Gareth Ward says that printers should reclaim the profit being sucked out by third parties.
Once the pandemic is over, there is sure to be a huge focus on the success of certain companies as part of the inquest into Covid, and not just those that seem to have benefitted from PPE supply contracts.
Already it is clear that Netflix, that Zoom and Amazon, DHL and the like, have enjoyed extraordinary growth, winning while their street bound rivals have been frozen out and prevented from trading. Should these businesses pay a windfall tax on the unplanned for revenue achieved?
Because for these internet giants and other disruptors like Uber, business-as-not-normal is part of their strategy. Professor Michael Wade from the IMD business school, describes them and their actions as Value Vampires. They enter a market not only with the aim of disrupting it, but of sucking every last drop of profit from that space. Ultimately no other business can survive and having achieved a monopoly position they can begin to earn the real profits.
Their proposition is built on efficiency, on software, on big data, on servers, not on shops with staff and storerooms out the back, not on cars because those driving for Uber pay for those. Expanding a business in these conditions is relatively simple; shrinking it again equally so.
Fortunately while Amazon can sell and print books, while it can sell and print stationery items and sell and print T-shirts and other apparel, it cannot become the Value Vampire in the printing industry. It would need to invest in heavy machinery, and its business model does not support this approach. And if Amazon is not inclined to drain the profit pool in print, nobody else will come into the market in the near future.
This does not mean there can be no Value Vampires in print. Just that there will be no dominant Count. Online purchasing of print is going to soar, based on making the specifying of print via a web page easier than ever, on transparent prices and because people are becoming accustomed to buying all manner of products online, a trend that has accelerated in recent months.
But even Cimpress, by far the largest of these businesses, will not invest in enough machinery to achieve worldwide market domination across the printing industry, to suck the market dry. The online world has enough head room for even those late to the party, though it gets more expensive to achieve brand recognition for the latecomers.
Richard Pepper, founder of Funky Pigeon, reckons that the greetings card market in the UK is worth £1.6 billion and that currently only 10% of that is bought online. He also reckons that establishing a brand that consumers recognise is expensive, and Funky Pigeon commits 17% of revenues to marketing – something absolutely unheard of in the printing industry.
Online, however, is not the printing industry. Those buying the millions of leaflets, hundreds of thousands of books, gazillions of business cards from an online printer, do not think they are buying print and have little if any interest in the process. This limited range of products is already big business, let alone when point of sale, promotional items, cartons, pouches, training manuals, calendars, T-shirts and more are included. These are the products that individuals and small businesses want and need and they are going online to find them. Online print is only at the start of its journey.
Not everything, not even greetings cards, can be standardised in this way. There will be room for commercial printers to handle the jobs that go beyond the online templates, that are using more tailored materials, additional inks and finishing processes, provided they understand where their strengths lie and what they can offer.
But if some commercial printers are immune, for now at least, from the online printers, they are not immune to attack by Value Vampires. In print these are the companies that have extracted profit before the job reaches the press and without delivering any real value to either customer or supplier. The most recognisable of these, the Christopher Lee of the genre, is the print management company.
When they first swooped in, the message to printers was enticing. Working with us you can fill that spare machine capacity that you have, and because your costs have been covered by your normal work, this can be taken at marginal cost because margins in print are good. It was an enticing offer and many, many printers agreed. But for many it has proved a bargain with the devil and they became hooked on the volumes from print management, so what was marginal but added to profits was now draining those profits.
The message to brands and corporates from the print management companies was even starker: We will save you 30% of your print spend. In the early days this was simple, a matter of consolidating work and directing jobs to the most efficient producer. Subsequent deals with a similar promise squeezed the money available to printers even further, but there was still no shortage of takers. There was an echo of the anti-heroin advertising campaign of the 1980s where the addict confidently asserts ‘I can handle it’. Printers were hooked.
Now the promise of reducing a client’s marketing spend means eliminating print altogether and convincing the corporate that digital – whether online advertising, website banners or SMS – is better value than print. Facebook and social media have become the channels of choice and ‘likes’ the currency that proves the effectiveness of the message. Only it doesn’t. And now perhaps, one of the beneficiaries of the pandemic could be print. All the positive attributes that we have also known about print – it is tangible, it is always on, it is browsable, it creates emotions, it is largely distraction-free – are being rediscovered by a new generation.
Only print risks remaining a victim of this value chain. A corporate marketing department has a budget to launch a new product or service and wants to use print. It has a choice of three or four marketing agencies it works with and trusts. In turn each of these has a number of designers they work with and the designers have relationships with a half a dozen printers. At each level the intermediary takes its profit and slice of the budget so that the printer, who physically creates something on expensive machinery instead of an equally expensive designer leather chair, is left with a few crumbs.
