A Visit with MSE Obsessed With Quality To gain inside perspective of aftermarket industry, ENX spoke with MSE’s Luke Goldberg, Senior Vice President, and Gil Wazana, Vice President of Sales–Americas. They spoke candidly about their view of the state of the compatibles industry, MSE’s business philosophy, newest innovations, color and MPS products. Tell me about your view on the current market challenges and opportunities for compatible sellers. Luke Goldberg: The aftermarket imaging supplies business is very resilient. We have been able to overcome many obstacles to provide ever increasing offerings of products. We seem to be managing the external problems of chips, raw material, and acquisition of empties, new equipment, OEM intellectual properties, and legal restraints. We have overcome the technical issues for 25 years and we will continue to overcome them. However, many compatible manufacturers are still unable to appropriately manage customer expectations. We need to understand our biggest challenges come from our own industry. We really need to provide a consistent, quality alternative. If you are unable to do it you should go to your customers and say ‘I can give you a recycled product or a new compatible. The product is probably not going to be as good as the OEM.’ Had the industry done that in the past, the industry probably would not be in the situation we are in today. The fact is many companies do not have faith in the quality of their own product. So they price it at 50% less than the OEM, when an appropriate price for a quality compatible is 25 - 30% less. The current industry pricing practices, if they continue unabated, will lead to the undoing of the industry. Too often product is priced as a base of cost up; rather than OEM retail price down. These problems are internal. One company cannot accomplish this repositioning by itself. We need a collective representation from the majority of remanufactures to improve their quality and price their products appropriately. How has the economic down turn affected the supplies aftermarket? Gil Wazana: A major shift in OEM equipment launches took place between 2008 and 2011 as a result of the global recession. The OEMs stopped developing new technology and releasing new printers. In previous years, they were releasing new chip technologies, faster printers, higher yields, 15+ new models per year. Each of these actions delayed the ability for the aftermarket compatible industry to quickly and effectively keep up with providing quality aftermarket products. Recently, many assemblers were able to go to the toner manufacturers and ask for toner that would work in many of the popular printers that had been on the open market for a couple of years. They would test new products until they worked good enough to offer a remanufactured product to the compatibles market at a very low price. Luke: In 2011 there is a noticeable increase in the amount of new hardware with new technology being offered by the OEMs. Faster speeds, new chips, advanced color formulas are being introduced. These new products play into the strength of MSE. Our history of innovation, creative engineering, state of the art testing facilities and first to market manufacturing ability allows MSE to quickly and effectively custom engineer compatible products for newly released equipment. How do these events fit in with the MSE business philosophy? Gil: MSE began as a reseller of compatible toner cartridges in 1994. From the very beginning we struggled to find a reliable product to sell to our own retail customers. We eventually transitioned into remanufacturing laser toner cartridges due to the inability to find consistent compatible supplies that met our demand for consistent quality and yield. This recognition of the lack of quality in the industry drove us into the world of manufacturing with a vision to successfully compete with the best OEMs. Quality has always been at the foundation of MSE even before we had the resources to invest in the technology, innovation and the patented processes we have today. Explain MSE’s trademarked phrase Intelligent Re-engineering™. Gil: By the late 1990s we stopped seeing ourselves as a cartridge remanufacturer. The foundation of everything we do is based on quality, innovation, and technology. Our focus on engineering became the driving force to deliver consistent quality. We decided that hiring engineers to provide innovative technology was more important than increasing our sales staff. Intelligent Reengineering™ became our trademarked phase that describes our quest for providing the markets truest alternative to OEM products. Our engineers understand the OEM process; the good and the bad. Our goal is to overcome OEM impediments and in some cases to even improve on the OEM process. It officially began in 1999 with the development of the first MSE patent. Eleven years and 16 patents later, MSE continues to invest in development and continuous improvement of our products. How are the compatible color resellers dealing with product quality? Luke: Coming from the raw material, manufacturing and distribution side of the industry, I have seen firsthand the major issues caused by the raw material side of color. Those challenges are exacerbated by the fact many manufacturers do not have the necessary manufacturing