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Hugging the curves

Nov 1, 1996 12:00 AM


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Printers must develop specialized "assets" and sell in up-cycle markets

Change! It's usually so gradual that it goes unnoticed.

Take the way printing is used. At the beginning of the 20th century, ours was the only medium for the mass storage, reproduction and distribution of information. Motion pictures, electronic recording media, broadcasting and, ultimately, the computer eroded our 500-year exclusivity, but it took these new media more than 80 years to start to displace print.

Yes, it is in danger of happening. Print will be the #2 choice among American information consumers. For many managers and marketers, the task today is to rethink print as either supporting new media or revamping print as a "master medium" for improved information delivery in under-served or mature markets.

The first option is, of course, to aggressively seize opportunities on the digital platform. It is possible to do this with hybrid imaging products such as CD-ROMS, Internet pages and all types of scannable print. The investment can be risky as the payback periods are long relative to displacements, which are frequent.

The CD may have a 30-year life as a product, but it is more than halfway through its market life cycle already. Home page creation on the Web has noticeably dropped during the past few months.

The remaining option is to do better at what we do best. The capital and experience are in place, and the markets both know and trust our medium. The "investment" is cognitive: the knowledge of relevant product-use cycles and what precisely influences the market run lengths. There are four principal print use categories: advertising, entertainment, utility and education.

The cycles for all four have risen over the past quarter century, but when the data are adjusted for inflation, a completely different set of curves emerges. Education is shrinking dramatically while entertainment is increasing comfortably. For a book manufacturer, the strategy must be to shift selling and production resources away from textbooks and workbooks to customers and products in the booming leisure-time category.

A prudent planner also looks at the intervals between various cycles to anticipate future trends.

Advertising and utility printing changed slopes in both early 1981 and 1991 after the only two recent declines in ad spending and retail sales. In each case, printing slumped the following year, lagging behind the overall economy by 14 to 22 months.

Pundits may notice that both events occurred around Presidential elections, which influence consumption and business decision making. That can affect what and how much gets printed.

However, our industry can't blame the economy for its forfeiture of media dominance in the U.S. In general, salespeople ignore structural changes in GDP growth. As a result, printers have sometimes been left out of the action.

The most profound example is healthcare - the biggest buyer of printing and the least served printers. When was the last time a sales rep called on hospitals for their work?

Indeed, if we judge demand for printing based on areas in which salespeople congregate, we might be missing fully one-third of the U.S. economy, including sectors with the most spectacular growth. Printers, instead, typically saturate the most obvious markets for short-run gain, a practice analogous to overhunting or failing to rotate crops.

Retailing is one flat sector that has been overwhelmed by web printers. Price cutting of freestanding inserts, coupons and shoppers has reduced the perceived value of these products among both advertisers and consumers. However, Sullivan Graphics has had the wisdom to reinvent retail print by changing the format and distribution means. Others are systematizing the distribution and redemption of inserts and coupons as declines in both newspaper circulation and supermarket sales dictate new alternatives.

While such actions prolong and add profitability to a medium in a traditional market, perhaps a better course for the long run would be to introduce products in an entirely new, high-growth category. This is the "master medium" approach in which printing is almost incidental, but the formats, finishing and distribution expertise are critical and, possibly, proprietary.

Observe the positive effect on overall profitability when we move up either side of the information-stage curve in Figure II on page 47.

The bottom-line means moving toward the top of ownership and/or fulfillment. Reproduction is, sad to say, a commodity except when it is marketed as part of a system that, ultimately, is exclusive. Intellectual property, such as a patented, trademarked or copyrighted process, brand name, graphic or work, earns at least a multiple of what the printing can. Often the profits from the asset actually exceed the revenues since the asset may be amortized, sheltered, licensed in other markets and eventually sold.

In addition, a known process in one industry may be patented as novel in another. Mercury Printing's double-blind patient forms are exclusive in the pharmaceutical sector, but for those in sweepstakes, it is nothing more than a scratch-off!

Thus magic motion, web lenticulars and musclewires count among an ever enlarging array of print enhancements that differentiate and add value while removing less inspired competition.

Riding high in tangible, proven print media is certainly more desirable than surfing in the virtual non-reality of unproven media. Cycling up with the best market categories only makes our great medium even greater and profit margins even more profitable.

Figure 1

Cycles Rising; Cycles Falling

Current up-products

* Plastic/trading cards

* Bind-in magazine inserts

* Point-of-sale materials

* Packaging and labels

* Security/anti-counterfeiting devices

* Miniature and odd-size books

* Posters and large graphics

* Color copies/short-run color-sheets

Soon-to-be down-products

* Business forms

* Software packaging

* Schoolbooks/blankbooks

* Stationery

* Financial printing

* CD-ROMs

* Lottery and sweeptakes tickets

* Non-heatset web products

Current up-markets

* Healthcare

* Home improvements

* Motor vehicles

* Beverages

* Book publishing

* Telecommunication

* Medical products/pharmaceuticals

* Leisure activities

Soon-to-be down-markets

* Computer software

* Non-discount retailing

* Commercial banking

* Insurance

* Tobacco

* Professional practices

Source: AMFC Consulting

Vincent Mallardi, CMC, contributing editor and a leading market consultant, seminar leader and writer