American Printer's mission is to be the most reliable and authoritative source of information on integrating tomorrow's technology with today's management.
Sep 1, 2004 12:00 AM
I'm a huge Dick Gorelick fan. I often quote his AMERICAN PRINTER columns and never miss his newsletter or an opportunity to meet with him.
Not only is Dick one of the funniest people I know, he's also a font of practical advice. He's spent more than 40 years in the printing and publishing business and has successfully founded four companies. Dick is the president of Graphic Arts Sales Foundation (GASF), a West Chester, PA-based graphic arts training organization. He's also president and founder of Gorelick and Associates, Inc., a consulting and research firm working exclusively in the graphic-arts industry.
As we worked with Dick on this project, I found myself writing little margin notes such as “yes!” and “true!” You'll probably find yourself doing the same thing.
Dick writes that success results from “coordinated management of customers, supplies, staff, equipment and the graphic-arts community at large.” As you read “101 Ways to Increase Profitability” you will find valuable suggestions for achieving this coordination.
Katherine O'Brien, Editor
Thank you for taking a closer look at this special section.
You are about to read about the many ways in which small things can make big changes in your relationship with customers, suppliers, employees and, ultimately, your bottom line. AMERICAN PRINTER has compiled a treasure trove of ways to enhance your company's performance — ways that can be easily and cost-effectively implemented.
For printers wanting to enhance their profitability, the first step is to take a careful look at operational efficiency. To stay competitive, today's printing operations must become more and more streamlined. Efficiency can be gained by investing in the technology necessary to integrate and automate internal processes. The goal is not to buy what the guy down the street buys, but rather to make intelligent technology investments based on productivity improvements and competitive advantages. To not take advantage of the automated technologies is to ignore one of the best ways to create an efficient, cost-effective operation. And in this changing marketplace, no one survives for long without the most efficiently integrated processes possible.
In a highly competitive marketplace, honing management skills also is essential for long-term success. Understanding your customers' preferences, managing your operations more efficiently and perfecting a consultative approach to selling will ensure your company's growth and profitability.
Heidelberg is pleased to support this special 32-page look at how printers can sharpen their operations and build business profitability. Heidelberg is committed to the success of the printing industry and highly responsive to its needs and concerns. Today, more than ever, printers must invest time for forward thinking and planning. Such an investment of time and effort will ensure that they can take advantage of new technologies and stay ahead of the curve on industry issues and developments.
Heidelberg invites you to take a closer look at these “101 Ways to Increase Profitability.” By implementing these tips in your own ways, you can ensure sales success and operational efficiency. With that combination, plus a healthy bottom line, the entire graphic-arts industry will profit from change and grow its dynamic leadership role into the future.
There is a positive side to every business challenge. Turning lemons into lemonade is dependent upon one's inclination to avoid assigning blame and a willingness to accept — and understand — change as a permanent condition in this dynamic business environment.
There is no single, magic route to riches in the graphic-arts industry. That's because success is the product of coordinated management of customers, supplies, staff, equipment and the graphic-arts community at large. Equally as important, management of these elements needs to be accomplished under the umbrella of a strategy that is credibly differentiated from competition — something that is critical if a company is to cope with the impact of price competition.
Since not all companies are the same, it is highly unlikely that all 101 ways outlined here will be applicable to everyone. In many cases, printers may already be addressing these issues. No one way is likely to revolutionize a profitability statement, no matter how conscientiously it is adopted. However, improved performance is likely to result with the adoption of many of these ways, when they are used to support a differentiated strategy.
Action without purpose loses its potential. Implementing several ways in this article can contribute to the attainment of your organization's business objectives.
Dick Gorelick, President of Gorelick & Associates and the Graphic Arts Sales Foundation
Speed of invoicing has become an important point of differentiation in the graphic-arts industry. It is a particularly sensitive issue with designers, brokers, advertising agencies and other intermediaries that need an invoice from a print supplier in order to bill their clients. The speed with which they can retrieve their cash is directly related to the speed with which a supplier delivers an invoice.
Many print companies now produce a preliminary invoice that is faxed to the customer within 24 hours of job shipment. Any questions or discrepancies between printer and buyer can quickly be identified and resolved.
In this era of so-called “strategic alliances” and demands upon suppliers to provide a broad range of products and services, key suppliers play an increasingly important role in the success or failure of trade customs. In this business environment, suppliers need to be managed as conscientiously as employees and customers.
Suppliers can be a valuable source of information to both a printer's staff and clients. Speed, detail and accuracy of a supplier's invoicing can make a major contribution to your company's ability to satisfy customers.
Have you or a member of your staff been surprised during the past year by a change in the production capabilities of a supplier? What is your company's mechanism for keeping current with the capabilities and requirements of suppliers? Regular updating of supplier capabilities, combined with clear communication of your organization's needs and expectations, can result in a contribution to your bottom line.
There are no official trade customs for printing at this time. Each company is strongly encouraged to develop and publish its own Terms and Conditions of Sale for printing.
There are Trade Customs for Mailing and Trade Customs for Fulfillment available, both drafted by the Mailing and Fulfillment Services Assn. (MFSA). As printers increasingly handle post-bindery services, it is important that the printer and customer agree about issues such as payment of postage, confidentiality of lists and shrinkage of vendor-managed inventory. For copies of MFSA's trade customs, contact the association at (800) 333-6272, 1421 Prince St., Alexandria, VA 22314-2806.
Trade customs are not law. They are intended to represent customary industry business practices and may be used by a seller to represent the terms and conditions under which it conducts business.
Most graphic-arts companies can quantify only estimated manufacturing costs of a job and payment record of a customer. While it may be difficult or impossible to quantify other costs, it is important to consider them.
Issues to be considered include:
The above list is not complete. A company may not have adopted a full-blown activity-based costing program, but that shouldn't prevent adoption of informal consideration of non-manufacturing costs that can spell the difference between profit and loss.
Research on business-to-business communication indicates that frequency of customer contact is at least as important as the complexity of contact. Newsletters have become increasingly popular as a customer-communication vehicle. However, the effectiveness of a newsletter depends upon its frequency of publication, content and the distribution list.
Monthly publication is recommended. Less than quarterly publication loses much of its effectiveness, and content is a critical factor. Many businesspeople are inundated with newsletters. Clutter is a factor. The content has to be deserving of the reader's time.
When preparing articles for publication, avoid combining promotion and helpful information in the same publication. Promotion corrupts the credibility of the information. Effectiveness is maximized if separate newsletters or other communication vehicles are used.
An effective newsletter can enable a company to reach senior management of a buying organization. The distribution list should include both current and prospective customers.
A word of warning: Do not publish a newsletter unless there is a deep organizational commitment to continuous and timely publication. Failure to do so can create cynicism on the part of both staff members and customers.
We tend to remember, and more quickly react to, disappointments and negative experiences. That's unfortunate because it often results in failure to capitalize on opportunities to reinforce positive behavior by staff members, suppliers and customers. Recognizing and rewarding positive behavior can, over time, change the culture of an organization.
The sales, manufacturing and financial areas of a company most often interact when there is a question or a problem to be resolved. Requiring that salespeople, customer service reps, delivery personnel and others with direct company contact circulate all customer compliments as well as complaints creates a more balanced, if not positive, environment within a company.
Graphic-arts companies react decisively when customers' accounts are delinquent or when electronic files are prepared poorly. However, few companies formally thank customers with excellent payment records or those who prepare files correctly. The kindest comment a designer can make about a supplier is, “They work well with my files.”
Positive reinforcement also should occur up the supply chain. Recognize your suppliers for their services.
Every manager should consider dedicating 10 or 15 minutes a week to expressing appreciation to a staff member, customer or supplier. In time, that spirit becomes contagious.