equipment, technical understanding or investment capital that is required to produce a consistent quality color product. Today one of the things that makes it risky for the dealer looking to buy compatible color products is that everybody says they are the leader in color. So how does the dealer know what is reality and what is subterfuge? How do you differentiate between those who say they sell a high quality non-OEM alternative and those that actually deliver? Collectively the aftermarket has not done an adequate job of convincing the consumer that there is a good alternative to the OEM color product. Dealers are scared of getting their end users to try a product that has a history of being inferior. Eventually we will lose our opportunity to successfully sell compatible color if we continue to offer a subpar product to the same end users who have tried and been disappointed with inferior color products in the past. How is MSE responding to the color needs of the market? Luke: Patents, innovations, technology, engineering and unyielding commitment to quality directly relate to MSE’s commitment to producing the first true color alternative to OEM consumables.. MSE has earned a real leadership position in the color market. Today over 40% of our revenue comes from our aftermarket color supplies. This is in comparison to worldwide aftermarket color sales of less than 10%. We have been successful in convincing our dealers to use MSE color because it has proven itself to be able to produce superior consistency over an extended period of time. How does Absolute Color Technologies differ from other color products? Luke: From a marketing standpoint we established the MSE color sub-brand Absolute Color Technologies™ to establish a differentiation of quality and recognition at the dealer and end user level. Every MSE branded color cartridge has a sticker on it listing specific technologies and patents that are deployed in the manufacturing of this product. Aftermarket color was infamous for poor color consistency. There have been many historical causes of this including color toner adhering to the primary charge roller. This causes dirty prints, streaking print and unwanted background. Every dealer has seen this problem. As part of our Intelligent Reengineering™, we developed and applied for patents on our secondary cleaning system. This additional component is added to the cartridge to keep the PCR completely clean of toner additive buildup. It virtually eliminates the issues of streaking, back grounding and overall dirty print quality. This hallmark revolutionary technology eliminates many historical problems associated with aftermarket color. The Absolute Color Technologies™ brand of products is a true color alternative to the OEM. When it comes to laser color toner cartridges, MSE is in a Category of One for aftermarket color. How is MSE fulfilling the needs of MPS dealers? Gil: A traditional laser printer dealer has a different understanding and usage of compatible supplies than does the BTA channel dealer. The MPS movement has required copier dealers to take on the servicing of printers. Most copier dealers do not question the quality of their supplies. In the past they made good money selling new OEM hardware and OEM supplies. Quality was never an issue. That world no longer exists. When attending World Expo or ITEX, their discussions with manufacturers of compatible products deal with pricing and shipping. There is a preconceived notion that all aftermarket supplies must be at the same quality as the OEM. This creates a ‘false start period’. Explain the concept of the false start period. Gil: Most copier dealers established their MPS program infrastructure with little thought about the quality of the supplies they will be using. They are price focused when choosing a manufacturer and distributor of their supplies. They do not take the time to visit the manufacturing plant of the maker of the supplies. Price and logistics alone are the determining factors in their buying decision. For the first few months of using low priced compatibles, things seem to be OK. An inferior product will work for a while before that 10% failure rate begins to negatively affect serviceability and profitability. After 9 to18 months of use you have unsatisfied customers, increasing service calls, disgruntled field techs and a discouraged sales staff. End users are unhappy and refuse to renew their MPS agreements. The false start period requires the copier dealers to re-examine their MPS program. They know they must remain in the MPS market. They just have to find another way to make it work. Many find they are committed to long term agreement pricing that is dependent on the use of very low priced and equally low quality compatibles. Copier dealers are coming to MSE and saying ‘We need to use your products in our MPS programs. But we are already stuck with pre-established unrealistically low prices to our end users. What do we do?’ At this point, they have educated themselves to the need for proven quality the hard way that the foundation of a successful MPS program is the exclusive use of quality compatibles. After the false start period, MPS dealers diligently research the credentials of compatible manufacturers and sellers. What problems and benefits are the high yield and jumbo products creating? Gil: MSE has established a high yield cartridge with the MPS Engineered sub-brand. This product has been specifically engineered for use in equipment being covered under MPS agreements. MSE also provides MPS engineered marketing literature that is written in language easy for the end user to understand. The full color marketing piece explains what makes the MSE products superior. These include commercial benefits, environmental, technical benefits as well as cost savings. Users need to be cautious and aware of companies that advertise high yield products. There is more to jumbos than just stuffing more toner into a cartridge. Users need to measure the engineering and innovations ability of companies that offer jumbo cartridges. You are asking the cartridge to double its life cycle. Just marketing extended yield does not increase the ability of a cartridge to last twice as long. Over the years I have learned there is not just black and white, there are a lot of grays. If I told you every one of my products is perfect and equal to the OEM; it probably is not true. Explain MSE’s commitment to reinvestment and educating their dealers and users. Luke and Gil: MSE continues to educate and bring a true awareness regarding the critical importance of quality to the dealer community, especially the copier dealers. Printer dealers already had years of learning the hard way to choose quality over lowest priced. The industry cannot afford for the copier dealers to have such bad experiences when using compatibles that they revert back to using OEM products. Our goal is to increase the awareness of how to evaluate the overall value, not just the price, of different compatible products and their manufacturers. What suggestions do you have for the BTA channel MPS buyer and user? Gil : A large part of the MSE marketing approach is through consultative sales and brand name recognition. MSE never sells directly to the end user. We understand that our products must be sold by a 3rd party. We are committed to support our dealers. We translate our very technical achievements to sales and marketing support that end users can understand. After the sale we continue to advise and help our customers succeed. MSE has a vast array of dealer marketing support including those specifically designed for the dealer community and other material for the end user. What benefits does the MSE branded products provide? Gil : MSE is the only major wholesale manufacturer that prints their name on the box. It is not just the dealer’s reputation who sells the product that is at stake. The MSE brand was launched in 1998. We were the first in the business to use color packaging. Our checks and balances insure we never sacrifice any element of the product. Using our name on our box allows our dealers to use our credentials, certifications, patents, marketing tools, manufacturing plant visitation, webpage, corporate videos and reputation as part of their selling process. Luke: Dealers who are researching compatible manufacturers should consider the importance and benefits of brand recognition. Without a specific manufacturer’s brand name on the box, how do you know who actually made the product you receive? When you buy from a distributor, how can you guarantee (to your end user) the consistent quality of the product? There is no brand integrity, consistency or yield guarantee with most of the non-OEM products being offered. The box packing does not identify who or where the product was made. MSE is proud to print their name on the products we make. MSE continues to prove their sustainability as a partner that can provide first to market products that work. We also have a 17 year track record of reliability. When a dealer writes a 5 year MPS agreement using MSE pricing and reliability as the foundation of their pricing, they know MSE will be in business to support the promises the dealer makes. Having a trusted, US based manufacturer, whose name proudly appears on each product that is manufactured and sold, creates a true business partnership with the What advise can you give the struggling MPS dealer? Luke : The copier dealer needs to look no farther than MSE for a trustworthy partner that will be around in future decades. When you visit MSE you see, feel and hear innovation, reinvestment and industry commitment. Many of our customers come for a visit every 6 months because they can see the advances, changes, innovations, new products, additional employees that are part of the MSE culture. Our dealers understand part of every dollar they pay to MSE is invested in our collective future. The core of MSE is built on the knowledge that quality will win out over time. When viewing our price list, MPS dealers quickly realize we are not the lowest priced option. But we continue to prove that MSE offers the greatest overall value. MSE partners with the MPS dealer to increase their customer retention. The future is a reflection of what we have achieved in the past. MSE believes in the power of our market which ensures that consumers have a viable choice. We are bullish on the future of our industry if we continue to be vigilant about quality.u By Ronelle Ingram Micro Solutions Enterprises North America 8201 Woodley Ave, Van Nuys CA 91406 tel 800.673.4968 www.msc.com  email: sales@mse.com