In line with the policy set at Heidelberg’s headquarters (now moved to Wiesloch), there is a drive for revenue from consumables and maintenance, what is described as Service, Support and Spares, the Three Ss for short.
And it is working. The corporate target is to have 50% of revenues from equipment sales, 50% from the areas that provide crucial recurring revenue. This will even out the cyclical dips in new equipment sales and make the figures less like a roller-coaster, the pre Drupa lull and post Drupa climb, for example.
Currently the UK is at 60:40 in favour of equipment sales (which includes finishing and digital presses as well as sheetfed litho), so is within sight of the target.
The change was almost inevitable. The UK press market has plunged to 25% of 2007’s record levels, the deepest correction of any market in the world, says Heanue. “The B3 market has disappeared, printers have either gone to digital or to B2 or even B1,” he says. “The B2 market is also down, but B1 is approximately the same: there has been a move up the food chain.”
Magazine printers are continuing to buy B1 machines and despite the predictions when iPads arrived, magazine paginations are reported to be rising “and magazine printers are buying presses this year”, he adds. B1 is also a preferred format for packaging printing, which is more resilient in recession than commercial printing.
Heanue points to three additional factors behind the ‘correction’. First comes the impact of recession, second is the reduction in printers through consolidation or closure and third is the increase in productivity which has triggered the trend to replace two old presses with one new machine. It adds up to a smaller market for new presses across the globe.
It means too that there is less space for businesses that are run almost on a wing and a prayer
“The customers that remain and which have not reinvested are going to be suffering because they cannot be efficient,” he explains. “Those that are successful are now more professional in terms of management, much more switched on about measuring return on investment and key performance indicators than they were in 2006,” he says.
Given this outlook Heidelberg has had to find other routes for growth. The strategy now is much more to stay close to customers, recognising what Heidelberg can and cannot do within its own resources.
And it is about balancing revenues from equipment with those recurring revenues from consumables and service. “In 2012, we sat down and looked at how we were going to grow,” says Heanue. But it has not been straightforward.
Customers have always tended to be reluctant to invest in service contracts, and with the emergence of freelance Heidelberg engineers, often sourcing spare parts from third party organisations, selling Heidelberg’s service contacts would not get easier. Yet in four years UK revenue from service has risen up sharply.
The secret has been tying service costs to consumable sales. Heanue explains that revenue from consumables, whether ink, plates, chemistry, blankets and so on, includes the cost of service. At the same time Heidelberg will create bespoke packages for its customers rather than push companies into fixed packages that are unsuitable.
The advantage to the bundled approach for the printer is that what is paid is tied to business levels. If there is a quiet month, there is no pressure to cover a regular maintenance payment, if business is brisk (perhaps putting more strain on assets) the cost of the service call is being covered.
Heanue points out that there are other benefits to working with the press supplier rather than a freelance engineer. The initial call to Brentford is taken by an engineer able to provide instant advice; remote diagnostics technology can identify a problem and ensure that the engineer is equipped with the right parts to solve the problem on a first visit. The printer should be up and running faster, says Heanue.
Then there is the trump card. No one other than Heidelberg can look after its Inpress Control technology. “We have more engineers in the UK than other press suppliers have staff combined,” he says, “because we have most presses.”
And once a company is on board with the ‘sales for service’ programme, it is difficult to step away for as soon as the printer switches consumables to a new supplier, its service cover ceases.
The drive to increase recurring revenues has also encouraged Heidelberg UK back into used press sales. A used Heidelberg will generate as much service revenue and consumables sales as a new machine, and Heanue quips: “The biggest competition to the sale of a new Heidelberg, is a used Heidelberg!”
The sale of that press is now a more sophisticated business, reflecting the greater business acumen of the printers that remain after the ‘great consolidation’. “Jim Todd and his sales team really do try to understand the customer and what sort of product is required, the right press for their needs. We examine the range of jobs they have and consequently will not push an XL machine if an SX or CX is more suitable. Now we have LE new generation UV we can offer that as well.”
It is a tailored approach. “We explain the upsides and the down sides before recommending that this is the press for them,” he adds. “It’s a very consultative approach. For example, with UV it is about understanding the printer’s business, balancing the extra cost of inks against the savings that can be made on work and turn jobs or through getting rid of the coater. When the price of the inks come down, more customers will be looking at that option.”
Heidelberg’s LE system uses a tuned mercury vapour lamp while LED is coming, probably for Drupa with a technology that switches on only when needed, it will not be in use on smaller format sheets, turning off at the edges and across the cylinder gaps.
The technology is popular in Japan and Switzerland for Heidelberg, and while there has been interest in the UK, it has yet to result in sales. The LE technology can be retrofitted to CD generation presses, not yet to the XL generation.
There are suitable inks in the Saphira consumables portfolio, says Heanue, continuing the sweep of the policy. This too becomes part of the consultative approach, along with pressroom audits to check that equipment is laid out in the most effective way.
Performance Plus is a new package imported from the US which seeks to ensure that inks, blankets, founts and press set up are optimised to ensure that the machine will run at its rated top speed.
Analyse Point will check that this remains in place over the course of time and will identify whether any slippage in performance is the fault of the consumables, press set up or that operators need training.
There is also an expanding digital press business thanks to partnership with Ricoh. The Linoprint CP and Linoprint CV will be the centrepiece of an open house in June. These are the Heidelberg versions of Ricoh’s C9100 and C7100 and which will be launched with a Heidelberg digital front end including Heidelberg colour management and interface to its Prinect production workflow.
The open house will also feature a web to print workflow that is provided by ROI360, Heidelberg UK’s preferred partner in this space. Heanue says: “We have moved away from trying to supply everything ourselves in order to focus on what we are good at and our salesmen are good at selling equipment and service; they are not good at selling web to print.
“Likewise we decided we did not want to use our own Heidelberg MIS software where we were working with Tharstern. We will continue to work with them in the UK.”
Digital amounts to 4% of Heidelberg’s UK business “and is growing”. The UK took to the more powerful Ricoh C901 faster than to the C751 which was more popular with the other sales and service units.
“Customers are using them for proofing, for short runs. Digital is now part of the offering that every printer has. It raises the question Will offset disappear? That used to be the perception. Now it’s what is the best output device for the job in hand, the most profitable way to produce a job. We think the cut off point for digital is 250 copies, perhaps 500.
“A customer told us that he was asked to print digitally ‘because he wanted the job quickly and the perception was that digital is associated with speed’, but offset has changed significantly and can compete on speed.”
The user base has also changed, becoming like Heidelberg, more customer focused and able to offer a combination of technologies and a consultative approach. In short as printers have changed to become more professional, Heidelberg is changing with them.
"The B2 market is also down but B1 is approximately the same. There has been a move up the food chain."
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Magazine printers are continuing to buy B1 machines and despite the predictions when iPads arrived, magazine paginations are reported to be rising “and magazine printers are buying presses this year”, says Gerard Heanue.
B1 is also a preferred format for packaging printing, which is more resilient in recession than commercial printing.
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These are the Heidelberg versions of Ricoh’s C9100 and C7100 and which will be launched with a Heidelberg digital front end including Heidelberg colour management and interface to its Prinect production workflow.
Story 3 of 4
The sale of that press is now a more sophisticated business, reflecting the greater business acumen of the printers that remain after the ‘great consolidation’. “Jim Todd and his sales team really do try to understand the customer and what sort of product is required, the right press for their needs. We examine the range of jobs they have and consequently will not push an XL machine if an SX or CX is more suitable. Now we have LE new generation UV we can offer that as well,” says Gerard Heanue.
Story 4 of 4
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