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Commentary & Analysis

Predicting Profitability

By Nancy Ingalls April 19,

By WhatTheyThink Staff
Published: April 19, 2004

By Nancy Ingalls April 19, 2004 -- Since the introduction of digital color technology in the early nineties, market projections have consistently fallen below expectations. Over the past two years, the print market has experienced net revenue declines and deflated print prices. As a result, the industry will see more and more consolidation of functions. To survive, print service providers need to diversify their businesses and look for growth opportunities with value-added services. This will enable them to increase revenue growth and compete in ways once thought inconceivable for a "printer." If they don't consolidate and diversify, they may find themselves falling short and losing the race. That said, technological advancements continue to progress, cost of owning digital color technology is steadily declining, and print providers have many options and alternatives from which to choose. Those choices can make the process of trying to figure it all out exasperating, time consuming and somewhat overwhelming. Just getting the answers to simple questions (What is my bottom line with all this technology? Can I make real money and be sure this is not all vaporware coming from the digital print manufacturers? Can I sell it and retire on it?) is difficult. Every one of these questions can cause print service providers to backpedal on purchasing decisions and oscillate indefinitely. And this can cause him to fall behind and lose his competitive edge. What about the printers who already invested in digital color and are looking for ways to expand their business? Is there a way to dust the cobwebs aside and bring clarity to the process? If we find ourselves still exhausted and confused, I guess we all could retreat and rely on the good old anti-anxiety medicated track. Great for a quick fix, not good for long-term strategic planning. Ask the key questions How can printers and pre-press firms take advantage of the digital printing technologies as ownership costs decline, technology diversifies and use it to expand their services while supporting a business model designed for profit? How can a printer ensure his business model includes not just cost per page, but equipment purchases, maintenance support, consumables, and still delivers value-added digital color services to their customers? I found one way to answer these questions at the On Demand show in NYC. Kicking tires in the Xerox booth, I came across Xerox ProfitQuick, part of the Profit Accelerator suite of Digital Business Resources. This tool is a comprehensive interactive financial modeling tool designed to help print executives see where and how digital production equipment can fit into their business. It is meant as an aid to making educated purchasing decisions and then to help ensure they are quoting jobs correctly based on the equipment they have in place. ProfitQuick allows up to five years of projection capabilities while continuing to demonstrate the most profitable applications and page volumes to ensure a positive cash flow. By plugging in different types of jobs and print volumes, it shows profitability of different kinds of jobs and identifies the business impact of quick-turnaround and variable print pricing. This helps printer understand where the costs and profits are to help them make better day-to-day business decisions. And as a printer plans expanding current offerings or taking on bigger jobs, the program can help sort out the variables to keep the business on track It doesn't get any simpler that this. Printers are in the business to make money. If it won't bring in profit, why bother? From Xerox's point of view, if you can help the purchase by providing a way to show smart business decisions from solid analytically driven business projections it is much simpler to do the math. For the printer, profitability is more attainable if you know your pricing models provide all the options you need to help keep your business in the black ProfitQuick in practice To get a first-hand view of how ProfitQuick can work I talked with David Murray Vice President of Sales and Marketing for Tucker Printers. Tucker, a subsidiary of Consolidated Graphics (CGX), is a full service printer located in Henrietta, New York. Murray shared with me how Tucker Printers used ProfitQuick to reaffirm their decision when buying a Xerox iGen3. Murray saw the business opportunities afforded by the iGen3 for short-run high quality, print-on-demand and variable printing. “We used ProfitQuick every step of the way through the buying process. The software helped us quickly develop an ROI that was utilized by sales, operations and management alike.” Today, Tucker Printing is using the iGen3 to help customers improve their productivity and profitability through short-run color and print-on-demand as well as by creating dynamic one-to-one marketing programs that aid customers in customer acquisition and retention. So, if you question how you can make money with digital color technology or are looking for ways to expand your existing digital color services, Xerox's ProfitQuick tool is worth a close look. It is intuitive, easy to use and provides the answers to the questions inhibiting you from growing your business with the technology that can diversify your portfolio of services and bring in new profits.



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