By Ed Crowley Definitions: Multifunction printer: Any printer with more than two of the following functions: fax, print, copy, and scan. Business class inkjet: Ink jet printers with a price point of greater than $99 January 18, 2005 -- Well, the title about says it all! Yes, I ‘m going to tread into that country that marketers dread: predications! Why do marketers dread this so much? Let’s face it. If you are right in your predictions, then everyone says “well, that was obvious, anybody could have guessed that!”, if you are wrong, then everyone says “where the heck was this guy coming from? Why didn’t he see this coming?” So, at the chance of either being obvious or looking foolish, I will venture forward with my predictions for key trends in 2005. Note that these trends relate to the business printer market (laser and inkjet technologies), and are not focused on specialty markets such as thermal or large format inkjet. The bottom line, though, is this: color laser and laser based MFP (multi-function printers) will become main stream at the expense of mono laser and business inkjet. Prior to 2005, mono laser shipments dominated the business printer market. This year will be the first year when MFPs and color laser printers represent more than 30% of the total worldwide laser market. At the same time, the total number of printers sold into the business market will remain fairly stable with less than 10% growth. As a result, mono laser printers share of the market will begin to show a significant decline. This represents a fundamental shift in the market structure for laser printers. Color laser and laser based MFP (multi-function printers) will become main stream at the expense of mono laser and business inkjet. Within five years, I believe color will represent more than 50% of the total laser printer market opportunity. By this measure, the market will have effectively shifted to color. At the same time, multi-functionality will become a standard ‘offering’ for laser printers. Whether it is a color or mono laser printer, in addition to having a base and network model, you will also have a multi-function model. Does Mono Laser Disappear? Within five years, color will represent more than 50% of the total laser printer market opportunity. No, but it does decline and the mix of products sold continues to shift to ‘entry’ price points. Mono laser will continue to represent a significant volume of the market. According to IDC, by the end of 2004 monochrome laser printer shipments will account for 16 million units worldwide, within a total laser market of just under 25 million units worldwide (all laser-based products including mono and color laser printers, mono and color laser MFPs, and single-function digital copiers). However, a significant portion of this volume will be driven by shipments of products with price tags below $500. Much of this growth will come from Europe (particularly the emerging Eastern European markets) and Asia. What About Ink Jet? While business inkjet will continue to be a substantial market, it will begin to decline as it is increasingly cannibalized by entry color laser products. In the past, business users have purchased inkjet for one of two reasons. Typically, business inkjets were either purchased as a ‘personal’ printer, or, as a ‘poor mans’ color printer. Now, for a little more than the price of your ‘business class’ inkjet, you can buy either a personal mono laser or an entry color laser. As a result, business inkjet will begin to be relegated to specific segments in the mobile printing market, in graphics arts specialty applications, and as a personal color device for ‘power users’. The one caveat to this is the inkjet based AIO segment. This segment will continue to grow (although at a slower pace) in the SOHO market due to its affordability and increasing functionality. 2005: The Year of Convergence In essence, color and multi-functionality cease to become distinct market segments, and instead, evolve into product ‘configuration’ choices. Color and multi-functionality cease to become distinct market segments, and instead, evolve into product ‘configuration’ choices. This evolution will result in what have traditionally been three very distinct market segments (monochrome laser printers, color laser printers, and multifunction laser printers) converging into a single market segment. While 2005 will not see the fruition of this convergence, it will see a significant step forward in this direction. The choice will not be what technology does the customer buy, but rather, how do they configure their laser printer? Do they configure it as simply a monochrome laser printer, or, as a laser printer with color, with scan, with fax, or a combination of these features? A historical precedent for this is the evolution of PostScript and PCL printer languages. At one time there were unique PostScript and PCL laser printer market segments. However, today, this is simply a ‘functionality’ choice available with almost any laser printer. Recommendations As the market matures, the winners will be those vendors and channel partners who are best positioned to capitalize on this convergence trend. In terms of printer vendor’s product strategy, this will require a company to have access and expertise in all three major technology segments (mono laser printers, color laser printers, and multifunction printers). Additionally, due to the continued price pressure, they will be required to have the manufacturing and supply chain infrastructure that will deliver the product at the lowest possible cost. Developing brand loyalty in an increasingly commoditizedc market will require building a customer experience that delights the customer as opposed to merely satisfying the customer. From a marketing perspective, as the market continues to mature, developing brand loyalty among an increasingly ‘commoditized’ market will be critical. This will require building a customer experience that ‘delights’ the customer as opposed to merely ‘satisfying’ the customer. This customer experience must encompass not only the interaction with the product and the product’s performance, but also all interactions with the vendor including the sales cycle and after sales customer support. So brand loyalty and retention programs will become critical. What will happen in the channel? The lines have already blurred between traditional ‘copier dealers’ and IT resellers. In the future, one has to ask if there will be any distinction between these two channels. Dell believes the market is ‘commoditized’ enough to fit with its direct sales and procurement model. So how will this impact traditional dealer channels? Lexmark, HP, and Xerox are all focusing on developing sophisticated outsourcing and managed print services models. Will this model take hold in corporate accounts? Clearly, there are implications and significant changes in store for printer distribution channels. Vendors will increasingly resort to price and promotional activity to capture the all important ‘footprint’ and ensuing supplies annuity. Finally, in the wake of these significant market changes, the competitive intensity will increase. As vendors are caught in this changing printer landscape, they will increasingly resort to price and promotional activity to capture the all important ‘footprint’ and ensuing supplies annuity. With this increasing competitive intensity, having world-class marketing intelligence capabilities will be essential to maintaining a competitive advantage. This will require more than the traditional competitive intelligence, market forecasting, and customer research capabilities. It will require a holistic approach which encompasses all of these disciplines, and which is able to interpret this information real time, in a way that is meaningful to executive decision making. For more information on the drivers assumptions behind these changes, and the underlying technology trends, feel free to contact me at [email protected]. Next month’s article will address how these market changes will impact vendors, the channel, and customers.