Commentary & Analysis
Why Printers Must Ask Themselves, “Is My Business Irreplaceable?”
The profitability gap between the best-performing and the weakest printing firms is wider than ever. It reflects the difference between the “haves”—firms with effective strategies for competitive differentiation—and the “have nots,” which lack them.
By Patrick Henry
Published: May 6, 2013
Paul Reilly spends a lot of time thinking, speaking, and consulting about what he calls “megatrends”: shifts in reality that have overturned many long-standing assumptions about what it takes to survive and thrive as a printing business. The chart on this page displays the matrix of talking points that he uses to make these megatrends clear in presentations to clients and industry groups.
In one way or another, they all relate to the need for competitive differentiation—the advantage enjoyed by printing companies whose customers have come to think of them as irreplaceable. Years ago, says Reilly, a printer might be able to claim an edge if “you had great people who knew how to make the dots dance.” Nowadays, when commonly used digital technologies let every printer be a Balanchine, customers are used to getting Swan Lake in every job no matter whom they are buying their printing from.
Firms that can’t or won’t find ways to be unique in the eyes of their customers suffer for it. Economic data from Printing Industries of America indicate that, thanks to recession, declining demand, and other factors, the profitability gap between the best-performing and the weakest printing firms is wider than ever. Reilly interprets it as a separation of the “haves”—firms with effective differentiation strategies—from the “have nots,” which lack them.
Being a “have” is a powerful advantage for a business positioning itself as a candidate for acquisition, says Reilly, who plans and executes print industry mergers and acquisitions as a partner in New Direction Partners (NDP). He points out that a company’s multiple of EBITDA—the primary determinant of its selling price—is enhanced by its growth prospects, which are directly affected by how well the company gains share-of-customer from the accounts it already has.
But, turning a “have not” into a “have” isn’t easy. The difficulty is compounded by the fact that when most selling organizations do get new products or services to put before their customers, they often don’t present the new offerings very effectively. According to Reilly, print salespeople have become “so honed” to listening to purchasing agents tell them what they need that the sales conversation usually stops right there.
Unfortunately, this kind of passive order-taking represents the antithesis of the proactive, problem-solving selling that they should be doing. Reilly also believes that the inability of many salespeople to sell a different value proposition has led to the success of print management firms: service-bundling business entities that come between printers and their customers with deals and options that individual printing companies can’t match.
This obviously is not the way to achieve differentiation, and what it suggests, Reilly says, is that solution selling should be the responsibility of print company CEOs. After all, the people at the top got there precisely because of their skill in pinpointing and eliminating problems. Rank-and-file salespeople generally can’t bring this kind of insight to conversations with customers.
THE PRINTING INDUSTRY
• Slow to no growth driving overcapacity
• High quality, mass produced machinery
• Selling organizations focused on fulfilling existing needs
• Consolidating customer and supplier bases
• Shorter-run customized messaging
• Severe downward pricing
• Difficult to differentiate on product quality or cost
• Selling organizations are not good at creating demand for or delivering new products and services
• Customers are effective at demanding lower prices
• Suppliers in some categories are gaining pricing power
WHAT TO DO
• Move from selling to marketing organization: niche marketing, selecting customers
• Invest in digital printing technology
• Invest in technology that differentiates services and cost
• Consolidate – grow externally
• Increase sales into less mature products
• Be a customer or a product expert
• Reduce cost
WHAT NOT TO DO
• Put new technology cost benefits into your estimating system without protecting your selling price
• Invest because you “have to”
• Invest in mass produced solutions
• View customers on a job by job basis
The need for differentiation becomes even more crucial when customers merge with other customers, concentrating larger volumes of sales in smaller numbers of accounts. This phenomenon, Reilly says, is “the inevitable result of being a solution provider.” It’s also a feature of the new business model that printers are now confronting—like the trend among certain print technology suppliers to do some of their printer customers’ selling for them.
This occurs, Reilly explains, when a maker of digital printing systems approaches print buyers and urges them to do their printing on those systems. Jobs are referred to a printer operating that equipment, and there’s certainly nothing wrong with profiting from the extra volume that the supplier has sent the printer’s way.
The downside, according to Reilly, is that when a printing company shares its sales prerogative in this fashion, it also gives up some of its unique value to customers—hardly consistent with maintaining the kind of competitive differentiation that he recommends.
How is it to be accomplished? It’s impossible, Reilly contends, for a printing business to set itself apart across the board with one unique feature that all customers will appreciate. He speaks from considerable experience here. As the former CEO of one of the nation’s largest printing conglomerates, he remembers the day-to-day challenge of keeping the company’s value proposition fresh—and of making sure that the message was being delivered consistently by its 1,000-strong sales force.
Instead of trying to differentiate globally, says Reilly, printers can do a better job of distinguishing themselves by building a set of individualized approaches to customer retention. “Then the world seems less daunting,” he says, adding that smaller businesses frequently have more flexibility for this kind of differentiation than bigger ones.
He points out that a company doesn’t literally have to create a separate game plan for each customer. A firm with several hundred accounts, for example, might ultimately develop 10 adaptable strategies: nine for the high-value contributors, and one to fit the needs of the remainder.
Printing firms advised by NDP have showcased the principle of competitive differentiation in action. One achieved it by developing customized store plans for one if its customers, a multi-location retailer of business and home-office supplies. The plans, tailored to each outlet, are information kits that tell store managers what kinds of signage and other promotional materials they need to order in support of chain-wide sales events.
Devising, producing and distributing the kits solved a problem for the chain and “really increased the stickiness of the client,” Reilly says.
Another case study from his files is the recruitment program that the printer planned and executed for a medium-sized college. Nationally, competition for collegiate enrollment is fierce. The printer helped the school overcome it by developing a 1:1, fully personalized outreach program that engaged prospective students by name and specific interest.
Information from SAT and ACT exam rosters provided the database on which the 1:1 communications strategy was built. As the program began to persuade students to register, the printer was able to report measurable, directly attributable results to the college. Reilly notes that IT management expertise of this kind is a hallmark of printing firms that have learned to learned to differentiate themselves as problem-solvers.
Reilly’s urgent advice to firms that haven’t evolved as problem-solvers—the ones that still use “What can we print for you?” as a conversation starter—is that they need to take a hard look at what that outmoded mindset implies for the future of their businesses. Competitive differentiation, he says, is a skill set that can be acquired. As a megatrend, it may be the most mega of them all.