PART ONE: IN SEARCH OF PROFITS – BUSINESS STRATEGIES FOR TODAY’S MARKET

Posted on by Dave Erlandson | 1 Comment »

We are coping with unprecedented industry consolidation and declining print volumes. NAPL reports that the number of U.S. printing industry establishments shrunk by almost 25% between 1998 and the end of 2011. Over the past 12 years, almost 10,400 businesses closed.

As the overall volume of print declines, printing companies are scrambling to find strategies to not only survive, but to grow revenue and margins. Companies realize that with declining volumes in a market most often perceived as a commodity, price becomes the deciding factor. This places huge pressure on margins. Companies need to find alternative strategies to alleviate this pressure.

What are Companies Doing?

We routinely see successful companies doing one of the following:

  1. Acquire competitors
  2. Become the low-cost producer for a niche
  3. Add new services complementary to print
  4. Add marketing expertise and technology to manage the marketing process which includes creating what gets printed – commonly referred to as becoming a Marketing Service Provider
  5. Use technology to change the way print is ordered and managed. In this scenario companies don’t have to create what is printed, just produce it more effectively

We’ll explore all these options in more depth in a 3-part series here on the Caslon Blog. Let’s start with the first three directions.

 

ACQUIRE COMPETITORS

In a commodity market, excess capacity drives down prices and profits. Some industries are great at managing capacity. For example, the paper industry routinely takes mills out of production when demand drops.
The pace of acquisitions in the printing industry is high as companies with cash can easily find companies that have fallen into financial hard times and can be purchased for a good value.Typically the purchase just

centers on acquiring a customer base and the added production equipment is less important.

 

LOW-COST PRODUCER

While the market for print is declining, it’s still a very large market. And in a commodity market where price is the deciding factor the low-cost provider will win the majority of the jobs.

No one company can become the low-cost provider for every printing job. Printing equipment is designed for different run lengths and configurations. Each company has to pick a niche where they can be the low-cost provider and tie that niche to a market segment that they will serve. Some companies are set up for high-volume production. They have the largest presses that run at the fastest speeds. Economies of scale allow them to reduce costs and price low.  

Other companies are set up for large numbers of short-runs, with printing equipment geared for shorter runs and configured to minimize the cost of those orders.

 

COMPLEMENTARY SERVICES

If we look at print as part of a process then we can look at the additional steps in the process, either upstream or downstream from printing, which can be offered as a service.

Two of the most common services that commercial printers add are mailing and fulfillment. This is because, after printing, a piece has to go somewhere and that is either directly into the mail stream or to a warehouse for later shipping to the customer.

This is not a new idea. Letter shops started out by handling the mailing of printed pieces in the most cost efficient manner. Their main value was in minimizing mailing costs. As this business became a commodity many letter shops expanded their operation to include print. Then they added data services. Some have continued to take on additional steps in the process and now offer creative, analytics and call centers.

Next week we’ll see how service providers who combine technology with marketing expertise create the biggest opportunity for high margin growth.

If you would like more help moving your printing business to a more profitable model, PODi has a wealth of resources that can help you and your team understand your options, learn about new applications and opportunities, and sell more high-margin digital print solutions. www.PODi.org

One Response to “PART ONE: IN SEARCH OF PROFITS – BUSINESS STRATEGIES FOR TODAY’S MARKET”

Comment from Diane Toomey
Time May 8, 2012 at 10:16 am

Complimentary services are free. Complementary services are what you are describing in this piece.

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