by George J. Whalen There is evidence that creatives who understand ROI-based print marketing programs appear to be finding VDP highly attractive, July 26, 2004 -- Last week we began a look at how variable data printing has been gaining ground as a profitable offering for commercial print providers and an effective tool for companies needing a more effective means of reaching customers and prospects. This week dig a bit deeper and take a look at the trends in the creative publishing and packaging markets, and how some companies are successfully implementing VDP print strategies. VDP In The Creative Market Among creatives surveyed by TWGA, 84% cited economic conditions as a top business challenge. Internet marketing programs may be growing, but print remains the number one sales opportunity for creatives, with 66% citing this as a top sales opportunity. This is followed by cross-media programs (which usually include print and direct mail projects). So the top three sales opportunities for creative firms are print-based. This is very good news for the commercial printing industry -- especially since this was not the case as recently as two years ago. Looking at creatives' print-based sales opportunities, however, digital and variable data printing don't rise to the top. Only 13% of creatives said that general digital printing was a top opportunity and VDP ran dead last, with only 5% citing variable data as a top sales opportunity. TWGA says this is a decline from 8% just six months ago.) This decline was said to have occurred in all of the creative segments tracked by TWGA, except among corporate designers. On the other hand, top VDP specialists say their variable data printing business increased over last year, and they are getting increasing inquiries from top creatives at advertising agencies, who previously had side-stepped VDP projects. These creatives are a relatively small group, reflecting a recent TWGA Design & Production survey that showed only 5% of creative respondents calling variable data printing projects a "top sales opportunity." Clearly, there is much room for growth. When budgets are tight, those who must justify outlays find it easier to OK a program with a provable ROI, rather than one whose ROI cannot be proven However, there is evidence that creatives who understand ROI-based print marketing programs appear to be finding VDP highly attractive, particularly during economic downturns when budgets are in jeopardy. This goes to the heart of the difference between traditional printing and VDP. Unlike traditional print, where ROI on any particular job is not easy to figure or prove, the data components within a VDP project usually make it much easier to directly track sales resulting from a VDP program, and hence to calculate its ROI. As a result, when budgets are tight, those who must justify outlays find it easier to OK a program with a provable ROI, rather than one whose ROI cannot be proven. Hunter Lodge One example is Hunter Lodge, a UK-based firm that began as a design, repro and marketing services business that outsourced its printing. In 2001, the company began working with ThornEMI subsidiary Quadriga on developing a new menu card presenting the viewing program choice on Quadriga's pay-to-view film system available to international hotel rooms. At the time, Quadriga was having the regularly changed cards litho-printed in runs as small as 150 per hotel. Hunter Lodge realized Quadriga could enjoy a substantial saving using digital printing, while improving the accuracy and quality of the product by combining databases efficiently. Hunter Lodge won the contract to print the cards even though it did not possess the necessary digital press, and quickly acquired two Xerox 6060s. Production of the card has been refined further by the introduction of a PDF system allowing hotels to change card details on short notice. The Quadriga operation, which involves 26 countries, numerous pricing variables, scheduling, and film rights, is one of the most complex variable data production jobs in the UK. The company has developed its commercial digital printer business further, so that it now produces one third of turnover. VDP In The Publishing Market Publishers can produce effective, tailored, programs at a cost of pennies per piece, compared to the much higher costs of VDP The greatest barrier to VDP growth in publishing is that this market has been so successful for so long, using other, more traditional methods. Publishers have long been adept at target-marketing and at developing long-term relationships with their customers. As a result VDP with four-color digital presses has had a hard time taking root among book and magazine publishers. According to TWGA, a scant 2% of publishers surveyed in 2003 said they planned to purchase digital press/VDP solutions. Two reasons have been advanced for this reticence. First, books and magazines are not high-value / high-priced products. A publishing marketer would likely not be willing to invest $2.00 in a VDP piece in order to solicit the sale of a $19.95 book or magazine subscription. Second, publishers had been developing sophisticated databases and techniques for segmenting and finding their market target for decades. They are still quite capable of creating highly targeted direct mailing programs using their databases and traditional printing and bindery systems. What's more, they can produce effective, tailored, programs at a cost of pennies per piece, compared to the much higher costs of VDP. While VDP is not compelling to the publishing market, digital printing is, and publishers are beginning to see the value of short-run book printing for a variety of applications. Some large publishing houses have small digital print programs in place, while others have them in development. You may not have books that are personalized for you, but chances are you will soon find digitally printed books taking their place on your bookshelves. VDP In The Packaging Market Part of the challenge to growth is much like that in