Except for a rare emergency, no meeting should be held unless it is preceded by a written agenda to participants. That's true for sales meetings, business-planning sessions, and visits by customers and prospective customers. Surveys reveal a general belief that most meetings could stand improvement in terms of both planning and conduct. Without a formal agenda and effective facilitation, many meetings lose focus, drifting off course and devolving into a discussion not relevant to all attendees.
If this occurs, consider appointing a “gongkeeper,” an attendee empowered to cut off conversation that becomes irrelevant, personal and/or pertinent to only some of the meeting's attendees. The gongkeeper should be a staff member viewed as fair, reasonable and impartial by other attendees.
Meetings can be expensive considering the time spent by participants. It is prudent to take steps to make meetings as productive as possible. It can be done.
Job descriptions are important. They should be reviewed, and, if necessary, changed annually. They are an important element in performance evaluations, however, they are usually inadequate in helping an employee understand the full range of management's expectations and in defining authority.
This is especially important in the case of job descriptions for managers and supervisors. For instance, is an individual empowered to hire or terminate a subordinate? Is that individual only authorized to recommend a subordinate's change of status? Who is empowered to stop a job on press? Who may determine that specifications will not be estimated? Who determines whether or not a job will be accepted? What are performance expectations?
Consider a separate document explaining authority and performance expectations to breathe life into a job description.
It's rare to visit a company in which a receptionist stands up to extend a welcome. The fact that this is rarely done magnifies the positive impact of the few receptionists who stand to greet a visitor and project a sincere interest in forging a relationship with a specific account. Visitors don't forget this simple gesture.
Attendance at a training session, whether it's a half-day, one-day or one-week session, should never be viewed or treated as a solution. In fact, the more effective the training, the greater the level of frustration upon the attendee's return to day-to-day company activities. The attendee may be motivated to change current policies, procedures and attitudes but faces resistance by those wedded to traditional methods of conducting business.
The long-term value of skills training and organizational development is determined by congruent management activities and reinforcement between classroom training sessions. Third-party training does not achieve its objective if it is viewed by management as “a fix.”
Think twice about which staff members you select for a training investment. There's a tendency to focus on marginal performers in the hope or anticipation they can be transformed into stars. Think about your organization's investment. What will deliver the most bang for the buck? Is it a 100 percent performance increase from a marginal performer or a 25 percent improvement in performance of an outstanding performer? An investment in staff competence may produce superior results if the results from the best performers are more productive than improved performance from marginal performers.
It's almost a cliché that the perceptions of many visitors to a printing facility are more heavily influenced by the condition of the restrooms than by the equipment or products. A review of checklists of several Fortune 500 companies reveals some other factors potential customers consider important in evaluating a prospective print supplier:
It is safe to conclude that a prospective customer wouldn't be visiting a plant unless they were already convinced of the competence to put ink on paper. The visit usually involves checking out a company's ability to manage and control the production process.
Management consultants extol the virtues of conducting an extensive employee survey every year or two. On paper, it's a good idea. After all, improvement is difficult unless preceded by an understanding of the issues that need to be addressed. However, senior management should consider some factors before conducting an employee survey.
Having said this, employee surveys can be a valuable management tool, especially after two or more have been conducted a year or two apart. Management then has the information to track changes in attitudes and perceptions.
Every company has a different culture, status and objectives. Therefore, there is no universal response to what percentage of a company's sales should be spent on advertising and promotion. The answer should be based on the company's differentiated message and the intended audience.
There are three possible objectives of self-promotion:
As the nature of promotion progresses along the awareness-to-loyalty spectrum, the promotion should become less generic and more customized. Beware of the “spray and pray” promotion tactic. Promotion seen by the marketplace as indiscriminate may be counter-productive, creating a negative impression among customers and prospective customers seeking tailored, if not personalized, products and services.
The industry appreciates the need for a company to develop a differentiated strategy/mission/direction. The outcome might be a credible, meaningful reason that one or more companies should do business with your organization. It also might be your USP — Unique Selling Proposition.
It is ironic that the need to formulate and implement a strategy based on competitive differentiation is caused by technology. Many early adopters of technology use technology as a differentiator. At best, that's a short-term solution. Why? If effective new technology becomes more affordable, it becomes more widely available. Because it is widely available, it loses credibility as a competitive differentiator.
Competitive differentiation that is effective for several years is not product-based or technology-based. It provides a reason to buy from your company — a unique value perceived by the customer. It's relatively simple to be different. That may reflect awareness of a company or a product. However, that does not translate into one or more reasons that a buying organization should choose your company from among the many others. There's a major difference between different and differentiated. Confuse the terms at your own peril.
Advice to interviewers could fill several hundred pages. Limited by space, we suggest that you be wary of an applicant who fondly speaks about his/her past and volunteers little discussion, let alone optimism, about the future. This type of applicant is unlikely to have researched your company and verbally and substantively falls back upon “how we did it at my previous job.”
Age is not necessarily the determinant of this attitude. Some applicants look forward to retirement at 40. On the other hand, some applicants in their 60s are positive, optimistic and sincerely interested in the future of a prospective employer.
Operations should reflect consistency and routine and be governed by written programs and procedures. It's difficult to disagree with this paradigm — in most cases. However, think about your three or five highest-volume and most profitable customers. It's a safe bet that industry paradigms and your company's own implied rules and regulations have been violated in order to acquire or retain these accounts.
In the current print market, it is doing the difficult and the extraordinary that elevates perceived value to customers. Many print companies can successfully perform the routine. Providing differentiated value to customers frequently involves the will, not only the equipment, to satisfy special customer needs. Listen to, and even assiduously search out, those special needs. Seizing opportunities in a commoditized business environment may mean walking into the unknown, providing services that may be new and different to your organization.
It is axiomatic that the most mistakes are made by the most profitable companies. Why? Because profitable companies proactively reach out to seize special opportunities.
A common management mistake is the assumption that all staff members understand the economics beyond the dictum “buy low, sell high.” Many surveys indicate that some employees believe graphic-arts companies earn pre-tax profit of 25 percent or more. Having an open-book policy under which management shares operating results with employees does not necessarily ensure that employees understand the information shared with them.
Consider group meetings conducted by the company's CPA, at which staff members are educated in the basics of finance. It need not be a boring, academic session. The impact of spoilage, use of old sheets for press makereadies and delayed billing can be discussed, making the sessions relevant to everyone.
In companies offering distribution services, sales representatives need to understand the differences between profit and cash flow, the cost of floor space to customers, the cost of excess inventory and the financial benefits that may accrue to customers if the print company is to manage post-press functions. Don't assume that every staff member can read a financial statement.
When there is discussion of a disaster striking a business, thoughts of a flood, fire or hurricane come to mind. However, customers, suppliers and all other stakeholders may also be adversely affected by the death of an owner, the unexpected loss of one or more key customers or some other unanticipated change in the status of the company. The need for a well-conceived disaster plan has become more important with the advent of sole-source relationships in which a buying organization puts most of its eggs in one basket. In that circumstance, the buying organization has elevated anxiety and welcomes a disaster plan, whether or not it has requested one.
An offer of a disaster plan may be an important gesture. It is a tangible demonstration of empathy for the risk and commitment taken by a buying organization in allocating all or most of its print to a graphic-arts company. Most buying organizations are satisfied with an arrangement with an out-of-the-area print company to honor the workload, schedules and prices in the original agreement. The customer is provided with the name of that back-up supplier. The back-up supplier, of course, agrees not to compete for that customer's work.
Beware of graphic-arts industry statistics, regardless of the fine credentials of the authors or researchers. Percentages are fine, but you should always determine the number of respondents before putting credence in the results. Be skeptical of research reports that fail to publish the phrasing of questions.
For example, reports signaling the popularity of short-run variable color printing are projections of reports about purchases of four-color variable presses. However, subsequent research revealed that the preponderance of these presses spend the majority of time printing proofs and regular short-run jobs. A report extolling the stampede to buy waterless presses failed to note that it considered all electrostatic copiers to be waterless.
