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Commentary & Analysis

Why Printers are Vulnerable to Brokers, Distributors, and Print Management Companies

Customers expect more from their vendor partners than simply delivering the product on time and at a fair price. As the print industry continues to contract, differentiation is required to remain competitive. Printers are at risk from print-manufacturing independent service providers because customers are looking to reduce the number of vendors and engage with vendor partners who make doing business with them very easy.

By Jennifer Matt
Published: August 18, 2014

Question: What does a printer bring to a sales meeting?

Answer: Print samples.

Question: What does a broker/distributor/print-management company bring to a sales meeting?

Answer: Dashboards, reports, and data about how they can improve the customer’s business and save them money.

 

Do you see why printers might be vulnerable to being replaced by a broker, distributor, or print management company?

Customers assume you can print. What they are looking for is how you can help them get other parts of their job done, make their lives easier, and give them all the information (data) to report up through their bosses about what a great job they are doing. Customers want you to extend your value proposition beyond the delivery of printed products. Since brokers, distributors, and print management companies have to provide value above and beyond the manufacturing of print, they lead with providing these solutions. There is nothing preventing printers from leading with what the customer actually cares about, other than the need to break old habits and adapt to the new realities of the information age.

Land was the raw material of the agricultural age. Iron was the raw material of the industrial age. Data is the raw material of the information age.”
— Alec Ross, Senior Fellow at Columbia University’s School of International & Public Affairs.

We are squarely in the information age, customer’s wants access to data that makes their job easier, makes you an easier vendor to buy from, and provides insight into their business. A print broker, distributor, or print-management company sells the “service” of procuring and managing print related logistics. Printers generally give this “service” away as part of providing the printed product.

There are three reasons printers are vulnerable to displacement by brokers, distributors, and print management companies.

  1. Printers fail to deliver the data customer’s desire (order status, order history, roll-up reports on monthly, quarterly, and annual spending, etc.)

  2. Printers limit their sales efforts to what they can manufacture themselves (this forces the customer to potentially have many different vendors to meet all their needs)

  3. Printers don’t invest in and properly implement the technology required to be a data-driven organization (the data isn’t being captured in a manner that can be utilized by both the printer and their customers).

REASON #1: Printers Fail to Deliver the Data Customer’s Desire

Ask yourself this very important question. How good are you at giving your customers all the data they want about the business they are doing with you? If your customer is constantly asking for more reports and you are simply responding to their requests – you are vulnerable. Don’t make the customer work for data about the business they do with you. As soon as a broker walks in there and shows them 2-3x the data, analytics, and business intelligence – essentially showing the customer data that they didn’t even know they needed or wanted, you are at risk.

Why is data so important? Data helps us make better decisions and we have access to more data than we ever have before, exponentially more. Online businesses which are 100% self-service, meaning it’s very hard to ever talk to another human have had to go to great lengths to make everything the customer may want available online. This empowers the customer to do business with them when it’s convenient for the customer and without the expense of your labor. Why should a customer have to get you on the phone during business hours to request a duplicate of an old invoice or re-order something from inventory? Data is critical, access to data is a differentiator, taking that data and presenting it in a way that produces business intelligence for your customer is a homerun.

REASON #2: Printers Limit Their Sales Efforts to What They Can Manufacture

Virtually every company in the world is trying to simplify their procurement efforts; the easiest way to do that is to limit the number of suppliers you buy from. When you sell only what you can manufacture then you limit the solutions you can offer the customer with whom you’ve developed a trusted relationship. Most printers outsource but not actively through their sales team, they outsource the small parts of a job that they don’t do like die-cutting or perfect binding. They still primarily sell products that they can do the majority of the manufacturing on.

So your sales team has done the hard work of developing a trusted relationship with the customer. By selling only what you manufacture, you limit the amount of business and services you can provide through this established trusted partner. Yes, this means you have to become good at sourcing/procuring print that you don’t manufacture! There is a limit to how many trusted relationship routes your sales team can establish and maintain, why limit the amount of revenue that can flow through those routes?

Many printers avoid outsourcing because they view it as not as optimal as a job that perfectly fits your equipment and your labor. Outsourcing by definition is not optimal for your equipment/labor but it is still an excellent way to build more business at a solid margin. You simply have to build systems around it so that you capture the expected margin and your team executes on the outsourcing events. The risk of not doing this is that the customer will move all their business (the sweet spot jobs for your equipment and the outsourcing jobs) to a single source supplier who promises to simplify their lives by have one resource.