publishing--fighting against long-established practices. There's said to be a lot of interest in doing digital printing and personalization in the packaging market but there's not yet much business there. In the folding carton market, digital printing is minimal. In pharmaceutical labeling, variable data inkjet printing is growing. Part of the challenge to growth is much like that in publishing--fighting against long-established practices. To some extent, digital printing offers new ways to do things the packaging industry already knows how to do (some with greater sophistication and at lower cost) with equipment and technology it already owns. VDP presents some completely new packaging approaches. So new, that the structure, organization and culture of the industry resist it. For example, most high-end/high-quality color folding cartons are printed by conventional offset in eight or more colors, spot varnish and aqueous or UV-coated. Digital presses currently lack such capabilities and their output may not exactly match the traditional versions, so it's not yet possible for digitally printed packages to simply be shorter-runs or personalized versions of traditionally printed packages. Digital printing can still be used for short-run simulations,samples and prototypes, giving it an "under-study" position in the industry. VDP presents some completely new packaging approaches. So new, that the structure, organization and culture of the industry resist it. The issue is whether it makes sense to explore the new VDP options, or even how to put them into practice. These challenges demand time from people who are already too busy producing packaging to spare much time for VDP development. Experiments with VDP promotions, such as "put your kid's face on the front of this Kraft Mac 'N Cheese package;" and promoting products such as gourmet coffees or cosmetics manufactured and packaged for individual consumers are still exceptions. Distribution appears to be the biggest hurdle keeping VDP from achieving stardom in packaging. Colorfully packaged goods are not usually distributed direct to recipients via direct-mail. Most are distributed through retailers, catalogers, warehouse stores, and similar mass distribution outlets. Given these channels, the personalization capabilities of VDP matter little. Unless consumer product companies are marketing directly to end users, true variable data printing is a concept whose time hasn't yet come. Distribution appears to be the biggest hurdle keeping VDP from achieving stardom in packaging. However, TWGA believes static digital printing will become more mainstream in the packaging industry as the speeds of the machines increase. Nine percent of consumer product companies with their own printing and packaging operations said they plan purchases of digital presses in the next 12 months. Among those who already own digital presses, 23% plan to increase, replace or upgrade their existing capacity. While personalized or customized VDP may be destined to remain in specific packaging applications, some applications, such as barcoding, are proving effective on a daily basis. And where actual packaging is being produced, the printed piece is able to be die-cut as it comes off a continuous-feed digital press. Songbird Hearing in Cranbury, New Jersey manufactures disposable hearing aids featuring high quality acoustics. These are said to be more convenient and affordable compared with traditional hearing aids. Quality packaging is important for Songbird, which outsources the package graphics and applies the variable data in-house, using Hewlett-Packard's (HP) thermal ink jet technology, supplied by Nutec Systems of Larenceville New Jersey.. Nutec distributes the m600 printer manufactured by Wolke, Germany, which is fast and durable enough to print on packages moving along a conveyor belt. The machine can print bar codes at 600 dpi, using water-based inks. Songbird's m600 was customized with a conveyor system to move the boxes through the process. VTT Information Technology in Finland, has been researching development of a comprehensive system for new types of package production chains using VDP, with emphasis on the special needs of consumer packages for product information, identification, anti-counterfeiting and appearance. One of the projects, "Active Communicative Packaging," is aimed at developing and integrating packaging with an effective logistics system for sensitive, demanding products, using intelligent coding, radio frequency identification (RFID) and data networks. Coding systems that compress data into a denser form can increase the information on packaging. These methods can be optical or electronic and can usually also be used for brand protection and/or theft prevention. VDP is the key technology for flexible packaging and there are two areas of use. The entire package can be printed digitally, ensuring that every printed package is 100% different. Alternatively, ink jet printers can add variable data onto preprinted packages. Cartes Equipment, an Italian manufacturer of finishing equipment, has collaborated with MAN Roland to develop a carbon dioxide laser die cutter, which generates variable die cutting forms on demand from a digital database. This is designed to work with the MAN Roland DICOpack press, which is said to be ideal for short runs of color digital package printing work with cyan, magenta, yellow and black (CMYK) dry toner colors, as well as white for label printing. The facility to print from variable data offers the means to change text and pictures as often as required during the run. Another variation, developed in cooperation with Nilpeter, Denmark, enables digitally printed labels to be ultraviolet (UV) coated, laminated, rotary die cut and rewound inline. StoraEnso is testing a similar process using a Xeikon DCP500 digital press. In the final part of this series next week, we'll look at database conversion and how some companies--called enablers--are seizing the opportunity of VDP and carving out profitably businesses.