LEXMARK LISTENS Lexmark brought a handful of analysts to scenic Lexington, Kentucky for a briefing. We were treated to informal open discussions with key executives, including CEO Paul Rooke, who started off the morning. Mr. Rooke candidly discussed challenges Lexmark faced last year with situations like the Japanese earthquake and other events that had a negative impact on not only Lexmark, but on the entire print industry to one extent or another. While Mr. Rooke wouldn’t provide much information about growth, he did tell us that the laser, business inkjet and MPS “core” grew about 7% and supplies achieved record numbers in 2011. Most of the presentations were focused on the dealer channel. Lexmark has about 250 U.S. dealers and 750 worldwide. Lexmark has strong coverage in North America, Latin America and Europe and is in the process of bulking up their coverage in Asia. While their coverage is solid, Lexmark is adding feet on the street in the U.S. to support their dealers. Like other vendors, Lexmark sees the dealer channel as an excellent opportunity with considerable growth potential. They acknowledged some hiccups in the early days of their maturing program and have worked very closely with dealers to make adjustments. Indeed, dealers we’ve spoken to seem to really like Lexmark as a partner. Lexmark has a strong direct sales force that numbers in the hundreds (they wouldn’t pro-vide an actual figure). Unlike other vendors that sell, serve and support customers through their direct sales forces, we were told that Lexmark fulfills 99% of Lexmark’s sales through their channels – not directly. Rather than competing with their dealers and resellers, Lexmark is providing them with opportunities. Sean Endicott, Manager of Business Development, provided an overview of Lexmark’s embedded solutions. Lexmark has brought to A4 what traditional copier vendors are working on with their own A3 products – equipping the hardware to work as an on-ramp for solutions. One difference is that most of these solutions are Lexmark products, meaning support and engineering are provided by Lexmark – not by third party software/middleware developers. The solutions are presented vertically and laid out in an organized easy-to-understand format so sales people can better grasp what they do and how they work. After the presentation we were taken through a solutions center that had several areas dedicated to different vertical markets with Lexmark devices configured to accomplish different tasks such as digitizing paperwork for a shipping dock, secure printing and more. It was helpful to see how these solutions worked in action instead of simply hearing what Lexmark can do. Best of all, because Lexmark devices have such powerful user interfaces, they are able to embed these solutions in the devices making them incredibly easy for the dealer or reseller to install. I have to say I’m typically sick of hearing about solutions. We’re a hardware-based industry and the approach most manufacturers have taken pushing solutions from third party developers through a sales force that often doesn’t understand the technology is a prime reason these solutions have not taken off. It’s as if these vendors turned to these solutions as a means to justify their A3 products that cost three or four times as much as an A4 device with comparable print speeds. After all, there are only so many customers that actually have Ledger size paper printing requirements. Along comes Lexmark with an A4 product line that can support comparable solutions on lower cost A4 devices. This is unique. I don’t think any other vendor’s full product line, particularly A4, can work with their full solutions portfolio. This is due to the fact that many of them don’t manufacture their own A4 products, making it more difficult to integrate those devices into their solutions strategy. We also saw Lexmark’s business class inkjet devices. While these are not yet a factor in our channel, it’s certainly a technology that continues to improve and will eventually begin to penetrate business accounts. Will dealers ever grasp them? Maybe. They certainly have an upside when it comes to environmental benefits and operating costs but could there be enough margins in them for dealers to sell through an outbound sales force? I don’t know about that. Overall, I was struck by how little Lexmark seems with respect to personnel running this program. Don’t get me wrong, they’re a $4+ billion company. They’re not small by any means. But it’s only a handful of people running this program making it easy for dealers to get to the right person when they have a question, problem or issue. Lexmark is very hands-on and works with the dealers in a way that others don’t. Maybe this is because they’re an American company and can actually bring their engineers, product developers and dealers together to discuss the products. Meetings like these occur and have resulted in features and accessories on Lexmark products that dealers wanted, such as the first and only stapling/hole punching finisher on an A4 product. What other manufacturer sits with dealers and asks their input when developing products? The bottom line is Lexmark listens. They openly admit they had problems at first and have worked very closely with dealers over the last six years to build a program that is now very well received. The level of communication is unparalleled. For example, at last year’s dealer meeting, some of the sessions were completely interactive. Rather than having a marketing executive stand on a stage and run through a PowerPoint presentation about the new products or programs, each dealer received a remote control and Lexmark executives polled them on issues, and then discussed the responses in real-time. This was a great approach and dealers had a chance to voice their opinions in an open forum. I’ve never seen another vendor do that. Customers are gravitating to A4 from A3. It’s already started and it’s only going to increase. Virtually all dealers now carry A4. Did you know Lexmark has the largest A4 portfolio? Lexmark’s staff of genuinely nice people, their willingness to listen to the dealers and attempt to give them what they want, combined with their unique, cohesive A4 solutions portfolio make them a very strong option for dealers looking for another product line. u Andy Slawetsky is President of Industry Analysts, Inc., a marketing and management consulting firm for the office automation industry. visit their website www.industryanalysts.com.