The Evolution of a Print Shop
Don't Let Your Profits Become Extinct
By John Kaufman
Segment Marketing Manager
Ricoh Americas Corp.
At Ricoh's next Smart Business Seminar, "Value-Based Pricing," I am going to ask each attendee, "Why are you here?" I believe the majority of responses I'll get will emphasize the need to sell more services to the right customers.
When selling your services competitively, if the deciding factor comes down to price, then you're selling a commodity and not value. The customer may be willing to pay more when he or she perceives the job to be worth more—to have more value. Instead of just selling a sheet, you want to sell what the sheet will deliver, more revenue for your customer.
A good example of selling value versus traditional cost-plus pricing is the toll road system. The price you pay to drive on a toll road can vary by the time of day, or even by which lane is used. If you are driving during rush hour, you may pay a dollar or two to take that toll road or use the express lane. If it's the middle of the day, it might be as low as 25 cents for the same road and lane. All pricing is based on what the perceived value is to you as the driver during those peak and non peak times.
TRANSITION TO VALUE SELLING
Transitioning to selling value instead of utilizing cost-plus pricing may require a completely new direction for your company. Changing this direction and philosophy is easier said than done for many reasons. Smaller companies, as opposed to larger ones, may find this transition less painful due to the flexibility of the business, clients and staff. In either case, salespeople in both large and small shops may have difficulty selling new value-added services instead of the quality, and volume production they have sold in the past.
In general, people tend to be afraid of the unknown and will resist sailing into uncharted waters. They would rather keep doing what they have been doing than move out of their comfort zone, even if they are not achieving the desired results. For businesses this plays out as well. It's easier to simply react to customers' needs than to be proactive and strategize for their growth. If you haven't looked at your customers in this light, then you are probably not in tune with their real needs.
Making this transition can be difficult for the whole company, and not just your sales staff. The CEO, marketing, production, and shipping departments must buy into the new direction to make the transition successful. You should also consider changing your company name to reflect the new direction in which you're moving. This will help both internal and external customers see that you are committed to serving their evolving market needs.
It is evident that providing value-based services is critical to effectively differentiate your company from your competition. Here is a question: Is it harder to sell value-based services or to price them? I believe it is both. An interesting challenge arises when implementing value selling. You are no longer competing against other printers, you are competing against companies that view themselves as marketing and communications providers, companies that sell marketing programs designed to touch their customer's customer on multiple media platforms.
WHERE ARE YOU ON THE EVOLUTION SCALE?
This graphic is designed to help you visualize where you fall on the evolution scale, based on the products and services you currently provide to your customers. Looking at the scale of services allows you to measure yourself, and in some cases your customer relationships, to see where you and your relationships fall in the evolution chain. It will also illustrate the ways you may be providing higher-evolved services to some clients, while still offering lower-scale services to other clients. Viewing your customers according to this scale will help you identify which customers have potential for growth into new products and services that you already offer your more evolved customers. In looking at your business you need to make sure you are not giving away your value-based services. It has been well documented by many industry analysts that the ancillary services you provide with the printed product are more profitable than the actual presswork itself.
EVOLUTION SCALE
Customer Business Consultant:
- Programs and services focused on customer needs and profits.
- Consultative team approach to sales with multiple internal contacts; CEO, Marketing Director, VP Sales, and Print Buyer.
- Jobs priced according to market value and ROI for customer.
- Primarily offers contract programs, no price per job.
High customer retention programs generate recurring revenue.
- Research is not only focused on customer, but on the customer's customer.
- Delivers multimedia, multitouch campaigns aimed at ROI.
- Printing is only small piece of overall programs.
Program automation is key, built once then program is sold to others.
- Compensation is salary plus bonus and profit sharing.
Concentrates on advertising and communications, not printing.
- IT focused - some digital, some printing.
High profit.
Digital Printer:
- Programs and services tied to customer needs.
- Consultative team approach to sales with multiple internal contacts; CEO, Marketing Director, VP Sales, and Print Buyer.
- Jobs priced according to market value, not cost-plus.
- Concentrates on lead generation, direct marketing campaigns, and web-to-print services.
- Focuses business on an annuity model based around managing print.
- May deliver multimedia, multitouch campaigns.
- Printing is a significant piece of overall programs.
Program automation is key, built once then program is sold to others.
- Compensation is salary plus commission.
- Targets direct mail and print collateral management.
- Provides digital and some small offset technology.
- Mid to high profit.
Print Service Provider-Mailing and Fulfillment::
- Sales directed towards print buyer, neither consultative nor team driven.
- Cost-plus pricing model, opportunities typically evaluated on cost per page.
- Production and sales-driven organization concentrating on volume.
- May deliver value-added services and personalization.
- Printing and converting is a major piece of overall programs.
- Compensation is usually commission based.
- Company focuses on direct mail, print collateral, converting and mailing.
- Crowded market offers little sustainable competitive advantage.
- Offers value-added services, without charging customer, to gain competitive advantage; results in increased cost, decreased margins.
- Provides digital, inkjet and offset technology.
Moderate to shrinking profits.
Commercial Printer: :
- Sales directed towards print buyer, neither consultative nor team driven.
- Highly competitive cost-plus pricing model, opportunities always evaluated on cost per page.
- Product-driven organization targeting volume.
- Printing and converting is a major piece of overall programs.
- Compensation is usually commission based.
Company focuses on direct mail, print collateral, converting and mailing.
- Crowded market offers little sustainable competitive advantage.
- May offer value-added services, without charging customer, to gain competitive advantage; results in increased cost, decreased margins.
- Uses digital for short-run color, hoping to obtain larger offset runs.
- Provides some small digital, but primarily offset technology.
- Low and shrinking profits.
The higher your business rises on the scale, the less competition you'll encounter, and the greater customer retention you'll experience. This is because you'll be selling programs, not just a commodity, to a new and emerging market—a market many of your competitors don’t understand. Moving up this scale doesn't necessarily guarantee higher profits. To be profitable and reach your margins you must understand the internal workings, market opportunities, and problems of the industries your customers serve. Once these are understood you can deliver effective products and solutions based on the customer's true needs.
John Kaufman
Segment Marketing Manager
Ricoh Americas Corp. An expert in production printing environments and solutions, John Kaufman is responsible for Graphic Arts Marketing for Ricoh Americas' Production Printing Business Group. He brings 20 years of digital product solutions, application development and industry marketing experience to this assignment. John can be reached at john.kaufman@ricoh-usa.com or at 815-210-8815. |
