Commentary & Analysis
Going Vertical for Diversification and New Opportunity
y Barbara Pellow September 6,
By WhatTheyThink Staff
Published: September 6, 2006
y Barbara Pellow September 6, 2006 -- Inter-State Studio, in Sedalia, MO, has come a long way since founder Guy Snyder was a school photography "road man" journeying door to door seeking contracts with local school superintendents to shoot class portraits. Since its modest beginning in 1933, Inter-State Studio and Publishing has partnered with schools all across America, ensuring their school day memories are preserved for a lifetime. Utilization of digital technology and marketing knowledge in a targeted segment has spawned an entirely new business opportunity. In 1988, the baton of leadership was passed to Aric Snyder, and today Inter-State is the fourth largest school portrait and yearbook company and the largest family owned firm. Its targeted focus on the rural elementary and middle school market has led to diversification in its product line to include traditional school picture services plus graphic identification cards, spring portraits, sports photography, class composites, memory books and yearbooks for all grade levels, and much more. By keeping abreast of ever-changing technology, Inter-State remains a strong leader on the cutting-edge of school photography and in the creation of customized products for schools. The utilization of digital technology and marketing knowledge in a targeted segment has spawned an entirely new business opportunity for the organization and the evolution of a new company: Convertible Brands. This past week Michelle O'Donnell, Marketing Manager, and George Fry, Managing Director, told me about the company's vertical market focus and product diversification within its target market, and how marketing success has evolved into a new business opportunity. Memories for School Children The memories made in school are treasured for years to come through school pictures. Inter-State has positioned itself as a full service school portrait provider with Fall School Portraits, Fun & Casual Spring Portrait Programs, Professional Dance Photography, and Sports and Special Events Photography. It extended its offerings to include yearbooks, student planners, programs for special events, trading cards and large format "all school" banners. Inter-State's business has two key production seasons. In the fall, the firm produces more than one million portrait packages and 250 yearbooks. Its spring season focuses on less traditional theme portraits with more than 850,000 packages being produced. In addition, the company generates more than 3000 different yearbooks. The yearbooks are typically 48 to 56 pages in run lengths of 300. Four years ago, Inter-State purchased an HP Indigo 3000 to support its yearbook production. Inter-State has since added two additional HP Indigo 5000s as well as Xeikon technology. According to Fry, "This is a market where color has really taken off. Three years ago, 10 percent of our yearbooks were in full color. It is now running at 30 percent, and within the next 18 months, all of our yearbooks will migrate to a fully digital color production process." Business Growth in a Tough Market Inter-State was experiencing declines in order rates and decided to leverage personalization and digital color technology to drive its business. The objectives were simple, according to Fry. The traditional marketing package was a sales flyer that had two unique photos of the child affixed. While it was the standard method for a marketing package across the industry, it was also time consuming to create. "We needed to increase the participation rate, drive the average order size, and sell more of the higher-value options and packages." The management team developed a new way of creating flyers using its Indigo technology with variable data that it hoped would improve participation and order size. Inter-State created a four-page personalized flyer that featured an image of the child. The company also tested other creative approaches, including personalized proofs with different features, theme borders and special effects such as the child's autograph. The conversion to digital color print technology eliminated the need to manually affix photos to the package, although there was still a requirement to staple the envelope for ordering prints. Customization resulted in improved sales, and the new format was more efficient to manufacture. Automating Manufacturing Necessity became the mother of invention for Inter-State. The post-press aspects of producing a million-plus marketing kits each season created both time delays and significant waste. Inter-State developed a solution that utilized its Xeikon engine with pre-converted paper stock. Fry said, " We identified a supplier that had the capability to pre-convert the stock with perforations and co-adhesives appropriately to our specifications. The payment envelope was integrated into the paper stock before printing. We could then print the personalized flyers on the paper and fold the flyers using traditional folding equipment." This eliminated the need to manually affix the ordering envelopes, and now the company had a completely automated manufacturing process. The new flyer featured personalized images of the child in various poses as well as in the child's autograph acquired when each child was asked to sign a small white card on photo day. Inter-State incorporates that autograph into the flyer unless the parent requests that the autograph not be