Robert Coen, vice president of Universal McCann, an Interpublic Company (New York City), has for years published forecasts about spending on various media by national advertisers. Direct mail, magazines, broadcast and other media are listed, along with projected expenditures for each communication vehicle. Coen's numbers are reprinted throughout the industry, but the statistics weren't all designed for use by the graphic-arts industry. Decision-makers should use all the information at their disposal before making investment and organization decisions. Recognize that not all reports are created equal.
Discussion of employee incentives generally falls into three categories: cash, travel and merchandise. When asked their preference, employees usually say they prefer cash. However, research indicates that cash incentives are considered to be part of regular income. Failure to earn a cash incentive is more memorable and grievous than the satisfaction of earning a cash incentive through superior performance. Where appropriate, consideration should be given to presenting the award via a mailing to the home so other members of the household can share in the recognition. Ideally, the award should involve participation by the employee and at least one other person. Travel and merchandise most often meet these criteria.
We're entering the time of year in which a decision needs to be made regarding holiday gifts and communication with customers and important suppliers. Consider the recipient's policies about acceptance of gifts, religion, costs, etc.
Consider sending Thanksgiving rather than Christmas cards. The theme of bounty is secular and appropriate for business, and a Thanksgiving card is more memorable. It won't be lost in the clutter of Christmas cards.
It might be worthwhile to consider a contribution to a worthy cause in the name of selected customers and suppliers. The cause might be a hospital or philanthropic organization. The recipients of your firm's gift are usually willing to send acknowledgement cards to the individuals or firms in whose name the donation has been made. This is a gesture that is universally appreciated and usually non-controversial.
Some staff members welcome the opportunity to work overtime. In fact, some staff may consider lack of overtime to be a de facto reduction in compensation.
From the employer's point of view, the issue of plant overtime has assumed increased importance in recent years. Due to the attrition in the volume of “information printing” — price lists, parts lists, schedules, manuals and directories gravitating away from hard copy and toward the Internet — demand for print has become more seasonal. Peaks and valleys of print demand are falling out of equilibrium.
Print companies are faced with a dilemma: staff to exploit the peaks of demand, or organize to break even during the low points of demand. This is not an academic decision.
To many companies, it's a life-or-death management decision. The difference in the median graphic-arts company's sales between the best and the worst month is a factor of 2½ times — and heading toward a factor of three.
Let's lay aside this macro trend for a moment. Many companies faced with peaks of production are faced with deciding how much overtime is too much. Not knowing when the workload may decline, there's a natural inclination to avoid permanent decisions to add staff. In some companies, plant personnel have been asked to work overtime hours that are patently unreasonable. When that occurs, public recognition should be extended to those staff members. The recognition should also be extended to the staff members' families.
The industry devotes more effort to managing customers than it does to managing suppliers and staff members. Customer Relationship Management (CRM) has been the fad du jour for the past couple of years, but few companies invest in a skills inventory of employees or formally perform an annual update of suppliers' capabilities.
That's curious because research indicates employees tend to treat customers in much the same manner in which they themselves are treated. Millions of dollars are spent on customer loyalty and frequency programs. The same is true of CRM software. However, research also indicates that 40 percent to 50 percent of employees at most companies do not believe their employers have earned their loyalty.
It is interesting to note that Frederick Reichheld, author of the best-selling books “The Loyalty Effect” and “Loyalty Rules,” notes that 70 percent to 80 percent of buying organizations state that some suppliers have earned their loyalty. A recent customer survey conducted on behalf of a midsize general commercial printer by Gorelick and Associates revealed a loyal, admiring account base that viewed the printer as largely differentiated because of its culture and treatment of employees. Several of the customer-respondents wrote, “I wish I worked for your company.”
Attendance at seminars can be valuable to attendees from your company. However, it is often possible to get more for your money.
Research suggests that attendees' rate of retention and implementation is greatly enhanced if two or more individuals from an organization attend the same seminar or any training program. There is reinforcement through subsequent discussion, and teamwork may result.
Management in many graphic-arts companies spends precious time trying to craft a meaningful mission statement. This is frequently a frustrating exercise, in large part attributable to the tendency to base the statement on the participants' views of the company rather than customers' perceptions of the company. This is important because a meaningful mission statement must describe a competitively differentiated strategy. A mission statement is inherently deficient if the name of a competitor can be substituted for the name of your company. Most credible mission statements are not confined to exceeding customer expectations regarding the product.
It is frequently the case that a graphic-arts company is already seen as differentiated — and the company isn't fully aware of those reasons. The basis for development of a mission statement should be information rather than inspiration.
There is a tendency to be less than thorough in this electronic age in the belief that technology assures accuracy and consistency. In reality, everyone is in a rush. The proofing process may not be thorough. While a customer sign-off on a proof may absolve a print company of liability, failure to correct a problem or error results in an unhappy customer, regardless of who is to blame. In addition, there are cases in which type and text are inexplicably altered when files are RIPed.
Encourage everyone, including press and bindery operators, to proofread a job and to search for problems. It is time-consuming, but not as time-consuming as delivering a job with which the customer is unhappy or that needs to be corrected and reprinted.
Some companies have instituted formal programs to reward staff members who identify problems, errors and discrepancies. It's an ongoing reminder that customer satisfaction is everyone's job.
MBWA — Management By Walking Around — is a generally accepted business principle. Its impact was quantified by a study of 475,000 employees conducted by HR Solutions (Chicago). The study found that the issues of senior management visibility and employees' perception of managers' concern about them are closely related.
The research showed that a 9 percent increase in the visibility of management resulted in a 9 percent increase in the perceived concern of management toward employees. Benevolent programs and correspondence are helpful but are no substitute for management's physical presence among staff members. An organizational price is paid by senior management that spends excessive time in its office.
Even though economic conditions and sales volume at many graphic-arts companies are showing improvement, few owners and managers believe they are home free. Many are more hopeful than optimistic. They continue to feel threatened.
That attitude is not confined to owners and managers; line employees also feel threatened. In fact, their uneasiness may not be confined to general economic conditions. Technology has replaced many production jobs. Staff reductions usually are the first reaction to declining sales and profits. Despite the rhetoric, few companies invest heavily — or even at all — in cross-training.
Under these circumstances, anxiety is a natural reaction — especially among younger members of the work force. They want to know about the future of the industry and the mission and plan of their employers. To some extent, it's comforting to many staff members to know that ownership and management share their concerns.
The mantra of many articles, books and seminars is the need to know your customers. This encompasses knowing customers' business objectives and overall communication needs, not simply their graphic-arts needs. It is inadequate to simply provide solutions; it is becoming necessary to integrate selected customers into your company.
An article in Strategy and Business poses several questions that constitute a checklist to help companies determine the state of readiness for dealing with this next phase of a buyer-seller relationship.
These provocative questions may provide an excellent platform for your business planning process.
It is easy to assign productive staff to supervisory roles. It is public recognition of their contributions and, in many cases, their professional growth potential. In their new roles, they may be called upon to interview applicants, conduct performance evaluations, compliment and reprimand employees, and even explain the company mission to subordinates.
In many cases, the recently appointed supervisor may lack the information to satisfactorily perform these duties. Consider a skills inventory, especially in the case of inadequate-performance supervisory activities that could lead to legal difficulties. There may even by justification for an annual third-party update of legal and regulatory considerations and changes for all managers and supervisors. As burdensome as that may be in terms of cost and time, it is a good investment in terms of preventing future problems.
Companies that are increasing their billings for distribution services (storage, kit assembly, mail-list maintenance, list procurement, mailing, bulk fulfillment, vendor-managed inventory, etc.) frequently have difficulty predicting month-end results based on experience during the course of that month. That's unlike the days in which the preponderance of billings involved only print and the level of plant activity was usually a direct reflection of sales and profits.
