LAST YEAR’S CHANGES SHOULD DICTATE

THIS YEAR’S STRATEGIES

                      By Lou Slawetsky

It’s hard to believe that another year has slipped by.  Tell me that each one is getting shorter.  If not, I’ll have to believe that the passage of time has increased in velocity.  Either way, we seem to have less time to deal with an increasing abundance of change.  I can’t help but wonder during this particularly reflective part of the year whether we’re developing strategies to help us cope with these changes or, in the worst-case scenario, we’re going to wake up one morning and wonder what happened to our businesses.

Taken individually each change might be easy to deal with.  Collectively (and simultaneously) the strategic task might be overwhelming.  So, let’s look at some of the more significant changes of the year gone.

Direct Competition      

Increasingly, dealers find themselves competing with branches of their primary vendors. Ricoh, Canon, Toshiba, Kyocera Mita, just to name a few, have all worked to strengthen their own direct distribution systems.  Even Sharp, last year’s holdout among the top tier vendors, has begun opening their own branches.  Dealers have begun adding additional brands as a strategy to compete with the branches of their primary vendors.  But, with virtually all vendors (Panasonic may be the exception, having sold virtually all of their branch operations), there are few alternatives that would not result in additional branch competition.  Dealers should focus on those strengths that set them apart from their vendors’ distribution systems in order to continue to be a major presence in their individual markets.

New Imaging Technologies      

Traditional ink jet technology, long the leader in the home market, is evolving to the point where it is poised to capture a significant share of the commercial workgroup market.  Consider just a few changes:

• Xerox Corporation will continue to expand their solid ink technology with the launch of new MFP products.

• HP will launch ink jet printers using new inks and wide print heads that allow for high speed printing with high quality at a cost lower than that possible with existing ink jet systems.  Speeds of 50 PPM or more will become the norm.

• Ricoh Corporation has launched a series of Gel Printers using a proprietary ink that promises higher speeds coupled with images that are not affected by liquids (spill coffee on an ink jet image and you’ll immediately see the benefit).  Look for this technology to expand into MFP systems.

What all of these technologies have in common is the simplicity of the hardware that produces the images.  Service contracts for these systems will be difficult to justify since they will be virtually service-free.  A major part of the dealer profits engine is at risk.  What are you doing to develop other sources of profitable revenue to take the place of these lost contracts?

Expansion of Color      

Business color units currently account for approximately 30% of all placements.  Most dealers continue to offer cost per page contracts covering service and supplies.  In the days of monochrome systems, dealer costs were impacted only slightly by an unexpected increase in page coverage.  That same dynamic in a full color system can result in a contract that loses money over the entire life of the product.  Dealers have asked their vendors to supply cost estimates for full-color images at various levels of coverage.  To date, few, if any, have responded, leaving dealers to fend for themselves.  This year, you’re going to have to develop alternative solutions to the issue of full-color service and supplies contracts that do not put your profits at risk.

Scanning          

Document solutions are increasingly making use of scanning to merge hardcopy and digital documents into a seamless flow.  Our research indicates that scanning activity is exceeding 2,000 pages per month when these applications are in use.  Yet, despite this increased usage, dealers continue to offer this service at no additional cost.  Increased use of scanning and document feeding components will eventually erode service margins.  This year’s strategic plan should include a method for recouping the cost of increased scanning activity so as to stop the further erosion of profits.

Customer Service        

This is, no doubt, the most significant trend we’ve seen this year.  Customers have begun to categorize MFPs as commodities, feeling that there is little difference between one brand and another.  The true differentiator has become the relationship between you and your customers.  If they feel they’re being supported, they’ll stay.  If not, they’re gone.  Unfortunately, our research indicates steadily declining levels of satisfaction in the area of customer service.  One respondent was even ready to push their MFP down a flight of stairs out of total frustration.  We were invited.  I would have loved to have seen it.  We’ve experienced this decline in service in our own labs.  Problems with hardware or software solutions have suddenly become our fault (humidity, power supply, etc.) – this, despite the fact that nothing has changed in our controlled conditions during the last 12 years.  We don’t have the luxury of changing brands.

A test is a test.  But, your customers do have a choice.  And, when frustrated, they’ll leave you in a heartbeat.  The core of this year’s strategies, then, must be to strengthen the relationship between you and your customers so that you become a true partner with them.  You’ll find that it’s far less costly to keep a customer than to find a new one.

Finally, let’s all take a collective breath.  The old year is gone.  The new one stands with the brightness of expectation.  Our entire staff hopes that, for all of you, those expectations are exceeded.u

Industry Analysts, Inc., is a marketing and management consulting firm for the office automation industry. Much of the company’s research and testing results can be viewed on their web site – www.industryanalysts.com.