REASON #3: Printers Don’t Invest in and Properly Implement the Technology Required to be a Data-Driven Organization

Printers are focused on print manufacturing investments, just go to GraphExpo or Drupa and look at the traffic in front of new presses and then go hang out in the quiet software booth areas. I know presses are important, I also know there is an obnoxious amount of excess capacity in our industry and as the press manufacturers have been doing a great job making high-quality print of all types easier and easier to manufacture, we as an industry have done very little to make print easier to BUY.

So the customer is stuck wondering why a very sophisticated print supplier can’t easily provide them the data they need to manage, evaluate, and monitor the business they are conducting with them. Worse yet, the customer doesn’t have the self-service tools to go and access this data when it’s convenient for them. If you are hanging your hat on your ability to jump every time your customer requests a report or specific data, then step back and think about the customer burden in this scenario. A competitor with a self-service dashboard which gives the customer access to data, analytics, and business intelligence would make you look quite antiquated.

What really drives me crazy is when I’m working with a printer who has just purchased two new digital presses, well into six figures and he’s wondering how I could possibly recommend a web-to-print solution that is $300/month! To keep those presses running profitably, you need to invest in software that will decrease the costs of getting jobs on the press (all the people that touch the order before it actually lands in production) and you have to offer solutions to your customers beyond the printed page.

The two key software investments required to build a data-driven organization are Print MIS and web-to-print. The Print MIS is the most important, not the act of buying the software (that’s the easy part), the actual implementation of this software system so that it makes you a data-driven organization AND allows you to use data to create differentiation in the marketplace with your customers. We typically don’t think of the Print MIS as customer facing but the data the Print MIS captures has to eventually make it out to the customer if you’re going to compete in the information age. Web-to-print technology allows you to segment your jobs into “self-service and full-service” so that that you can both reduce your labor costs on jobs by allowing your customer to submit on their own and you provide the customer with the convenience they desire.

Quality manufacturing used to be the differentiator, we have moved into a new era where quality manufacturing is expected and solutions are the new differentiator. In the information age, the solutions will be dominated by those companies who can control, manage, and utilize data to deliver value-added solutions around their manufactured product.

Jennifer Matt is the managing editor of WhatTheyThink’s Print Software section as well as President of Web2Print Experts, Inc. a technology-independent print software consulting firm helping printers with web-to-print and print MIS solutions. You can reach her at jen@whattheythink.com.

 

Discussion

By Slava Apel on Aug 18, 2014

That is funny...

"What really drives me crazy is when I’m working with a printer who has just purchased two new digital presses, well into six figures and he’s wondering how I could possibly recommend a web-to-print solution that is $300/month!"

We see that all the time.

 

By Jennifer Matt on Aug 18, 2014

Slava -

I know you feel that pain all the time. I believe we have co-created this (meaning the software vendors and the printers) have both contributed to this "devaluation of print software solutions". This hurts the whole industry. Pricing keeps dropping on print software solutions and the hype of "it will completely change your business keeps growing" Needless to say there are a lot of missed expectations out there.

How have printers contributed:
Printers look at software purchases like press purchases - they think of them as capital investments that you eventually own and they try very hard to reduce any recurring expenses on it. This is the worst way to buy software because software isn't a static product, if its any good today, it has to keep moving to adapt to how the technology world is moving. You can't "own it" unless you want to fullly adopt it as your own and provide the investment to keep it competitive yourself (a very bad idea for most printers). Printers also assume all they have to do it buy it and it will work - that's not true and the investment in "making it work" should be 3-4x of the technology purchase. That investment might be in internal labor (yes you have to have someone own the project and be dedicated to it at least to get it launched). Nobody talks about this in the sales process - yes, this technology purchase will temporarily cost you more in labor ;-)

How print software vendors have contributed:
The software is NOT the solution. The software is a part of the solution. The people at the printer have to bring the solution to life leveraging the software. For the most part software vendors are spending the majority of their focus on technology and very little on the process to make their customers successful. The technology is now way ahead of what the printers can actually do with it. The people have to run the system - the system has outrun the people.

I know its sexy to talk about marketing campaigns using virtual reality but the people talking about those campaigns haven't been in a printer lately. Most printers do not have any online strategy/aren't accepting any significant work via a web-to-print solution, are only personalizing a small portion of their products, and are struggling with legacy Print MIS systems that don't support the business they are in today.

We have a lot work to do to help printers get as comfortable with print software as they are with presses. It can be done but it will take a concerted effort by all parties involved.

Jen

 

By Vincent Mallardi on Aug 20, 2014

Gloves off! Printers are vulnerable only to themselves, not to the brokers, distributors and others who out-smart and out-sell them every day. If the printers were outward solutions providers instead of inward mechanical problem makers, there would be no need for intermediation. That it is only 16% of sales share is remarkable. Other fields, like real estate and insurance are 75% of more in reseller share. All of us who broker (or whatever anyone wants to call it), all came from manufacturing printing plants where no matter what we sold was "greeted" by grumbles from the inside people. To spare the end-users the same agony, we started organizations independent and agnostic of the pressrooms and binderies that dragged us down. The printers created their fate, and as we emerge into the post-printing industry, we feed the living dead and pick up part of the gross margins.

