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 user 2006-10-05 at 11:21:00 am Views: 64
  • #16630

    Disposable Color Laser Printers:
    A Case for SMB Pay-per-Print Programs
    How the Industry Can Fight the Monster It Created
    OCT 06
    dramatic price reduction in desktop color laser printers has caused a
    frenzy in consumer purchases, and the previously elite color models are
    now affordable for all. Color laser printers have always been viewed as
    the Cadillac of the printing industry and have been considered a
    machine that only a select few could afford. Thanks to dramatic
    hardware cuts and retail exposure, however, the color laser printing
    segment has changed forever. Now that the doors are open for all to
    experience color laser printing, a new set of problems has cropped up
    for manufacturers and consumers. In order to make up for the reduced
    margins on the hardware, manufacturers are increasing the cost of
    supplies, which takes the customer by surprise and also leaves small
    and medium businesses unable to predict their color printing costs.

    increasing cost of printing in color shows no signs of slowing down. On
    average, the cost-per-page for color laser supplies is increasing
    roughly 15% per year. This increase is driven by the lowering of page
    yields while toner pricing remains steady. Manufacturers have learned
    that consumers are not printing very much in color in the SOHO or small
    workgroup segments. To help offset the margin losses on hardware,
    manufacturers have kept supplies pricing stable but have decreased page
    yields in order to boost replacement purchases. The biggest pricing
    pressures are occurring within the SOHO and small workgroup segments,
    but Current Analysis is also finding gradual cost-per-page increases in
    the small and large workgroup settings.

    The recent wave of
    high-priced color laser supplies has created a family of disposable
    printers, for which the printer costs less than a new set of
    replacement consumables. Many manufacturers are shipping a full set of
    cartridges to offset the replacement sticker shock of consumables. In
    actuality, though, this is not a factor in purchasing decisions for
    consumers or small businesses. Consumers do not view the cartridges
    included with the printer purchase as a variable that can extend their
    printing capacity, but rather, they see the included cartridges as a
    standard purchase that comes with the printer. In their minds, the
    supplies should not cost more than the printer since their original
    purchase included supplies. Consumers and small businesses quickly
    caught onto the high price of replacement consumables, which in turn
    has dramatically reduced page volumes.

    Now, manufacturers are
    struggling to increase those page volumes within the low-end color
    laser segment, and this same issue will trickle into the workgroup
    segments if cost-per-page continues to increase at a steady pace. When
    the price of consumables is two or three times the price of the
    hardware, the manufacturer is left in a weak spot, and reduced market
    share and negative brand equity are just around the corner. History is
    repeating itself, as the page printer market re-enacts every misstep of
    the inkjet industry.

    While history repeats itself, many of the
    “disposable printer” offenders have never experienced life in the
    inkjet printing business and thus are going through the inevitable loss
    of supplies revenues for the first time. The biggest offender of
    disposable printers is Lexmark, and it should know better, considering
    that the company has already experienced the same problems on the
    inkjet side. More than 82% of Lexmark’s current products are considered
    disposable printers, which makes Lexmark the leader in disposable
    printers, followed closely behind Konica Minolta (see chart:
    ”Disposable Printer Share by Manufacturer”).

    There are several
    key players in the industry whose replacement cartridges cost two or
    even three times the price of the hardware (see chart: “Low-End Color
    Laser Printer Hardware and Consumables Pricing”). Manufacturers are
    struggling with these issues, and it will cost them more than supplies
    revenue in the long run, if they do not develop a solution for selling
    color printing to the SMB market.

    Opening the doors of color
    laser printing to the mass market has created a monster for
    manufacturers. Manufacturers that rank high in the disposable printing
    segment are creating several problems from which recovery can be very
    difficult. One of the biggest concerns is consumer loyalty. Without
    consumer loyalty, a rash of problems can occur, creating a spiraling
    downfall. Consumers and businesses alike need to be able to trust that
    their printer manufacturer provides the best cost alternative for their
    printing needs. This is one area that has been overlooked in the
    expansion of the color laser printer to the mass market.If consumers or
    businesses cannot trust a manufacturer to provide optimal printing
    costs for their needs, then brand image quickly falls, and market share
    follows. Consumers and businesses need peace of mind when purchasing a
    hardware product that they hope will drive their incremental sales and
    revenue. Consumers have quickly caught onto the high price of
    consumables, and this will have several negative impacts on select
    manufacturers if they do not deploy a solution that allows affordable
    color printing for all.One solution that manufacturers are starting to
    deploy to gain trust and cost benefits is cost-per-page programs. To
    expand upon a cost-per-page program, manufacturers need to explore
    offering leasing programs to all. The rising CPP will not go unnoticed,
    and consumers and SMB customers alike will no longer be fooled by low
    hardware prices. Manufacturers are caught in a catch-22 situation:
    lowering their hardware prices will not move any more units (ask Dell
    executives, they know), and price elasticity has been stretched beyond
    the point at which lower prices lead to higher sales.CPPs have risen so
    steeply that customers are prompted to question that cost. But,
    manufacturers that consider reducing CPP would start a price war that
    would jeopardize their very existence. If manufacturers undercut each
    other on CPP, profits will come tumbling down and will put the printer
    industry in its worst crisis ever.

