Commentary & Analysis
Target Marketing at Associates Graphic Services
By Barbara Pellow September 13,
By WhatTheyThink Staff
Published: September 13, 2006
By Barbara Pellow September 13, 2006 -- Owners of graphic communications companies continually complain that profit margins are rapidly deteriorating in the U.S. market, in part because their offerings are perceived as commodities. To dispel this belief and restore the graphic communications industry to sustainable growth, firms are emphasizing specific niche opportunities and catering to more focused customer needs. Successful service providers are taking a vertical market approach to de-commoditize their product and service offerings. "We make sure that our marketing messages communicate to customers in terms that they understand." Last week I talked with Karen Keenan, Director of Marketing at Associates Graphic Services. Revenues were up 40 percent in 2005 and projections are for more than a 25 percent improvement this year. While its complete solution portfolio is a major contributor to the firm's success, the organization has also taken a targeted approach to clients and delivered a solid value proposition. According to Keenan, "We make sure that our marketing messages communicate to customers in terms that they understand." Associates Graphic Services (AGS), with headquarters in Wilmington and a production facility in Stanton, Delaware, has been a leading provider of print communication materials for more than three decades. Services include electronic pre-press, digital and commercial printing, variable data marketing programs, web-to-print solutions, bindery, and mailing services. The company has a versatile and expansive array of digital and conventional equipment with three digital color presses, three black-and-white digital machines, two Heidelberg 6-color presses, and a variety of smaller presses. AGS was founded in 1969 as a traditional commercial print service provider. In 2004, AGS acquired Wilmington based DocuSource. DocuSource was one of the first to recognize the possibilities of digital short-run and variable data printing (VDP) in its area. The company jumped on the VDP opportunity early on, when the tools and markets were still green. It provided a range of services including variable data printing, database management, and mailing services for one-to-one business applications and marketing communications. At the time of purchase, DocuSource owned two Xerox 6100s and a DocuColor 2060 and 6060. The acquisition of DocuSource by AGS positioned the new entity to satisfy a full range of both conventional and digital printing customer needs. Market Focus The decision to focus on specific vertical markets needs to be done in the context of the value of that vertical market. When Keenan took over as the Director of Marketing, she knew that gaining a clear understanding of AGS' target market was essential. In business-to-business markets, the objective of segmentation is to arrive at groupings of like-minded companies and to gain competitive advantage. Good B2B market segmentation typically starts with an understanding of your current customer base and that's where Keenan started. She did a detailed analysis of current customers and the products and services they were buying. She also looked at the current customers and prospects by geography. When the decision was made to focus on specific vertical markets, it needed to be done in the context of the value of that vertical market. That value can be calculated by: * Evaluating the size and revenue potential of each vertical industry, and * Determining and defining your expertise in the particular market segment. The results of her efforts indicated that primary success had been with pharmaceuticals, creative services agencies, financial services, higher education and manufacturing. She listed and categorized customers by total sales, average dollars spent per customer, sales efficiency by customer, light versus heavy usage of printed materials, market stability and long term potential. She also tried to determine what they were buying from other graphic communications service providers. With the combined entity and expanded capabilities, it made sense to sell more to the existing solid base of clients with a broader portfolio versus going after potential new prospects. Market statistics say it can cost up to five times more to win a new customer than to keep an existing one. Rather than chase prospects 24/7, AGS assessed its current customer base to understand if there were profitable-to-adopt programs they could implement to increase the "share of wallet" within current customers with its expanded service offering. Market Positioning Every time a firm comes into contact with the outside world, the position it takes in the marketplace and its unique specialization or offering must be clear and consistent. AGS wanted to ensure that it was properly positioned in its target markets. Positioning should be part of every aspect of a graphics communications business. Every time a firm comes into contact with the outside world, the position it takes in the marketplace and its unique specialization or offering must be clear and consistent. Internally, staff members need to understand what the business is about so their motivation is aligned with the company's core purpose. All external parties who come in contact with your company should instantly understand what you do. A scrambled message or a weak purpose will have a negative impact on sales and reduce your business efficiency. If your products and services are properly positioned, prospective purchasers or users should immediately recognize their unique benefits and be better able to assess them in comparison to competitive offerings. Identify your strengths and use them to position your business. AGS has articulated that it provides "Printing Solutions/Personal Service." According to Keenan, AGS wants the firm to be viewed as having a very customer-service-oriented attitude. Keenan also realized that the positioning needed to be articulated in terms that AGS' vertical target markets would comprehend. Keenan recognized the importance of micro-targeting. The concept of micro-targeting means that you will deliver a specific message by industry, job function or organization. It is where you communicate the specific value of "What's in it for the customer." She developed micro messaging that clearly differentiates AGS within selected micro-target markets. She re-engineered the company's web site with a focus on customer success stories and produced PowerPoint presentations for sales reps that clearly communicate: * The AGS unique value proposition for the targeted audience * The distinct benefits AGS delivers that have the most value to the targeted client * The benefits that will be most difficult for competitors to replicate A library of vertically oriented print samples that link to the PowerPoint presentations was prepared. According to Keenan, "The work isn't complete. This fall we will be starting AGS University and providing clients with classes on designing for digital, mailing and variable data. These sessions are designed to reinforce our customer service orientation." Each month Keenan measures the success by vertical market. Her objectives are simple. She wants to see if effort equals results. "If I am spending dollars, I want to see the ROI" said Keenan. Higher Education Success This fall we will be starting AGS University and providing clients with classes on designing for digital, mailing and variable data. These sessions are designed to reinforce our customer service orientation." Higher Education marketing communications is a core competence for AGS. AGS worked closely with Wesley College to drive improved donations from alumni utilizing relevant personalized communications. Wesley College is keenly aware that an alumni's relationship to his or her alma mater is a personal one. After years of handling their development giving campaigns with a mass mailing approach, AGS presented them the idea of using variable digital printing technology to customize communications with their alumni. Wanting to elicit a personal response from their target audience while continuing to cultivate and nurture relationships with them, Wesley is testing the use of custom images and text related to majors, extra curricular activities and history of giving. Although taking this approach increased the price per piece, Wesley has seen a return on investment already. Hard statistical results are still not in, but they have received positive feedback from a variety of sources and will tweak the components for their next several mailings. The college plans to integrate the variable technology with AGS into upcoming niche marketing strategies and as a cultivation tool to secure support for niche groups on campus, like the women's soccer and field hockey clubs. Effective Targeting The current state of the graphic communications marketplace underscores the need to abandon business models dependent on commodity offerings and move toward business models that provide services that cater to specific vertical industry needs. The success at AGS illustrates the value in focus combined with the right product portfolio. Graphic communications service providers with no specialization are viewed as generalists, meaning purchase decisions will primarily revolve around pricing. The success at AGS illustrates the value in focus combined with the right product portfolio. As competition drives down margins, solution selling into vertical markets enables real competitive differentiation and allows increasingly sustainable profit margins. When graphic communications service providers focus on vertical market solutions, they move away from the commodity sale and move toward higher-margin, value-added services. The vertical approach to marketing strengthens customer loyalty by developing closer links to the customer's core business by way of customization (by vertical industry) of products, services, sales reps, customer service and support, documentation, and training. Vertical marketing is not something that the graphic communications service provider should take lightly. It needs to be done with comprehensive, quantitative market analysis, and blended with wisdom and insight . And these efforts will deliver results, as demonstrated by the experience of AGS.