can easily foresee their load and offer a price reduction if the customer is willing to wait. Alternatively, they have the flexibility to commit to a job immediately, if they’re able to nest objects in the printer in an efficient way.

Printer sharing hubs
These specialize mostly in low quality prints. Pricing typically starts with a setup fee, and then increases based on volume. Volume-driven pricing is similar to the Shapeways model, but the difference is the setup fee, which implies that there is manual work to be done, educating customers and slightly setting expectations.
Global online vendors
These companies achieve scale by sacrificing the luxury of communicating with each customer on a personal basis. Therefore, it is difficult for a global online vendor to effectively communicate why the price for a specific object makes sense, once all the relevant factors are taken into account. An online business must communicate price in a straightforward way, or risk losing the customer to a competitor that does (many consumers are turned off by what they perceive as arbitrary pricing). Some choose to price 3D printed objects by volume, others by the bounding box size. Some take a more complex approach: Sculpteo chose to implement a cumbersome price calculator, powered by algorithms which are not shared with the customer. While this approach is undoubtedly more precise, the resulting pricing might seem arbitrary and unpredictable to customers.

Pricing by volume – advantages and disadvantages
Advantages

  • Addresses material costs and machine time (I’m assuming volume pricing can be calibrated to address both of these).
  • Pricing is extremely clear to the customer. A straightforward and predictable model should increase the customer base, by making the platform accessible to beginners and hobbyists—those who do not understand the complexity behind the process. The model sets clear constraints within which creatives can operate without specific knowledge outside their field.
  • Any model that does not require further explanation is a clear marketing benefit.
  • Exceptions can still be made at the margins for very dense and large sparse models. Special rules for these edge cases can ensure that they are not serviced at a loss, without compromising the simplicity of the overall approach.

Disadvantages

  • The full complexity of all price considerations is hidden from the user, thereby distorting the customer’s understanding of the process. The model offers no view into why a 3D printing service can be a multi-day, not a multi-hour process. The primary factor that’s concealed is labor. This sets customer expectations very high, creating the impression of a pure commodity.
  • While Shapeways tries to optimize tray loads, positioning objects to minimize costs, the customer, only aware of volume as a variable, sees longer wait times only as a downside, not an optimization to keep costs low.
  • Beyond the crude “dense and large” exception discussed above, the model cannot address post-processing costs associated with specific shapes: for instance, costs associated with thin objects with a large surface, which have a tendency to break more during cleaning.
  • The model does not allow for a potential cost reduction to the customer if he is not as sensitive to delivery time, and is willing to wait for a more optimal time for his print.

How I would price strong and flexible plastics material family
As competition in the industry intensifies, I believe that the older companies should focus on its strongest competitive advantages: production volume, historical information, and strong brand. These strengths can be leveraged through some combination of the following pricing strategies. While clarity and simplicity in pricing are very valuable, there is way to incorporate more variables into pricing without sacrificing transparency.

1. Allow customers to control the production timeline by using varying cost
Reducing manufacturing time needs to happen one way or another, due to pressure from competitor offerings. That doesn’t mean pricing can’t change too—variable delivery times present an opportunity to engineer pricing to better track cost. Today, generally speaking, consumers who need their objects printed faster go with Sculpteo, while those who want them printed cheaper go to Shapeways. Sculpteo’s pricing model is quite complex and not at all transparent to customers. I believe that all companies can utilize a more sophisticated pricing model than one purely based on volume, without sacrificing transparency. If done right, such a model can actually add value by being better at cost communication, as if the customer was communicating with a live person face-to-face for each transaction.

2. Surface\volume ratio affects price
Assuming that a higher surface\volume ratio means more labor, on average, price should change based on that ratio.

3. Machine time affects price
Assuming that (1) it’s possible to assess machine time with some accuracy in advance and (2) machine time drives cost, product prices should change based on this factor.

4. Post-processing time affects price
Assuming that is it possible to assess post-processing time with some accuracy in advance, price should change based on this factor.

5. Planning for part breaking
Parts having a higher than average risk of breaking during post-processing should be priced higher, assuming there is a reasonable way to measure this. This premium would account for the potential cost of a second (or third?) printing. Small printing services often incorporate this factor into their pricing.