    The Benefit of SMB-Focused Pay-per-Print Services
    pay-per-print services are emerging as the industry’s escape route from
    a building engulfed in flames. These programs are not new — they have
    their roots in the copier market and are quickly gaining in popularity
    for enterprise customers with printer-based devices as well. The long
    and difficult sales process has kept these programs at the enterprise
    level, but they are now beginning to head downstream to the SMB level
    as a means of saving the industry. Xerox PagePack is one of the latest
    programs of that kind, announced at this month’s analyst conference in
    New York, and OKI is scheduled to follow suit this fall. The European
    markets are spearheading these developments; European pay-per-print
    print programs for SMBs have been available from OKI, Epson, and Xerox
    since January, starting as low EUR 25 per month — as easy and cheap as
    a subscription to Netflix.The new SMB pay-per-print programs combine
    hardware cost, service and maintenance cost, and consumables expenses
    in one flat monthly fee. The programs vary in detail — page volumes
    and payment options differ across the board — but they all have one
    thing in common: They transparently tell the customer upfront what the
    total cost of printing will be each month. And, they offer
    pay-per-print contracts in an SMB-friendly way by not discriminating
    against low-usage SMB environments. Therefore, they resolve a problem
    that the manufacturers themselves have created: customers’ inability to
    predict their cost of printing.These programs are win-win situations:
    Customers get back control, while resellers that sell the contract no
    longer have to compete for supplies revenue for the life of their
    customer relationships; instead, they have secured it with the original
    sale. The manufacturer thereby reduces the focus on hardware cost and
    can offer higher-priced devices with lower CPPs in order to woo their
    customers. More importantly, they can now forecast profits from
    consumables based on these contracts, which investors and financial
    analysts will prefer over the current “crystal ball” method that many
    manufacturers seem to use, judging by their inability to meet profit
    goals, which has been apparent in recent financials. Manufacturers are
    on the fast track to replicate in the SMB segment the success that
    solution-based sales approaches accomplished with enterprise
    customers.However, one last remaining bump in the road will slow down
    the acceptance of these programs before they can accelerate again: For
    SMB customers, the most important aspect is the bottom line. Simply
    knowing the cost only solves the problem that the industry artificially
    created. The real problem is the cost itself, not just knowing it, and
    the solution is to offer cost savings and tell customers how much a
    business can save by switching to the program. Manufacturers’
    complicated cost-assessment tools that are used for enterprise clients
    do not work in the SMB segment because these tools are too tedious for
    resellers and customers to use. Instead, manufacturers need to offer
    comprehensive cost-comparison tools that meet three key requirements:
          •     First, they must be easy to use.
          •     Second, they must be sourced by a third party in order to alleviate suspicions of subjectivity.
        •     Third, they must focus on hardware cost (including warranty)
    and finance charges, but must disregard productivity loss. (If the
    distance from the desk to the printer rooms needs to be made part of
    the calculation in order to show savings, or be a better deal than the
    competition, resellers would be well advised to move on the next
    account instead of spending valuable time micro-argumenting.)Until
    manufacturers give their resellers such sales tools, the programs will
    fail to reach their full potential. The first manufacturer to do so
    will kill three birds with one stone, by solving its customers’ needs
    and its resellers’ needs, while at the same time resolving its own
    profit problems. The rewards will come in reseller and customer loyalty
    and increased profits. In this situation, everybody wins. The
    combination of decreased hardware prices and increased total cost of
    printing through expensive consumables did not work for the inkjet
    market, and it will not work for the laser market either.A disposable
    laser printer alienates customers that were looking to laser printing
    as the more cost-efficient technology; subsequently, selling a
    disposable printer destroys brand image and creates a disloyal customer
    base. SMB-focused page-per-print programs are the solution that can
    lead the industry out of this dilemma, but manufacturers need to do
    more than just show the real cost. They now need to show the potential
    savings in order to close the sale and win back their customers’ trust
    and loyalty.