That paradigm is distorted by distribution services that tend to be characterized by high-value-added sales. Companies may wish to consider monthly and year-to-date operating statements that separate print and distribution sales. It enables managers to see the changing relationship between these activities and bottom-line performance.
Being busy and operating at a profit, on the one hand, and being slow and operating at a loss, on the other, are no longer necessarily synonymous.
Several new industry initiatives have been promoting career opportunities in the graphic-arts business. It is projected that about 20 million U.S. workers will need to be replaced by 2008 due to retirement or death, and as many as 4.6 million of those jobs will go unfilled.
Under these circumstances, companies may be wise to adopt a formal policy designed to retain older employees. Studies reveal that seniors are frequently willing to bypass retirement or early retirement if employers offer them new responsibilities and more flexibility. One of every four older workers planning to retire say they are doing so because employers are offering them little in terms of management direction, growth opportunities and respect. Seventy-two percent of these survey respondents say they are interested in additional training.
Many CEOs pride themselves on having an open-door policy, making themselves available to any staff member who wishes to discuss a problem, ask a question or make a suggestion. A study by Prof. Michael Roberto of Harvard Business School found that, despite this policy, few staff members sought time with the CEO. One reason is the perceived need by employees to go through channels.
Roberto goes on to say, however, that the most common reason few staff members voluntarily bring bad news is that CEOs reported a poor reaction to negative feedback. If that occurs, or is perceived as having occurred, word quickly spreads within an organization.Another problem is that the CEO does not expeditiously act upon the information or treats bad news as isolated incidents.
Two of the largest trade associations representing advertising agencies recommend to members that their purchase orders include the so-called “Principle of Sequential Liability.” This claims that an intermediary, such as a design agency, advertising agency, broker or some other entity, need not pay a supplier until that intermediary is itself paid by its customer. This puts the supplier at the mercy of the intermediary's credit and collection policies.
Use of the Principle of Sequential Liability became increasingly common about 10 years ago, leading many graphic-arts companies to discontinue relationships with agencies. Today, use of this principle is not widespread. However, companies doing business with agencies are advised to read customers' purchase orders and to include the following provision in its Terms and Conditions of Sale:
“RESELLER: When contracting with a broker, advertising agency, designer, intermediary or reseller on behalf of clients, the printer will hold the intermediary responsible for timely remittance and any related interest, legal fees and/or collection costs. This will be the case whether or not the intermediary has been paid by its client for services rendered.”
Meaningful long-term organizational change is not likely to be effective if it is attempted by subjecting staff members to little more than rules, regulations, systems and procedures. Unlike machines, people do not react as intended, or uniformly, when subjected to linear systems and procedures.
Current literature on the subject suggests an approach best described as the “whitewater school of management”:
Most companies demand a completed credit application from a first-time customer. Many firms demand that half of the value of the first invoice be remitted upon delivery.
Once credit is established, there is frequently a tendency to handle credit and collections in a routine manner. As many graphic-arts companies can attest, this can be hazardous. Some customers with a consistently acceptable record of payment quickly developed financial problems. It could have occurred due to a customer's sudden loss of a major account or contract or some other event.
Regular tracking of the financial status of the top tier of customers may be a prudent step. After all, the majority of credit and collection problems occur in buying organizations that have been customers for at least a few years.
In spite of the whirlwind of technology introductions during the past few years, printers have not always adopted new ways of doing things as quickly as their customers might like. Consider the comments from a recent GAMIS survey on The Future of Direct Mail: “Be more open to new technologies and equipment investments,” said print buyers. [That,] along with “quicker turnaround with affordable personalization, is what customers are going to be looking for.”
In the area of direct mail, printers got top marks versus other suppliers for their efforts to support direct mail. However, print buyers also stressed that printers will need to speed up the process of bringing in new printing technology that handles variable data and improves their performance in timeliness and coordination.
Perhaps the solution is to think of a digital press as a big computer.PRODUCTION
During the past several years, graphic-arts companies have been taking steps to reduce production spoilage and to increase efficiency and productivity. Technology is changing workflow. The term “lean manufacturing” has become part of our regular vocabulary.
Despite the need to become more competitive, many companies fail to take full advantage of these production improvements. The reason: Production standards are infrequently reviewed. Speak to experienced equipment operators and you are likely to find steps and “tricks” they use. These procedures, however, may not be shared with others in the department.
Production standards should be reviewed (and, if appropriate, revised) every six months in order to accurately reflect ongoing results of process improvement. This is especially important if a “closed loop” management software system is in use. Work is scheduled according to the estimated hours per piece of equipment; the more accurate the standards, the greater the ability to schedule a plant accurately.
The issue of proofreading in print companies is, in many cases, linked to error liability. Most prepress operations proofread to see that material matches original art and to catch obvious errors and omissions. However, this function is taking on increased importance, There is a realization that spellcheck does not catch all problems. So-called “random events” have been known to occur when files are RIPed in a computer-to-plate workflow.
Some graphic-arts firms provide formal training in proofreading to everyone in the prepress, press and finishing departments. Rewards are frequently offered to those who catch errors. Suffice it to say that technology has not reduced or eliminated the need for conscientious proofreading.
There is a school of thought that every job should receive extraordinary attention in the manufacturing process. As a result, it is thought there should be no need to highlight work that is to receive special attention. That may reflect an ideal, but the fact is there are occasions in which certain jobs should be flagged.
The request for estimate form and the job jacket should have space for the salesperson and the CSR to alert the rest of the organization to special considerations or precautions.
Customer deadlines continue to become more demanding. One of the consequences of this pressure for accelerated turnaround times is the tendency to rush jobs into production, even though some information may be missing. It's not uncommon for a job rushed through production to reach the shipping dock with no delivery information, for example.
Devise a program in which missing information is recorded by job number, account name, salesperson and the last possible date the information must be received by in order to meet customer expectations. Missing information should be recorded “upstream” before being released “downstream” into production. This formal recording system reduces dependence upon the presence and memory of the salesperson or CSR and facilitates follow-up. The system also may be used to manage customer “proof out.”
The contract for purchase of new equipment usually includes a provision for manufacturer training of the purchaser's personnel. Training is an important issue, but the timing of the training and identification of those to be trained should be specified.
Training should go beyond operator training. It should encompass education of sales representatives, customer service reps, estimators and those involved in the production planning process. These individuals are in a position to influence the success (or failure) of new equipment by promoting its benefits to customers and by planning its optimal usage. Failure to educate non-manufacturing staff members runs the risk of creating dissatisfaction with intra-company communication.
Certainly it is helpful to schedule the training during, or even before, installation. Additional training may be needed a few months after the equipment has operated in a production mode. At this point, an effective trainer is able to identify opportunities to fine-tune operators' procedures and practices.
Even with an overlap of time, shift changes in the plant are an opportunity for information to fall through the cracks. That's especially true in the pressroom, particularly if communication from operator to operator is verbal.
Consider a formal log book for each press running multiple shifts. The departing operator is required to indicate any changes or issues in the following areas: mechanical, press malfunctions, chemistry, blankets, other.
The log book also should list information about the job on press at the time of the shift change: operator's name, job number, sheet size, color sequence, blanket condition, guide and cautions.
Makeready is defined as the anticipated, unproductive use of time and materials. Spoilage, on the other hand, is defined as the unanticipated, unproductive use of time and materials. In truth, most graphic-arts companies define spoilage only in terms of unproductive use of materials. It's more difficult to quantify unproductive time, because time must be spent identifying the cause of spoilage. Companies that go to the trouble of identifying the loss in terms of both time and materials are better able to prevent spoilage in the future and appreciate the true cost of spoilage.
Even with measurement of time and materials, a company will find it difficult to capture all the costs of spoilage. The impact can extend to overtime costs needed to meet customers' delivery dates. Organizations that conscientiously measure all the ramifications and causes of spoilage are increasingly finding the core problem lies in pre-manufacturing communication rather than equipment, materials or the press operator. Missing, inaccurate or ambiguous information upstream runs the risk of becoming spoilage downstream.