included. Based on geography, pricing options vary. On the back of each flyer, Inter-State prints the school's package information and pricing options. Parents complete the order form, tear it at the perforation, and place it in the envelope with payment for the photos; the child then returns the envelope to the school. Members of the school's staff collect the envelopes and forward them to Inter-State for batch processing. Personalized marketing worked for Inter-State. There was a 30 percent increase in average order size, a 300 percent improvement in productivity and a 40 percent reduction in manufacturing costs through the utilization of pre-converted roll-fed paper. Visionaries See the Market Differently While the solution to its marketing problem seemed simple, according to Fry, the company faced one additional hurdle. He says, "There was no place to buy pre-scored paper. After extensive searching we realized we'd need to produce our own. We sought out paper converters and worked out agreements with them to create custom templates with our die cuts built in. We believed that if we found value with pre-scoring papers others would, too. As a result, we formed a new company, Convertible Brands; brought a new product, Fold-N-Go, to market; and patented the offering." Convertible Brands demonstrated the stock for the first time at Print 05 at McCormick Place in Chicago. The company also showed the Fold-N-Go concept at IPEX, DMA and DMIA, resulting in more than 1,700 leads. Historically, marketing materials requiring envelopes and other complex conversions have been printed with offset technology and converted later. Printing overruns compensated for the waste involved in setting up the converting. The lengthy setup and specialized equipment involved limited these types of mailings to large volume runs. Fold-N-Go stock is delivered to the printer "pre-converted" with all of the perforations, die cuts and adhesives in position. Digital presses don't fit well into a print-then-convert work process. Even a small amount of setup waste is a major problem when every impression in the job is unique. Fold-N-Go stock is delivered to the printer "pre-converted" with all of the perforations, die cuts and adhesives in position. After the job is printed, the only required post-press converting is to finish each piece with traditional folding equipment. Convertible brands has standard template sizes or they can be specifically designed for customer applications. Fry said, "Convertible Brands is really a provider of solutions to printers. A printer doesn't just need paper. He needs ideas to drive volume to the press and to deliver profitability. Printers need options that can quickly generate dollars and cents." The Fold-N-Go product line provides just that. While the product was designed in response to the needs of a school photography company, its use can be extended to an array of personalized and variable data mailings including catalog inserts, reply postcard mailings, billing statements, perfed coupon mailings, CD cases and pocket folders. Today, Convertible Brands is using outside suppliers for paper converting but plans to bring in its own converting equipment. The company sees tremendous potential and business opportunity in helping digital printers expand variable data printing while eliminating the post processing bottlenecks. Ingredients for Success The expansion strategy through Convertible Brands has all the ingredients to earmark it for success. Inter-State Studio and Convertible Brands have demonstrated that market focus reveals new opportunity. Inter-State started a business with a focus on a well identified target market --rural middle and elementary schools. It extended its photographic product line to include yearbooks, trading cards and school programs, and leveraged new technologies. Inter-State deployed creative personalized marketing to protect and expand the core business. The visionary approach the company took to marketing resulted in new patented solutions that simplify the creation of personalized variable data print jobs that require perforations, payment envelopes and other complex conversions. The expansion strategy through Convertible Brands has all the ingredients to earmark it for success. * Early entry to the market – While the market for digital color is well-established, Convertible Brands has a solution to post-processing that has not yet been addressed by the industry. The company has patented and protected the pre-converted paper solution to streamline variable data post processing operations for digital printers. * Go to market leverage – It is in the interest of vendors like Xeikon, Canon, Kodak, HP and Xerox to promote Convertible Brands in their selling process. In the quest for consumables revenue and new applications, Fold-N-Go stocks should drive volume to digital presses. * Linkage to a market that is well understood – Clearly, Inter-State Studio understands post processing and variable data. The firm is deploying skills integral to its business to a broader market. * A solutions sale to a targeted market – Convertible Brands has a well defined target market for its offering--digital printers. It is a market that can be easily accessed through trade shows, industry associations and partnerships. While paper may be deemed as a commodity market, converted paper that streamlines productivity offers an inherent value proposition. The timing for this concept seems right for Inter-State Studio, Convertible Brands, and most importantly, our industry.