Looking out from the 15th floor corner office, the brand director who instigated the campaign may see perhaps 50 printers in the distance any of whom may end up printing his job, but from that range none of them stands out. Like the peasants around a castle in Transylvania, printers are going to suffer in the face of these vampires.
What then can printers do to defeat the Value Vampire? First printers must make themselves visible so that they are not just another face in the crowd of almost identical businesses. And the lowest price is not a strategy to do this, even if you are the most efficient.
Offering the best quality is not the answer either: best quality is subjective, most consistent quality is objective. Use that. In any case the latest presses from Xerox will download settings from the cloud for any paper and any job. As a result any printers running the same job on these presses will print identically. The same will be true for Landa and a growing number of print technology providers. Only when you venture into extended colour gamuts with additional violets, greens or oranges can printers achieve a discernible difference. Even the idea that this is extra value print is possible may help achieve the sought for differentiation.
Or it could be the range of services under one roof, say large format printing where output on the flatbed inkjet machine is perfectly colour matched to output on a litho press. It might be an easy to understand and use web to print platform. Or any number of things that matter to the buyer more than just price. That the print business is in its fourth generation of family ownership holds little water for a 21st century buyer of print.
The other action to avoid the Value Vampire is a move to control more of that value. Famously St Ives did precisely this, migrating into print management and then into research, websites, campaign management et al for retailers and brands. It realised how much, or how little, margin there was in its print division. And sold it.
That is an extreme example, but moving upstream into design and marketing, either through organic or acquisitive expansion, will achieve a bigger slice of the margin pie. Pureprint’s action in acquiring a photography business is an example and there are others. Not everything a printer produces has to be on paper any longer. At one time print was the communications business. Today print is part of that much larger communications business and there is no rule that says a print business cannot become a communications business, supplying expertise across a number of channels and delivery methods.
Thinking like this immediately puts the printer in the shoes of his customer, looking at the problem as more of a holistic challenge, not a decision to wallop the poor printer yet again. And thinking like this is garlic to the Value Vampires. After all, anything might happen if printers rediscover the power they have. And who wants that?
Seek that silver bullet for the Value Vampire
Gareth Ward says that printers should reclaim the profit being sucked out by third parties.
Once the pandemic is over, there is sure to be a huge focus on the success of certain companies as part of the inquest into Covid, and not just those that seem to have benefitted from PPE supply contracts.
Already it is clear that Netflix, that Zoom and Amazon, DHL and the like, have enjoyed extraordinary growth, winning while their street bound rivals have been frozen out and prevented from trading. Should these businesses pay a windfall tax on the unplanned for revenue achieved?
Because for these internet giants and other disruptors like Uber, business-as-not-normal is part of their strategy. Professor Michael Wade from the IMD business school, describes them and their actions as Value Vampires. They enter a market not only with the aim of disrupting it, but of sucking every last drop of profit from that space. Ultimately no other business can survive and having achieved a monopoly position they can begin to earn the real profits.
Their proposition is built on efficiency, on software, on big data, on servers, not on shops with staff and storerooms out the back, not on cars because those driving for Uber pay for those. Expanding a business in these conditions is relatively simple; shrinking it again equally so.
Fortunately while Amazon can sell and print books, while it can sell and print stationery items and sell and print T-shirts and other apparel, it cannot become the Value Vampire in the printing industry. It would need to invest in heavy machinery, and its business model does not support this approach. And if Amazon is not inclined to drain the profit pool in print, nobody else will come into the market in the near future.
This does not mean there can be no Value Vampires in print. Just that there will be no dominant Count. Online purchasing of print is going to soar, based on making the specifying of print via a web page easier than ever, on transparent prices and because people are becoming accustomed to buying all manner of products online, a trend that has accelerated in recent months.
But even Cimpress, by far the largest of these businesses, will not invest in enough machinery to achieve worldwide market domination across the printing industry, to suck the market dry. The online world has enough head room for even those late to the party, though it gets more expensive to achieve brand recognition for the latecomers.
Richard Pepper, founder of Funky Pigeon, reckons that the greetings card market in the UK is worth £1.6 billion and that currently only 10% of that is bought online. He also reckons that establishing a brand that consumers recognise is expensive, and Funky Pigeon commits 17% of revenues to marketing – something absolutely unheard of in the printing industry.