With emphasis on production efficiency and lean manufacturing, equipment maintenance may get short- changed. Many plants are trying to do more with less, and the rhetoric of management most often stresses speed and output of equipment.
A maintenance log at a prominent location near every copier, press, folder and other major pieces of equipment is a constant reminder of the need to do routine maintenance. It tends to prevent the “I thought you did it” comment at multiple-shift operations. A visible log also is a report to management about the need to schedule maintenance.
Readily accessible maintenance logs also may be valuable during plant tours by prospective customers and new buyers representing existing clients. In cases in which a supplier or prospective supplier does not have redundant equipment, it is natural for a visitor to ask, “What happens if there's a problem with a press or some other major piece of equipment?” Maintenance logs may not eliminate the buyer's concern, but the logs will signal subtly an understanding of that issue and usually will reduce buyer anxiety.
Energy is becoming more expensive. Natural gas prices are reaching an all-time high. Electricity prices are high. Regardless of the type of energy used, it is unlikely that these costs will decline appreciably.
Consider commissioning an energy audit of your facility. In some cases, government agencies will conduct them for businesses. Most often, power companies provide audits. In states that have deregulated utilities, the results may enable a company to negotiate a more favorable rate.
The complexity and difficulty of manufacturing a printed piece may bear little resemblance to the importance (or lack thereof) attached to the job by the customer. A job fraught with production challenges may be of only moderate importance to the customer. On the other hand, a simple-to-produce text-only job printed on commodity offset paper may be associated with the introduction of a product or may have compliance implications.
In the latter case, frequent status reports may be perceived as valuable by the daily buying contact. Those reports may be used to calm the anxieties of others in the buying organization. The need for status reports and the frequency of those reports should be included with incoming job specifications along with the communication vehicle preferred by the customer. Timing of the report also can be important; a report first thing in the morning frequently preempts at least one inquiry later in the day.
No graphic-arts company has escaped the pressure from customers for accelerated turnaround times. It's not entirely facetious to say that even the largest web printer has become a quick printer. The response to this marketplace pressure is to take action at each point in the workflow, then measure performance at each of these points.
However, a somewhat different picture emerges when the unit of measurement is not compartmentalized and is measured in terms of total number of days of throughput — the average number of elapsed days between the entry of an order and the receipt of customer payment. Reason for the use of the metric: In the rush to accelerate turnaround time, one point in the workflow slows the speed of processing at points downstream. For instance, lack of conscientious preflighting may result in detection of problems during the production cycle.
Haste in processing a job may result in the absence of documentation about authors' alteration charges, requiring two or three extra days to be spent “reconstructing the time” at the billing stage.
Suppliers often have information and insights that may be valuable and actionable to both your organization and your organization's customers. They can be a source of staff training. They may offer ideas for more effective use of products and services. In the case of major suppliers, consider making an annual management-to-management review of the relationship a condition of doing business. That review should include, but not be confined to:
The annual relationship review should not be held in an environment of problem-solving. It should be a candid conversation intended to strengthen an existing relationship, reduce the likelihood of surprises and clearly communicate mutual expectations.
The estimating function is seldom open to review. Management may wish to consider the basic functions of the position in addition to responding to customer needs for quick turnaround of estimates/quotations. These include:
An experienced estimator is in a unique position to educate sales reps, explain the value of accurate, unambiguous job specifications, and explain the consequences of alternative work methods and materials.
Too often, an adversarial relationship develops between an estimator, the salesperson and the CSR. Management may want to consider adding the function of educator to the primary duties of an estimator. Yes, it's time-consuming. On the other hand, it may be a worthwhile investment, especially if the company has sales reps and customer service reps relatively new to the graphic-arts industry.
Several organizations provide health, safety and environmental audits, including some regional affiliates of PIA. A fresh pair of eyes can identify violations, such as liquid in unlabeled bottles and impaired access to exits, that are easily overlooked during day-to-day operations. Time and expense are associated with a compliance audit, but it may be less costly and disruptive than a surprise visit by an inspector from a federal or state regulatory agency.
If communication among departments centers around problems, management may wish to take steps to construct positive, customer-centric communications. These can include:
A great deal is written about the need for employee training. However, there are distinctly different types of training. Management is well-served if it defines the areas of greatest need on individual, departmental and corporate bases. The different categories of training/staff education include:
Virtually everyone in business has a strong preference for a particular communication vehicle. That preference usually is based on a business reason, not simply a whim. For instance, a customer who spends many hours per day at meetings may prefer communication through a communal fax machine so that an assistant can handle an emergency. Others may prefer voice mail.
Consider including the preferred communication vehicle as part of the specifications on each job jacket or on a customer's master file. Simply asking the customer about the communication method he or she prefers will be appreciated.
Probably no word has created as many communication problems as “quality.” It means different things to different people under different circumstances. Among printers, the word is most often used in association with four-color process work. It is recommended that the word “quality” be avoided in internal and customer communications — even discourage customers from using the word.
Instead, identify factors that are critical and/or important. Use those words. They are specific to a particular job. And expand the use of these words beyond manufacturing considerations.
When expectations aren't met, many buyers believe it's not worth the time and trouble to try to restore the relationship. Many buying organizations will blame price for switching suppliers, or simply say nothing to the offending supplier and take the work elsewhere. Management of print organizations needs to take steps to deal with “the silent killer” of account attrition.
Account retention is essential for financial health. Churning of accounts involves hidden costs, even if gross sales are growing.
When asked about the value of a specific customer, most responses are framed in terms of that customer's annual sales volume. In truth, a customer is worth the resources and opportunity costs that would be required to replace it. That is often expressed as LTV — Lifetime Value — a factor that goes well beyond sales and profits.
Other considerations in evaluating an account's LTV include:
There's a cliché that “the squeaky wheel gets all the grease.” The flip side in business is that the accommodating account runs the risk of being ignored. That creates elevated risk for the graphic-arts company at a time in which account retention is critical to success.
Use of the word “schedule” is virtually universal in the graphic-arts industry. That can be unfortunate. The word implies order and precision, an ability to provide a manufacturing slot that will remain unchanged.
In the real world, companies can do little more than sequence and re-sequence many times during a typical day due to some combination of problems: An unanticipated customer need or demand for a fast turnaround of a job. Equipment challenges. Staffing problems. Proofs not returned in time by customers. Changes in art or in specifications while a job is in process. Late delivery of art promised for a particular time and date.
The word “schedule” implies an ideal. “Production control” may be a more descriptive term.
Well-run companies always are seeking opportunities to provide special services and information to customers. These opportunities abound but are not always exploited because, in most organizations, the seemingly minor details must be orchestrated by senior management. In the aggregate, however, these opportunities can result in changed buyer perceptions and more competent customers.
Make a list of all points of customer contact, beginning with specifications to be estimated and ending with delivery of finished product. At a minimum, there are at least 20 points of contact including — but not limited to — the quotation, receipt of files, proofing, reports on job status, samples and communication from the customer service representative while a job is in production. Think about information and messages that could be communicated at every point of contact.
A recurring theme in the graphic-arts industry has been customers' demand for accelerated turnaround times. Many printers frequently use the adjective “unreasonable” when describing customer demands. However, most printers routinely process work at a speed that would have been unthinkable only several years ago. In fact, many jobs are delivered ahead of schedule. When that occurs, make certain to tell customers — in writing. Most reports to important customers about delivery performance include only two categories — on time and late. Consider a third category — delivered early. It may win points with some customers.
The late Willard Brown, who became a remarkable industry consultant and speaker after a 50-year career at Judd's, Inc. (Strasburg, VA), conducted a landmark study that is as relevant today as it was three decades ago. The research involved interviews with print buyers regarding the reasons they quit doing business with printers.
