*NEWS*OEM’S NOW SELLING LOW YIELD CTGS
*NEWS*OEM’S NOW SELLING LOW YIELD CTGS
2005-08-23 at 7:21:00 am #12596
Low-Price Cartridges With Less Ink Inside
Over the years, printer makers
have launched a wide array of innovations, including stunning color
prints, zippy speeds and one-touch simplicity.
Now for a really big change: lower ink prices.
Facing pressure from off-brand ink sellers and sticker-shocked
customers, Hewlett-Packard and Lexmark InternationaL are
launching lower-capacity ink cartridges with smaller price tags.
They’re aiming for occasional printer users. These are people most
likely to use third-party supplies or, faced with another $35 ink
purchase, stop printing at home altogether.
“It’s a recognition that the market is segmenting,” said John Solomon,
head of marketing for HP’s printer unit. “The needs aren’t homogenous.
Some people print a lot. Some people print a little.”
HP is selling cartridges of different capacities — with prices
starting under $15 per cartridge — for the first time this year. It
also has been pushing “Value Pack” bundles of ink and paper for making
a specific number of prints.
Lexmark, meanwhile, has launched two printers that use a single $20 ink
cartridge. That price is about a third cheaper than the typical
Not that either company is ready to give up the famously high margins
associated with their ink business. Drop for drop, the new ink costs
more, not less.
But if all goes as planned, the lower price tags will help overcome a big consumer objection to brand-name cartridges.
The stakes are high. Inkjet printers have made great technological
leaps over the last 20 years, but their producers have rarely budged
from a time-tested business model: sell the hardware cheap and charge a
bundle for the ink.
A $50 printer can bring in several times that amount in sales of
replacement ink cartridges, which typically run $25 or more each.
That has made ink supply sales the steadiest and most profitable part of the printing business.
But in recent months, this once-reliable moneymaker has become less of
a sure thing. Price-conscious users are turning to cheaper off-brand
inks or cutting back on home printing.
Digital photos — which printer makers had counted on to spur more ink
sales — are being printed through Web services such as Shutterfly and
the neighborhood drugstore.
HP is hedging its bets. Earlier this year it bought online photo site
Snapfish and later signed a deal to link the service to the
Walgreen drugstore chain.
Still, such deals do little to change printer firms’ dependence on ink sales.
In Lexmark’s most recent quarter, a 9% jump in ink sales helped
overcome a 4% drop in hardware sales. Overall sales rose 3% over the
same period of last year.
Tweaking prices is a delicate balancing act. Companies have to be
careful that the low-priced cartridges don’t lure people who might be
willing to buy the higher-priced ones.
That’s why printer makers also are promoting the idea of buying in
bulk. Lexmark, for instance, is pushing its ink double packs. But while
these packages are cheaper for heavy users, the price tags can be
“A lot of people don’t want to spend $60 to $70 on the double pack,” said Gary Morin, Lexmark’s chief financial officer.
HP also sells ink double packs, and in some cases, triple packs.
Meanwhile, HP is pushing for a standard way of measuring how many pages
of photos and text a user can expect with a particular cartridge. That
will make ink prices clearer and make comparisons easier, Solomon says.
Although most cartridge labels display the amount of ink inside, the actual output can vary.
In a process called priming, some printers use up extra ink to drive
air bubbles out of the cartridge. That means a new cartridge that goes
unused for months can wind up half-empty.
Not everyone is joining HP and Lexmark in rolling out smaller ink tanks.
Canon has always tried to lower ink costs for users, says Michael
Duffett, head of the firm’s field marketing. But it has no plans to
create a facade of lower prices with low-capacity cartridges.
Instead, it looks for ways to keep true ink prices low, Duffett says,
Canon was one of the first to sell printers with permanent print heads.
Most printers integrate the print head into the cartridges, which
HP last month announced a line of printers that does the same thing. Cartridges for those will cost as little as $9.99.
And Canon is still the only company to offer individual color
cartridges, which run about $12 each, in its cheapest printers –
rather than the more common three-in-one cartridges.
That means running out of, say, yellow, doesn’t force users to throw away their unused portions of magenta and cyan.
The firm’s cartridges also feature see-through plastic that tells users how much ink they’re getting.
Seiko Epson officials, meanwhile, have no plans to lower ink cartridge
prices. Spokeswoman Pam Barnett says even with higher prices, Epson’s
products offer better value than rival brands. The inks provide
superior picture quality and resistance to fading, she says.
“Epson has fared very well in a competitive market,” Barnett said.