6. Varying final cost
Even after all the factors are crunched to produce a quote, the ideal is to have some flexibility on the final price. In the world of professional services, estimates are the norm, and final prices that land within 20% of the initial estimate are generally acceptable. Veterans like McMaster-Carr assess shipping costs only when an order is actually processed. The customer commits to an order without knowing exactly how much he will be charged for shipping. This is a significant operational benefit that McMaster-Carr can sustain due to its strong brand, having built customer trust over many decades. While the industry is young, Shapeways is its strongest brand. Such a model can cater to special cases, ensuring that both the customer and Shapeways are getting a fair deal.

7. Marketplace items
For designs sold at marketplaces, the price should be static, so points 2-6 should only come into play at the design creating stage. The designer, not the marketplace shopper, should incorporate those variables. However, the first point (Allow customers to control the production time line by using varying cost) can be incorporated in a structured way. Here, I would build in flexibility for product delivery time, but with 3 predefined, statically priced windows, using price discrimination to allow optimizing manufacturing. A Marketplace customer does not get the same value from being educated about the process, and the variables are already known. However, different buyers of the same item can have different preferences for delivery time, and offering a lower price for longer shipping time makes sense, since the additional flexibility reduces the cost of production.

Rolling out the new pricing strategy
If you are already running a company and looking to change to alter your pricing strategy; Communication, communication, communication and setting expectations. Customers tend to respond positively when they perceive that a change is mutually beneficial. Communicating the benefit clearly is essential. These are the factors to consider:

The alternated product
Pricing considerations
The alternated product should communicate pricing considerations very clearly. One way is through a UI that reflects each cost variable discussed in the previous section with a graphical information bar. Lets take Shapeways as an example. in the Upload and Buy\Edit model screen:

Offering different price based on the date
Varying price by delivery date can be done using a calendar and price coloring in a way similar to how flight booking websites evaluate flight date vs price. For example:

Provide sample pricing
The primary downside of a more complex pricing model, is that a customer will have more difficulty understanding it, on average. To tackle this problem, the company can use sample files, in a similar way that 3dprintingpricecheck.com

3dprintingpricecheck.com

is doing. The company can suggest that customers try out different sample products to see how they are priced.

Rolling out the pricing model to the users
If you are making a change to your existing pricing model; When the new pricing model is rolled out, customers will be asking themselves:

  1. How much does my product now cost to manufacture?
  2. Did the delivery time change?
  3. What, if anything, has changed?
  4. Why did it change?
  5. How does the new model now compare to the competition?
  6. Is this better or worse for me?
  7. Can I go back to the old scheme?

Before clearly formulating answers to all the questions above, I would run a numerical analysis, having all the information in hand, to see the impact on existing customers. If many customers will see their costs actually go up, the pricing factors may need to be recalibrated. Management should be aware of overall impact on existing customers, and a strategic decision should be made.

All current customers should be notified of a potential change to the price of the products they are selling, and should be directed to a simple tool to check. Being armed with specific numbers will help the communication effort. For example: “72% of our existing customers will actually see a price decrease on products they’ve ordered to date”.

To encourage positive reception in the community, I would recommend a coordinated strategy via the following channels.

  • Reach out to industry thought leaders in advance (possibly with NDA), both for substantive feedback, and to emphasize that their opinion is valued. Present the upcoming changes in detail, seeking buy-in from those who understand the complexities involved, perhaps using something like the 3D price comparison toolfor presentation.
  • Provide customers with a similar tool, allowing them to simulate future price.
  • Incorporate price comparison tool into the company’s information sections. The message should be that Shapeways has nothing to hide: the value proposition is clear and we know where we stand against the competition.
  • CRM outreach via email to all current customers.
  • Search forum for relevant posts, and plan responses to past posts in advance. Monitor ongoing posts closely during rollout.
  • Place an article on Medium
  • Monitor Quora closely, and respond to past posts where appropriate. Ask for community feedback.
  • Orchestrate a press release to outlets like Makezine and 3DPrintingIndustry, focusing narrative to emphasize mutual benefit to all parties.

The rollout should consist of four phases:

  1. Solicit and incorporate community thought leader input
  2. Notify community about the upcoming change, and clearly communicate switch date with advance time.
  3. Address feedback on all channels
  4. Notify customers again when new price model takes effect.

Marketplace communication
The communication strategy above should not apply to Marketplace customers. A more limited approach is more appropriate. One strategy is to notify prior purchasers about upcoming changes, with a specific call to action, suggesting that the price of a product they’ve purchased before (or put in their cart without purchasing) is about to change, and that they have X time to take advantage of the current price. That could result in a spike of purchases. Conversely, if a price on a prior purchase is about to go down under the new model, that should also be communicated, but on the date the new model goes into effect.

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