The most frequent reason that graphic-arts companies lost existing accounts was a general frustration with something considered trivial or inconsequential by the supplier that created problems for the buyer. It was the $100 credit that wasn't expeditiously applied, carton labels applied incorrectly, invoices not prepared as requested.
Use of the word “loyalty” frequently defies precise definition. Like “quality,” it means different things to different people under different circumstances. Is it “blind loyalty” largely based on a supplier's past performance? Is it repetitive buying behavior born out of habit? Is it preference, a relationship in which the selling organization is always given the opportunity to compete for work?
This is an important issue. It is important to understand whether repetitive buying behavior is due to habit or more compelling, differentiated reasons. If a relationship is attributable to habit, a customer is especially vulnerable to competition. Repetitive buying behavior is symptomatic of customers that buy out of a sense of loyalty and gratitude as well as customers that buy out of habit. It's dangerous to assume that the latter is the cause of that behavior.
It is important to understand the reasons particular customers buy from your organization. Do not assume all is well and that loyalty is a dominant purchasing motive when buying patterns are robust and consistent. In the meantime, assume the worst: habit. Treat every customer as a prospect at all times.
Many graphic-arts companies believe that customers and prospective customers couldn't help but be impressed by a visit to their facility. Sometimes that's the case. Often it isn't.
Mis-impressions can be innocently created by the host company, especially in cases in which visitors are not experienced in specifying or purchasing print services. Three of those impressions are:
Be sensitive to impressions that a visitor may form, especially a visitor not familiar with the graphic-arts industry.
In many companies, the salesperson will contact the buying contact within a day or two after delivering a job. The objective of this post-mortem is to review the extent to which the customer's expectations were met by the product and the overall buying experience. That information is helpful in fine-tuning an understanding of customer needs and expectations. It is especially helpful if the feedback is communicated to the customer service representative and others involved in the processing and production of the job.
In the case of direct mail, collateral and other promotional material, a second post-mortem often is valuable. It is held several weeks after distribution of the printed material. Its purpose is to determine if the material achieved its business objective. What was the response to a direct-mail piece? Was a new target audience reached?
Facts gathered at the second post-mortem can lead to suggestions that may improve performance of subsequent mailings. The information may enable you to calculate the customer's return on investment, supporting your content that the printed piece should be viewed in terms of its cost-benefit relationship, not simply as an expense.
Those involved in production of custom-made products have shipped work believed to be in strict conformance with customer specifications — and the customer hated it. Conversely, there are cases in which the decision was made reluctantly to ship products of which the plant was less than proud — and the customer loved the job. That's the reason graphic-arts companies should not automatically equate the rate of spoilage or product defects with customer satisfaction. Don't assume that customers are satisfied simply because no complaints have been registered.SALES MANAGEMENT
Many graphic-arts companies have altered their operating objectives importantly, albeit subtly, during the past three or four years as a result of changing economic conditions. Companies typically tempered optimistic sales goals, emphasizing staff reductions, production efficiencies and other steps as primary routes to increased profitability.
During this process, many firms left their existing salesforce compensation plans unchanged, or kept the structure of the plan but enriched the rate of variable compensation in the belief that it would inspire salespeople to improve performance. In many cases, salesforce compensation plans no longer reflect changed company objectives.
Some companies have taken a longer-term view of account development, a process that may consume 12-18 months. However, many compensation plans reward short-term performance.
It isn't uncommon for print companies to provide distribution services through alliances with mail houses and other post-bindery providers. However, they still compensate salespeople under a value-added program that discourages subcontracted work.
Some firms' compensation programs disproportionately reward new-account volume while the greatest opportunity for sales and profits resides within the existing account portfolios.
Perform a dispassionate analysis of subtle changes that may have occurred in the mindset, goals and objectives in the recent past. Then, examine the salesforce compensation plan. Consider changes to encourage sales activities that directly support, rather than contradict, your company's operating and strategic objectives.
The secret to success is in improving service with customized programs and procedures to meet specific customer needs. These customized programs and services may be an important untapped asset of a company. Consider other accounts or prospective accounts that may benefit from the programs and services tailored for the original account. All sales and customer service reps should be educated about the details of special programs developed by the company to accommodate special needs of customers.
Customized programs should be considered as models to be applied elsewhere, if possible. After all, development costs already have been absorbed. Once prospective accounts have been identified and customer needs established, senior management should consider becoming involved in contacting decision makers in the buying organizations.
Pricing should not be a one-size-fits-all exercise. There should be considerations, on an account- and job-specific basis, of your company's perceived value to the customer. Also consider the competition and the customer's long-term value to your organization.
Every Graph Expo visitor must base an acquisition decision upon its own resources and company goals and objectives. But there is a common, effective starting point from which to evaluate a buying decision. Once interested in the features of a new product, technology or service, ask the seller to quickly and precisely answer the following question: “How does this benefit my customer?” That's a critical bottom-line question. No change in equipment, staffing, location, organization or service has value unless it can be meaningfully and credibly translated into perceived benefits to customers.
New-account development can be compared to passing a kidney stone: It is always a painful, slow process and isn't always successful. Due to a variety of factors, such as sole sourcing and intense price competition, there are fewer opportunities to capture new customers.
Salespeople new to selling, in general, or new to the graphic-arts industry have an additional handicap — inexperience. In addition, there is the danger of frustration. Let's face it, few buying organizations are actively looking for new suppliers.
The new-account development process can be lengthy and arduous. It involves almost constant rejection for the salesperson, and that can be especially disheartening for the young, relatively inexperienced rep. Enthusiasm and self-confidence may suffer.
It's preferable to give the new rep some accounts to service. It will be a welcome, positive experience that will buoy enthusiasm until the rep develops some of his or her own accounts.
Former accounts should not be considered as active accounts — there may be a good reason that accounts are inactive. That reason may have involved a dispute, lack of adequate service or some other reason that the buyer may dump on the unwitting salesperson. Do assign some inactive accounts, but don't make the mistake of believing all or most of them are prime candidates to be reactivated.
Many companies are, or have been, reluctant to add post-bindery distribution services because of a lack of guidelines for pricing. Ironically, this is both the difficulty and opportunity of these services.
Given the fact that, in most cases, sale of these services involves a customized program, it is critical that a graphic-arts company understand the value to the customer as well as the supplier's own costs. Does the customer have better space available for storage? Is there a need for the customer to devote resources to its core business? Can its procurement and coordination costs be lowered? It's impossible to gather too much information about the customer's needs, buying motives and opportunity costs. Add in the perceived benefit to the customer of having one supplier responsible for management of all or most of the print process, and the value to your company is an assured flow of work.
Distribution services, except perhaps for mailing, cannot be estimated in the manner in which print is done. Instead it must be priced — and done so with an appreciation of the perceived value to both parties.
Some things to bear in bear in mind if you are inclined to consider paring the size of the account portfolio:
At a recent PIA conference, a participant asked about the maximum income of the highest-paid sales representative. The response ranged from $175,000 to $400,000. Delivering their respective responses, some attendees referred to the resentment felt by CEOs and others in their organizations regarding the income of some sales representatives compared to income earned by others in the company.
Providing a higher level of compensation for performance will not necessarily create more competent employees. Recognize that the concept of capacity has at least as much relevance to pre-manufacturing operations as it has to manufacturing operations. Consider changes that would provide your company's best sales performers with an additional four to eight hours a week of actual selling time. What might that mean in terms of company sales?
The key issue is company sales, profits and lifetime value of customers. In many cases, the cost of additional compensation to the best performers in your company may, in the long run, be accompanied by reduced transaction costs that benefit all parties despite elevated compensation to a salesperson.
There's no magic formula. However, employers are best served by evaluating the long-term value of the customer versus a company's costs.
Many graphic-arts companies, particularly those featuring customized products and services, have not experienced great success with trade shows. To the extent that there has been success, it most often involves a booth at a show in a vertical market in which the print company operates.