 

By Jennifer Matt on Aug 20, 2014

Vincent -

Excellent add to the conversation. Solutions is what the customer wants, externally facing (like towards the customer) problem solvers. You are right, manufacturers get "hooked" on internally focusing on the manufacturing. Not that it isn't important, it is but it isn't always relevant to the customer. The customer only cares about their challenges and how you are going to solve them.

I had many comments about this article come to me privately via e-mail that were MUCH MORE gloves off than yours ;-) One of the better ones was an internal resource inside a successful printer who was struggling because he wants to sell solutions but his CFO doesn't want to process anything that doesn't contribute to the "absorption the overhead". I told him, my inclination is to think about helping businesses grow by focusing more from the customer perspective. If a customer can count on you for all their work (the kind that absorbs your overhead AND the kind that simply solves their problems - you're way more likely to keep the sweet spot jobs as well!.

Being an independent solution provider is liberating, especially with today's technology. An individual with a cell phone and a laptop can procure print and print related services from around the globe. No infrastructure, just pure innovation. They need great relationships with their print partners of course (the ones they haven't fed on ;-)

Jen

 

By Michael Jorgensen on Aug 20, 2014

Very powerful and insightful article. One of the best I've read on this service. In the days of long ago, print sales trainers used to teach their students to get their respective customers to buy 5000 rather than 1000 units. As we were told, larger order quantities helped spread the set-up costs resulting in a much lower unit cost. We get more sales revenue, and the customer got more of what they needed at a lower unit price. What I actually learned later was that customers had figured out how much of their printed material was being discarded due to obsolescence - up to 65% in many instances. Like it or not, third-party document management services are attempting to address this problem, marginalizing the role of the manufacturer.

 

By Jennifer Matt on Aug 20, 2014

Thanks for your feedback Michael,

What I love about capitalism (not to sound too Ayn Rand like) is that it is extremely effective at finding inefficiencies and then monetizing the solutions. The strategies you described (sell people more than they need) and the fact that printing continues to be far too hard to buy effectively - created the whole market for brokers/distributors/print-management companies.

I heard a great one the other day, "we can't do e-commerce, our best customers are paying way more than the retail prices we would offer to be competitive." I guess the strategy there is to charge your best customers more than you would charge a stranger who wonders onto your website and see how long you can get away with it?

The market will find the inefficiencies... eventually.

Jen

 

By Mark Hahn on Aug 21, 2014

The lure of the Print Management (PM) concept for large corporations is not difficult to understand. The PM firms do not sell “printing”, they sell their “process as a solution.” They offer to cut costs, yes, but also they assume responsibility for the entire process of specifying, estimating, purchasing, storing and distributing printed matter. In addition, the PM firm can promise access to many specialized vendors that produce other print-related products, such as retail displays, packaging and fulfillment. The corporate client saves the cost and trouble required to understand all the little niches that make up the printing industry. In effect, the PM firm is a “super broker” that promises to lower the total cost of ownership. WorkflowOne calls this their “battle-tested” approach. No kidding – this is a war for control of your client’s print spend.

Excerpt from article in American Printer, April 2014

 

By Ngoni nehumba on Aug 24, 2014

I am glad to have found a blog that is very insightful when it comes to the printing industry.

Thanks for the post Jen. I do agree with Vincent though that printing companies are vulnerable to themselves and not brokers. Us brokers only have an upper hand as we provide clients with better options in terms of diversity, as compared with the overhead costs a printing company has to bear to provide a wide variety of products.

On the other hand,I don't know about you guys,but here in South Africa, people/businesses are not very familiar with brokers, so it is a bit of a challenge trying to establish credibility and hooking clients,unlike in first world countries where it is not just concept but actually trending.

Anyway, I hope you guys may stop by my blog some time:www.flavouritemarketing.com

 

By NG Ptl on Jul 08, 2015

Very Interesting Blog showing need of Common Platform for end client, reseller and printer service provider (PSP) coordinate their business activities & processes to minimize cost and maximize their effectiveness in market place.

OnPrintShop Trade Printer Solution (TPS) is also designed on same lines, a very simple solution evolved over 5 years, it is an integrated print order management channel, specially designed for SME/Trade Printers to offer reseller online w2p stores. Objective is to empower your reseller with a platform & all data to expand their market reach

You can check in detail at -
http://www.onprintshop.com/trade-printer-solution.html

 

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