*NEWS*DISPOSABLE COLOR LASER PRINTERS

[Anonymous]

Disposable Color Laser Printers:
A Case for SMB Pay-per-Print Programs
How the Industry Can Fight the Monster It Created
OCT 06
The
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.

The
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
SMB-focused
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.

[Author]

October 5, 2006 at 11:21 AM