Several steps can be taken to make the time and effort more effective and more productive. Mail invitations to visit your booth about two weeks before the event. Consider a gift for those who come to the booth.
Don't make the mistake of believing that representatives working the booth all have common answers to the most frequently asked questions or are comfortable selling in a trade show environment. Have a training meeting before the show opens. Role-play. Finally, set standards and procedures for the handling of leads and inquiries.
Trade shows can be physically challenging. After an exhausting day on one's feet, there's a disinclination to process leads and inquiries within 24 hours. Bear in mind that leads erode at the rate of about 10 percent a day. Devise a procedure for expeditious processing of these sales opportunities.
Successful salespeople traditionally earn above-average income. That may not be fair, but the fact remains that the majority of reps work on a commission basis: no sales, no commission. It also is argued that the marketplace, including competitors, establishes the value of a successful salesperson.
Some companies seek steps that will retain above-average reps while lowering their total compensation. Other companies have a different philosophy, taking steps to provide these reps with the support and tools so that they can increase their volume.
Regardless of the operative philosophy, the word “capacity” is just as relevant to salespeople as it is to manufacturing operations. Some salespeople insist on doing as much as possible themselves during the pre-production and production processes. Therefore, they have severely limited their capacity. Their behavior limits their growth potential.
Chances are that the greatest growth potential lies in salespeople who are already the best performers. Ask these individuals to suggest steps that management could take to help them improve their performance. Make no commitment to adopting these ideas, but do consider them, especially if they will expand the rep's capacity to sell.
The ability to accurately predict performance 12 months in advance is an unrealistic expectation, even if Alan Greenspan is the salesperson. Even if 12-month sales volume could be accurately predicted, seasonality is becoming an increasingly important issue. Cash flow needs to be forecast.
Print demand is directly related to the fortunes of customers and those customers' respective industries. The ability to predict those trends and events is daunting.
Here's an alternative annual exercise: Instead of asking sales representatives to predict sales volume for the coming year, management should consider an individual meeting with each rep to identify steps that may be taken to make the graphic-arts company more important to each account in each rep's customer portfolio. Not every account will have potential for increased sales and profits, but some will.
Devise an account-specific plan, with timelines and responsibilities for customers to whom your organization can become more important. That step creates elevated perceived customer value. That, in turn, is the link to creation of increased sales and profits.
Most printing companies have a sales force with no formally defined geographical territories assigned. As companies grow, they run the risk of two or more sales reps calling on the same prospective customer. Another common scenario: A salesperson has an excellent account, a buying organization with many departments and divisions. These other departments and divisions, however, may not be active accounts. In fact, often they haven't even been called on.
Consider a written sales department policy that clearly distinguishes a “customer” from an “account.” One would be specific to a department or division; the other describes the corporate organization. It may be desirable to assign two or more salespeople to different areas of the same organization. Various salespeople could call on different agencies of a state government, for example, or different departments of the same corporation. In any event, definition of company policy can be helpful in avoiding possible internal conflict.
At best, a focus group provides ideas and insights. Professional researchers are seldom unanimous about anything, but they would agree that it's dangerous to project feedback from a panel of 10 or 12 participants to conclusions about an entire customer base. That's especially true when focus group participants are selected based on their sales volume or importance to the research sponsor. The value of a focus group is to structure further research to identify issues to be explored in mail surveys and other forms of research. Having related this, recorded focus group proceedings have great value in training salespeople, customer service representatives and other staff members.
The value is accompanied by a danger, though. Consider the feedback carefully. It is a mistake to dismiss or lightly consider feedback from the secondary and tertiary level of accounts, who may have perceptions and opinions that are as important to a print company's future as those from the highest volume accounts.
Many companies measure the “hit rate” of estimates, the percent of jobs estimated that are won. Taking that analysis to another level of detail often can yield very useful information and insights. Estimates aren't free. Studying the success rate by customer may identify buying organizations that grant the company little or no work but request a large number of estimates. The cost to a graphic-arts company may not be justified by the resultant sales volume, if any.
Analysis of the estimating success rate by size of order frequently reveals information about competition and perceptions of the buying community. For instance, a company may have large presses but be perceived as a small-format printer by the marketplace. When that occurs, the company may be given relatively few opportunities to even quote on the larger jobs.
The success rate may be unusually great on work of particular dollar volume, an indication that the company is very competitive within a certain range.
Many management software programs allow this type of analysis. Input and analysis may take time, but the feedback frequently justifies the trouble.
Salespeople have different value systems, different talents, different perspectives and very different accounts. The marketplace is in transition. Many salespeople who have enjoyed success in past years are having difficulty in this new sales environment.
On the other hand, many companies have hired young reps with little or no experience in the graphic-arts industry. Though they may frustrate their estimators and production people due to a lack of technical expertise, these novice salespeople are frequently very successful in generating sales volume.
Certainly there are procedures and company policies that all sales reps should be expected to follow. Management needs to offer a wide variety of ideas and resources to reps, allowing each rep to adapt those tools to his or her situation. In other words, emphasize performance and lighten up on behavior management.
Breaking down walls between the sales and production departments is an ongoing challenge in many companies.
Here's a device to help address this communication gap: Regularly post detailed results of important meetings with customers. Also, include information about new accounts in paycheck envelopes — and conscientiously record and circulate compliments, as well as complaints, from customers. The regular flow of information will help the organization focus on customers rather than internal issues.
When told of the steps mentioned above, most customers react positively. They tend to view it as evidence of a supplier's effective internal communication.
There is no mathematical formula for an ideal balance in an account portfolio. Many observers believe that it is dangerous if purchases by an account exceed 15 percent of a print company's annual sales. (Interestingly, IBM for many years demanded that its national print suppliers reveal their annual sales and refused to purchase work in excess of the 15 percent limit.)
The best solution for an account portfolio that is either too diverse or too concentrated is, of course, management-directed, systematic account development to address both new and existing customers. In the case of the latter, that may require documentation of, and communication about, the full range of your organization's production and non-production capabilities.
To gauge the extent to which a company may be vulnerable to the loss of its largest account, consider creating a pro forma operating statement from which the revenues, expenses and cash flow associated with the highest-volume accounts have been deleted. The result typically highlights the urgency of developing other accounts.
Companies completing a request for proposal (RFP) should consider separating the costing and pricing functions. Studies at Purdue University and Harvard indicate that “supplier firms in long-term relationships are able to retain or even improve their profitability levels more than firms that employ a transactional approach to servicing customers. This means that supplier firms are able to achieve cost reductions in their selling, general and administrative expenses that could be due to such factors as lower customer turnover and higher customer satisfaction that leads to lower customer service costs.” In addition, estimates aren't free. The front-end-intensive estimating exercise may, in the long run, actually save estimating costs.
No two RFPs are the same, but consideration in pricing should be given to savings in non-manufacturing costs of a consistent flow of work.
Graphic-arts companies should dispassionately evaluate the status of relationships with high-volume and high-potential accounts. The American Society of Training and Development defines five levels of a “strategic value hierarchy” that companies may find useful in the evaluation process:
Major errors in new-account development include a failure to adequately research a prospect's business and printing needs, determine if there might be a fit between the two organizations and articulate the reason for the call within the first few seconds. Make the call as prospect-specific as possible. Provide a reason for the buyer to grant an appointment.
The objective of the first contact is to arrange an appointment so information can be gathered. Do not adopt a selling model during the first call.
Some general guidelines for successful sales meetings can be established. Publish an agenda at least 24 hours before the meeting. During the meeting, stick to the agenda; don't allow the discussion to wander off course. If appropriate, invite customer service reps, estimators and others to attend. Finally, the leader of the meeting should ensure the predominant tone is positive — not negative, punitive or remedial.
The litmus test of a successful sales meeting: Attendees are more competent at the end of the meeting than they were at its beginning.
