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Apr 1, 2006 12:00 AM
The graphic arts industry is changing. That change is being driven at least as much by changes in purchasing behavior as it is by technology.
There are two industry scenarios I’m hard-pressed to understand. The first is the creation of expensive technological solutions for which there are a limited number of problems to be solved. The second is the failure of print companies to respond to obvious customer needs, otherwise known as “business opportunities.”
Ink-on-paper is not dead. Those who a dozen years ago claimed that electronics would doom the printed word were so mesmerized by technology that they couldn’t realize that, thanks to digitized images, no book or text need ever go out of print.
While print lives on, the same cannot be said of all printers. Certainly, there will be exceptions. An estimated 40 percent of printers’ profits now come from products and services other than ink-on-paper. For the most part, this involves customized distribution services.
Give distribution its day
Depending on the situation, entry into customized distribution may not require back-breaking investment. Providing these services generates print—and usually an ongoing flow of print in an industry beset with increasing seasonality and the resultant cash flow challenges (See “We hardly discussed ye,” February 2006). Failure to provide customized distribution programs runs a substantial business risk: A competitor could respond to a customer request, effectively taking that account out of play.
This column could have been written ten years ago. I’m writing it today with a growing sense of incredulity about the number of companies of all sizes and types that eschew non-print services. Customers want it and need it. Correctly priced, the value-added sales can exceed 90 percent. Transaction costs are lowered. Account turnover is lessened. Cash flow becomes more regular.
Why haven’t an estimated 40 percent of print companies embraced customized distribution services? It defies the “printers’ paradigm.” It can’t be made routine. It needs to be priced, not estimated. That is seen by many CEOs and senior managers as involving excessive risk.
I’ve heard dozens of owners say, “We’re printers. What do we know about list maintenance, storage and mailing?” These individuals are risk-aversive, failing to realize that in the current environment in which the unit cost of ink-on-paper is being driven down and costs of distribution are escalating, the worst alternative is to do nothing. If the Titanic had taken 20 hours, rather than two, to sink, the loss of life would have been identical. Those inclined to act do so quickly and decisively.
Our research during recent years, published by PIA/GATF in a monograph, “Lessons Learned in the Recent Economic Slump,” found that the perponderance of industry profit leaders offer customized distribution services to selected customers. Printing is a commodity. Most companies that offer little else are likely to pay an increasingly high price.
The customer is always the issue
I admit that I do not understand the decision-making process in some graphic arts companies. Many owners and managers see their meal ticket in technology rather than in determining, and responding to, the wants and needs of customers and prospective customers.
The bottom line is that, when commoditization afflicts an industry, routine work has little value. Price competition is the inevitable result when buyers believe that many potential suppliers can satisfactorily deliver such work on time. In a commoditized marketplace, profit is the result of fairly-priced work that is difficult and extraordinary.
This perspective needs to get beyond owners and senior managers who haven’t yet embraced a love of difficult and extraordinary customer demands. It needs to be rolled down through the entire organization. It needs to be understood, accepted and embraced by all staff members, including many who believe that buyers conspire to torture print companies and unreasonable demands.
Doing the difficult makes you different
Organizational culture needs to internalize that these seemingly unreasonable demands limit competition. The answer to the question, “What do we do best?” is likely to be the same at all your company’s competitors. I recommend clients send thank-you letters to customers who make seemingly unreasonable demands for quick production turnaround. Nothing is more effective in fighting foreign competition.
Listen to customers. It’s not possible to fight fundamental marketplace trends, and consolidation of vendors to reduce procurement costs is not a fad. The customer is the issue, not the comfort regarding the ability to perform faultlessly today.
Dick Gorelick is president of Gorelick & Associates and the Graphic Arts Sales Foundation. He can be reached at email@example.com.