Commentary & Analysis
Two State-of-the-Industry Briefings at drupa Give Equal Reason for Optimism and Concern
“We need to be in the outcome business, not the output business,” said a printing executive at drupa. “They trust you,” said a senior spokesman for a vendor about the underlying strength of printer-customer relationships. Both presentations were rich in insights about the state of print markets and the prospects that printers will discover in them.
By Patrick Henry
Published: May 21, 2012
The drupa events are mostly about product and technology news, but they’re also full of opportunities to learn about general trends in the industry from some of its best-informed and most influential leaders. Two programs from the series of press briefings in the first week of drupa 2012 were particularly rich in insights about the state of print markets and the steps that printers should take to strengthen their positions in them.
During the Canon press conference, David Preskett, director, professional print, Canon Europe, presented the findings of a customer satisfaction survey that polled more than 400 European buyers of printing services. Thirty of these decision-makers and key influencers also took part in “deep dive” interviews aimed at clarifying their opinions about the printers they do business with.
Overall, said Preskett, attitudes toward printers and what they provide are strongly positive, with 87% of respondents deeming professional printing “important” to their business strategies. Seven in 10 (71%) rated print as effective as or more effective than other media in the communications mix.
The buyers’ affection for print isn’t unconditional, however. Although 88% declared themselves satisfied with their print service providers (PSPs), only about 30% were prepared to say that their PSPs fully meet their needs. Few of those surveyed, according to Preskett, know how to measure the ROI of their print spends despite their belief in print’s importance.
Take Nothing for Granted
This inability to demonstrate ROI—in contrast with the easier measurability of e-media—may explain why 30% of respondents said they believe that print’s share of the marketing mix will decline. Although the buyers who hold this view tend to be those who buy principally on cost, said Preskett, similar reservations prevail among the survey group as a whole.
The good news is that nearly all of the respondents (94%) use print in their marketing campaigns and spend, on average, 48% of their budgets on it. However, according to the findings, print isn’t part of a “grand plan” in these campaigns and doesn’t necessarily own a place in the buyers’ long-range communication strategies.
There’s a disconnect, Preskett indicated, between the buyers’ general satisfaction with their PSPs and their more jaded views of how progressive printers really are when it comes to innovation.
Fewer than half (47%) think that their printers keep them up to date about new developments, and only half (50%) even bother to ask their PSPs for innovation advice. Even though 90% buy on the basis of quality, reliability, and other factors deemed more important than price, said Preskett, that loyalty could be captured by other suppliers perceived to be better sources of information about what’s new.
Selling Is…Well, You Know the Answer
This is why doing a better job of telling the story may be simplest but most effective step that printers can take to cement relationships with their customers. According to the survey, there are plenty of knowledge gaps waiting to be filled: nearly one-third (32%) of respondents, for example, were unaware of opportunities in short-run printing. Almost one-quarter (24%) didn’t know that digital printing is good for personalized direct mail. And, a surprising 36% were in the dark about the quick-turnaround capability of print on demand.
“They trust you,” said Preskett of the respondents’ underlying faith in their PSPs. Talking to them about innovation, ROI, and high-quality applications is the best way to honor and intensify their confidence.
NPES, the trade association for suppliers of printing technology, co-sponsored the American Pavilion, a joint exhibit by about 30 of the 100 U.S. vendors that presented their wares at drupa 2012. The association also hosted a media breakfast at which it offered a perspective on the outlook for the U.S. printing industry.
The presenters were Ralph Nappi, president of NPES, and Tom Saggiomo, president and CEO of Diversified Global Graphics Group (DG3), a multinational provider of visual communications services. Although both noted the industry’s difficult economic conditions, they focused less on the numbers than on the fact that the business of printing has changed in ways that many printers still don’t fully appreciate.
Where Are They Now?
Not all of the news is bad. Total U.S. print market volume, according to Nappi, has continued to grow since bottoming out in the lowest depths of the “Great Recession” three years ago. But, that volume—estimated by NPES to be about $147 billion this year—is being shared by a sharply reduced number of establishments: 28,285 firms in 2011 versus the 37,673 companies doing business in 1998.
What’s more, said Nappi, the survivors aren’t depending on print for income as heavily as they used to. Most of the growth since 2009, he said, has come not from the pressroom but from ancillary services, which now account for about 15% of printers’ revenues. “Pure print dollars are break-even at best,” Nappi added.
The trend of main concern to NPES is equipment sales, and here, the accelerating technological shift in the industry’s manufacturing base is plain to see.
The association began separating sales of digital color presses from those of conventional equipment in 2007, and since then, the numbers have shown digital’s share of the market rising as the conventional portion continues to decline. In 2010, the most recent year for which Nappi presented data, sales of digital color presses, at about $1.19 billion, accounted for better than 70% of all equipment sales to U.S. printing firms.
“How Many and How Fast”: the Wrong Questions
Saggiomo’s company, DG3, has both capabilities, and he said he believes that in time, “digital and other services will eclipse the lithographic process.” Although this will be a “hard lesson” for printers to learn, Saggiomo said, a tougher one is that printing by any method can no longer be sold just on the basis of “how many and how fast.”
Although weak GDP growth and “frozen capital markets” are chief among printers’ economic concerns, said Saggiomo, “the strongest and most sustained force” ranged against them is competitive technology. As if a general flattening of media spending wasn’t trouble enough, he said, the majority of media-buying agencies will be less focused on print as they pump more dollars into TV (still the number one spend) and digital channels (a rising second).
“We can’t just wait for it to get better,” Saggiomo said, warning that the industry must adapt itself to a media ecology where smart phones and tablets represent what many people now understand to be graphic communications. But, simply shifting more of the emphasis to traditional services such as mailing and fulfillment won’t help. These activities, said Saggiomo, are “not transformational,” and doubling down on them “is not really where the end game needs to be.”
“We need to be in the outcome business, not the output business,” he said. This means delivering value by facilitating customer goals with the help of media of all kinds, including “mobile engagement” where that channel can be leveraged. It also means teaching sales forces that new media can’t be promoted to customers in old ways. Nowadays, said Saggiomo, “it’s more than a relationship sell.”
What hasn’t changed, he noted, are the facts that “liquidity is king” and that financial institutions still hold what amounts to life-or-death power over the fate of many printing businesses. “Your bank is watching,” Saggiomo said, noting the recent “overnight” collapse of an $80 million commercial print firm in New York City after a lender pulled its line of credit.
Upsides and Downsides
Nappi concluded the briefing with a summary of likely and upsides and downsides for the U.S. print market over the next two years. Among the positive prospects:
• GDP will strengthen at a pace between 2.5% and 2.8%—something printers can be thankful for even though their sales growth no longer tracks GDP as reliably as it used to.
• Consolidation (“the thinning of the herd,” as Nappi put it) has left more for the industry’s surviving firms to share.
• The “re-shoring” of expatriated manufacturing to the U.S. should include the return of some off-shored printing.
• Emerging markets such as printed electronics and three-dimensional printing offer fresh opportunities.
• Investment capital is becoming more available, although printers continue to rank low on most lenders’ lists of desirable borrowers.
Nappi said that things to be cautious about include:
• The perilous state of the U.S. Postal Service, which handles from one-third to one-half of all printed matter.
• The unfair perception that print and the printing industry are not eco-friendly.
• The continuing displacement of print by electronic alternatives.
Nappi also seconded Saggiomo’s point about the need for a new breed of sales force. In Nappi’s view, “20% of the sales staff can be retrained” to do the kinds of outcome selling on which the industry’s future depends. This means that printers may have to look elsewhere for the rest of the sales talent they need, he said.