Online, however, is not the printing industry. Those buying the millions of leaflets, hundreds of thousands of books, gazillions of business cards from an online printer, do not think they are buying print and have little if any interest in the process. This limited range of products is already big business, let alone when point of sale, promotional items, cartons, pouches, training manuals, calendars, T-shirts and more are included. These are the products that individuals and small businesses want and need and they are going online to find them. Online print is only at the start of its journey.
Not everything, not even greetings cards, can be standardised in this way. There will be room for commercial printers to handle the jobs that go beyond the online templates, that are using more tailored materials, additional inks and finishing processes, provided they understand where their strengths lie and what they can offer.
But if some commercial printers are immune, for now at least, from the online printers, they are not immune to attack by Value Vampires. In print these are the companies that have extracted profit before the job reaches the press and without delivering any real value to either customer or supplier. The most recognisable of these, the Christopher Lee of the genre, is the print management company.
When they first swooped in, the message to printers was enticing. Working with us you can fill that spare machine capacity that you have, and because your costs have been covered by your normal work, this can be taken at marginal cost because margins in print are good. It was an enticing offer and many, many printers agreed. But for many it has proved a bargain with the devil and they became hooked on the volumes from print management, so what was marginal but added to profits was now draining those profits.
The message to brands and corporates from the print management companies was even starker: We will save you 30% of your print spend. In the early days this was simple, a matter of consolidating work and directing jobs to the most efficient producer. Subsequent deals with a similar promise squeezed the money available to printers even further, but there was still no shortage of takers. There was an echo of the anti-heroin advertising campaign of the 1980s where the addict confidently asserts ‘I can handle it’. Printers were hooked.
Now the promise of reducing a client’s marketing spend means eliminating print altogether and convincing the corporate that digital – whether online advertising, website banners or SMS – is better value than print. Facebook and social media have become the channels of choice and ‘likes’ the currency that proves the effectiveness of the message. Only it doesn’t. And now perhaps, one of the beneficiaries of the pandemic could be print. All the positive attributes that we have also known about print – it is tangible, it is always on, it is browsable, it creates emotions, it is largely distraction-free – are being rediscovered by a new generation.
Only print risks remaining a victim of this value chain. A corporate marketing department has a budget to launch a new product or service and wants to use print. It has a choice of three or four marketing agencies it works with and trusts. In turn each of these has a number of designers they work with and the designers have relationships with a half a dozen printers. At each level the intermediary takes its profit and slice of the budget so that the printer, who physically creates something on expensive machinery instead of an equally expensive designer leather chair, is left with a few crumbs.
Looking out from the 15th floor corner office, the brand director who instigated the campaign may see perhaps 50 printers in the distance any of whom may end up printing his job, but from that range none of them stands out. Like the peasants around a castle in Transylvania, printers are going to suffer in the face of these vampires.
What then can printers do to defeat the Value Vampire? First printers must make themselves visible so that they are not just another face in the crowd of almost identical businesses. And the lowest price is not a strategy to do this, even if you are the most efficient.
Offering the best quality is not the answer either: best quality is subjective, most consistent quality is objective. Use that. In any case the latest presses from Xerox will download settings from the cloud for any paper and any job. As a result any printers running the same job on these presses will print identically. The same will be true for Landa and a growing number of print technology providers. Only when you venture into extended colour gamuts with additional violets, greens or oranges can printers achieve a discernible difference. Even the idea that this is extra value print is possible may help achieve the sought for differentiation.
Or it could be the range of services under one roof, say large format printing where output on the flatbed inkjet machine is perfectly colour matched to output on a litho press. It might be an easy to understand and use web to print platform. Or any number of things that matter to the buyer more than just price. That the print business is in its fourth generation of family ownership holds little water for a 21st century buyer of print.
The other action to avoid the Value Vampire is a move to control more of that value. Famously St Ives did precisely this, migrating into print management and then into research, websites, campaign management et al for retailers and brands. It realised how much, or how little, margin there was in its print division. And sold it.
That is an extreme example, but moving upstream into design and marketing, either through organic or acquisitive expansion, will achieve a bigger slice of the margin pie. Pureprint’s action in acquiring a photography business is an example and there are others. Not everything a printer produces has to be on paper any longer. At one time print was the communications business. Today print is part of that much larger communications business and there is no rule that says a print business cannot become a communications business, supplying expertise across a number of channels and delivery methods.
Thinking like this immediately puts the printer in the shoes of his customer, looking at the problem as more of a holistic challenge, not a decision to wallop the poor printer yet again. And thinking like this is garlic to the Value Vampires. After all, anything might happen if printers rediscover the power they have. And who wants that?
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