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  • 05 02 2016 429716a-cig-clearchoice-banner-902x177


 user 2005-05-02 at 12:12:00 pm Views: 43
  • #9303

    Ink stain on Lexmark’s bottom
    The printer company failed to lock out its competitors
    by legal means but hopefully it has been taught a deeper lesson about customer

    Lexmark’s books are still in
    the black, but the market saw red anyway. Growth is down, which is not a
    forgivable direction in a market going in the other way. Digital photography and
    broadband access have warmed up consumers to colour printing, but aggressive
    pricing from HP has hit Lexmark hard. It’s also not too happy on the way
    independent ink jet cartridge manufacturers have grabbed a chunk of the refill

    You can make an awful lot of money from consumables, but you
    have to play it right. The classic model is Gillette, which uses a combination
    of technology, design, marketing and distribution savvy to wrong-foot its
    competitors and extract premium prices from its customers for stuff they’ll
    throw away. Everything Gillette does adds perceived or actual value to its
    products, or cuts costs without affecting the end result.

    Lexmark, on the other hand, tried to protect its market by
    chipping its cartridges and then forbidding the production of compatible
    products. There was the usual spiel about ensuring consumer satisfaction by
    outlawing inferior products: the way to do that is through the brand, not the
    courts. The courts agreed, saying that reverse engineering for interoperability
    is explicitly allowed. Meanwhile, the consumers are happy to make their own
    decisions based on price and quality

    Talk to any printer company, and you’ll get a great tale of
    enormously expensive research and development, followed by sadness over the way
    third parties leap in and freeload. We feel their pain, but a business plan
    based on customer lock-in rather than superior products is dangerous even when
    that lock-in can be enforced.

    Sony’s attempts to reinvent digital music in its own image
    by excluding the MP3 has hurt the company far more than it has impacted its
    competitors: consumers are frequently brighter than marketing people assume. And
    a company that can contentedly gorge on its customers safe in the knowledge that
    they can’t go anywhere else is a company that will become reactionary and lazy.

    If your products are good enough and your marketing and
    business model are up to snuff, you won’t need lock-in. If your business depends
    on it, your products are unlikely to be competitive in their own right — no
    matter how expensively developed — and the competition will get through the
    barbed wire in the end. Lexmark isn’t the first company to learn this lesson the
    hard way, and we very much suspect it won’t be the last.