Account retention is not a passive concept. In an industry that is highly competitive and in which the product is becoming a commodity, competitors are calling on your company's best customers every day. Retaining those accounts involves an ongoing effort to provide unique value to customers — and frequently reminding them of the value provided by your organization.
In the current sales environment, absence of problems or customer dissatisfaction should never be interpreted as meaning that everything is fine. The danger of account attrition or loss is elevated if vendor selection becomes a matter of habit or routine. Frequency of orders should not necessarily be regarded as loyalty.
Remind customers of your organization's capabilities and the unique benefits to be derived from doing business with you. Treat every existing account as though it were a prospect. Don't lose sight of the fact that the first step in growing a business is retention of the current sales base. Take no account for granted.
Selling print involves finding buying organizations with products that are compatible with the finite dimensions of a company's production equipment. For example, outsourcing is the only alternative if a customer wishes to obtain a 40-inch poster from a supplier whose largest press is 29 inches.
Selling distribution services, however, requires a much different mindset than fitting the equipment to the job. It involves gathering information in order to be able to offer tailored, customer-specific products and services. To that end, here are some tips:
Be prepared for a selling process that may consume a year or more. Unlike the sale of print, the work is at the front end. Unlike bidding for work that results in a short-term buying decision, selling of distribution services is arduous, detailed and painstaking in the short term. The return on investment in the sales process is in the long-term relationship. A long-term relationship based upon extensive “front-end” work has long-term payback in terms of assurance of sales and lowered transaction costs.
Many printers, particularly commercial sheetfed operations that do business with advertising agencies and brokers, find themselves with odds and ends of different types of paper stock. Valuable storage space is devoted to this excess material.
Compile swatch books of this paper, indicating the name, weight, sheet size, number of sheets in storage and price at which the company is willing to sell it. Distribute the swatch book to salespeople, customer service reps and estimators. In some cases, an incentive may be provided to an employee who succeeds in selling the stored paper.
A study of buyer turnover conducted in the late 1990s revealed that about 28 percent of the daily buying contacts in the printing industry retire, die, leave their employers or transfer elsewhere within their respective companies each year. Since then, that percentage has undoubtedly increased due to downsizing, mergers, acquisitions, bankruptcies and reorganizations.
When a new person with purchasing authority appears at an existing account, it remains an existing account only as far as the accounting department is concerned. It should be treated as a new account by everyone else, especially if the new contact is not experienced in preparing, buying and coordinating print. Consider devising and enforcing implementation of a formal policy that includes:
You can't go wrong treating this individual as though he or she represents a new account. To a great extent, that's the case.
All buyers may be aware of recycled paper, but there is relatively low awareness of the availability of tree-free paper. Tree-free paper is nothing new. The Gutenberg Bible was printed on hemp, a substrate that is still available. Tree-free paper can be, and is, manufactured from corn cobs, Mediterranean seaweed, kenaf (a member of the hibiscus family) and even elephant droppings. These papers have different properties. In some cases, they offer good four-color reproduction.
Tree-free paper is usually more expensive than paper made from trees, however, there are occasions in which print-buying organizations are interested in the extra investment. Not-for-profit organizations involved in environmental and quality-of-life issues, as well as for-profit organizations interested in demonstrating interest in sustainability, may be good prospects for tree-free paper. Newspapers and business publications will frequently give publicity to firms using tree-free paper. It is a novelty of interest to readers, especially when this paper is used in combination with agri-based inks. These materials may enable your customers to tangibly differentiate their respective operations. It should be promoted on this basis.
What would the additional profit and sales volume be if your company could win an additional three percent of the work for which it is invited to submit quotations?
How can that be achieved without simply lowering prices? When receiving job specifications to be estimated, always ask the customer if alternative materials would be entertained. This may involve alternative paper stock, size and other elements. It may be possible to suggest alternative steps that would reduce production costs, increase the effectiveness of the printed piece or elevate customer-satisfaction levels.
The customer's willingness to consider suggestions for changed specifications should be clearly indicated on every RFQ form.
Many sales training programs fail to accommodate the challenges of selling customized products and services. In this environment, salespeople can't offer off-the-shelf solutions. Samples of work produced for other clients lose relevance.
Training of those new to graphic-arts sales should be rooted in an understanding that, except perhaps for buyers of art prints, no customer buys “printing.” Printing is a communication vehicle, an end to a means. Virtually no one buys printing. Instead, printing is a vehicle to achieve a business objective. That objective may range from promotion of a vehicle to public recognition of a new automobile, communication system or anything in-between.
An understanding of that scenario naturally leads print salespeople to the need to understand and appreciate the problem before formulating a proposed solution. Few people enjoy buying printing. No mother ever raised a child to specify print. The salient issue is the extent to which the results of the print project achieves its business objective.
Understanding that customers do not buy printing, but instead buy a communication vehicle to increase sales, profits, constituent awareness of a product or service, or some other business purpose, is fundamental to education of sales and customer service reps. No solution can be formulated unless a salesperson has a working knowledge of his or her customer's challenges.
Many production-driven graphic-arts organizations believe that selection and distribution of samples are relatively unimportant activities, almost an incidental part of the production process. In truth, selection and distribution of samples may be an important factor in providing perceived value to some customers.
Samples are especially important to such intermediaries as designers, advertising agencies and brokers. They are in a potentially embarrassing position when a call arrives from a client with a question about or problem with a job when the agency, designer or brokers has yet to see a sample.
The speed with which samples are distributed to the proper party may be equally as important as the final product itself. Salespeople should indicate special sampling instructions as part of job specifications. In some cases, the manner in which the customer's sampling needs are met may win or lose an account.
Buyers perceive themselves as having many viable choices when selecting a supplier. New-account development is, therefore, a delicate, arduous and usually lengthy process of trust-building and competitive differentiation.
With changes in buying motives and behaviors during the past several years, it is easy for a salesperson to say the wrong thing by repeating standard selling sentences that have been successful in years past. An example: “Give me an order so I can show you our capabilities.” Today that statement is often considered offensive to a buyer. It is considered to be a request that the buyer engage in disloyal behavior to an existing supplier. Instead, it is necessary to establish trust before the first job is received from a new account, not through the first job.
Another change to undertake: Many buyers at prospective accounts react angrily to questions about their current suppliers. They view it as nobody's business but their own. Many buyers also view it as preoccupation with the tactic of selling rather than geniune concern with their needs and objectives.
Research published by Business Week magazine indicates that e-mail often is used to avoid personal confrontation, resulting in statements made via e-mail that would not be said in person. There are suggested guidelines for effective use of e-mail:
For several years, the magalog has been the fastest-growing product category in the printing industry. It represents an unprecedented opportunity to create demand for print, frequently avoiding the price competition.
A magalog is defined as a publication with a single advertiser. Content is roughly one-half advertising and promotion and one-half helpful editorial content. The underlying concept is that information about a product or technology travels faster than the skills consumers need. Many people, for example, never get beyond the basic functions of their cell phones or televisions.
The magalog was popularized by financial institutions — banks, insurance companies and brokerage firms. They understood the need to educate customers to more effectively sell their products and services.
Print companies may be able to create demand (and sales) by promoting the magalog concept. A dental-supply distributor publishes a monthly 16-page magalog. Half the pages demonstrate leading-edge surgical techniques; the other half feature products to effect the surgery.
Selling a magalog requires contact at the top of a buying organization, some imagination and above-average time and effort put into the planning stage. Once successful, the orders are regular and repetitive.
Salespeople should be looking for opportunities to create, as well as capture, print demand. The creation of print promotion for customers usually mitigates the influence of price in the buying decision while, at the same time, providing evidence of the supplier's understanding of the customer's business and its willingness to help it achieve its objectives.
A review of a company's or sales rep's account portfolio may reveal combinations that can lead to creation of print that would benefit two or more customers. Examples include:
Buy low! Sell high!
Dick Gorelick is president of Gorelick & Associates and the Graphic Arts Sales Foundation. Contact him at email@example.com.