*NEWS*OEM’s GO TO THE BANK OR THE GRAVE ?
*NEWS*OEM’s GO TO THE BANK OR THE GRAVE ?
2006-11-15 at 12:55:00 pm #17293
Printer Usage: The Essential Ingredient in Printer Vendor Profitability
Why Usage Is Sending Some Vendors to the Bank,and Others to the Grave
It’s no secret that printing vendors make a vast majority of their profits from post-sale products such as ink, toner and paper. However, more often than not, vendors sell printers to people who simply don’t print at robust enough Average Monthly Page Volumes (AMPV) to drive supplies sales enough to make the relationship profitable for the vendor. As consolidation rumors continue to run rampant throughout the industry, and as most vendors once again post unimpressive quarterly financial results, Current Analysis has completed a study designed to find out more about the printing habits of the industry’s great unknown: SOHO and SMB users. While these customers present a large and growing opportunity, the segment has been marred over the past three years by price cuts of over 50% for some SKUs in low to mid-range printer categories. These hardware pricing challenges are breaking the backs of many indust! ry vendors. In this new competitive environment, it is no longer good enough to sell a printer to anyone; now, vendors must sell that printer to the right customer. Our study shows that there are specific higher-usage customers, and that there are a variety of variables which alter usage patterns.
Current Analysis surveyed over 500 users of monochrome and color single-function page printers to find out, simply put, who prints and who doesn’t. We did not rely on users knowing their usage history; rather, each respondent provided printer statistics straight from the unit’s on-board status reports to get an accurate picture of usage history. We then asked the respondents a variety of questions to get an understanding of the variables that affect usage behavior. Printers were broken into four categories: Color Low for products priced under $500, Color High for those products priced at $500 and above, Monochrome Low for products priced less than $250, and Monochrome High for products priced for $250 and higher..We found out that usage trends differ significantly depending on a vast amount of variables: where the printer was purchased, where the printer is located, which specifications alter usage, how many people utilize the printer, how different applications affect usage, how consumables buying trends are affected by usage, and more. The results shed light on the most important topic confounding printer vendors today: Which is the correct target audience for page printer products
A Factor in Usage Differences
While we found that many different characteristics drive higher usage patters, one of the most dynamic aspects of usage behavior that drives higher usage is the location of the printer (office vs. home environments). We asked our respondents to first identify the brand and model of the printer they use. Answers ranged from color page printer products from HP, Dell and others, to monochrome products sold by leading suppliers, such as Lexmark, HP, and Brother. We expected to find that the location of the printer was a major driver of increased usage, but the findings of our study showed an even wider difference in usage by location than expected.Respondents that reported they use a color page printer and stated that their printer is located in a home office, as opposed to a business office, printed 73% fewer pages per month, on average, than respondents that indicated that the printer is located in a business setting. Monochrome respondents reported 70% less usage, on average, in home environments than in business environments. While it’s no surprise that office users outpace home users in usage, the large difference in AMPVs is notable.The office/home disparity gets even larger when looking at the difference between products in the low categorizations, versus those in the high categorizations. The greatest disparity was revealed in the Monochrome Low section. Monochrome printers purchased for less than $250 printed 918 more pages per month on average when placed in an office than they did when located in a home environment.When examining this behavior trend over one year’s time, we see that placing a low-end monochrome printer in a business environment can increase usage by over 11,000 pages. From a consumables perspective, the average toner yield in a monochrome low printer is 4,150 pages with pricing averaging $91. Therefore, a low-end monochrome printer in a business setting will average 2.6 times more in dollars spent on toner purchases than will a low-end monochrome printer in a home environment, or an additional $200 or more in toner sales in the first year of ownership.The Monochrome High category also presented a significant difference in page volumes when home printers and business printers were compared. Monochrome High printers located in a home setting printed 54% fewer pages, on average, than monochrome high printers located in a business environment. Although this is still a very significant difference in page volumes, Monochrome High printers represented the lowest difference, in terms of percentage, between home and office settings of the subcategories in our study (i.e. Mono High, Mono Low, Color High, and Color Low). The other three sub-categories showed larger disparities in the usage patterns than Monochrome High in terms of location of the device. Monochrome Low, on the other hand, represented the largest difference between office and home page volumes, with Monochrome Low printers in an office printing over four times the amount of pages per month than Monochrome Low printers in a home.In the Monochrome High category, for which vendors’ stated average monthly duty cycles tend to bypass 100,000, it is clear that higher-end monochrome users are not even scratching the surface of their potential duty cycles. Our study showed that the average AMPV in the higher-end monochrome category was 1,114 pages per month and never exceeded 1,400 pages per month in either an office or home setting. The same trend was found in the low-end monochrome category, for which vendors’ stated monthly duty cycles routinely eclipse 20,000; the AMPV of our respondents averaged 592, so it is easy to see that the industry is not designing products for average consumers. However, some have indeed recognized this trend and are lowering duty cycles and engine capabilities on newer units, thereby lowering manufacturing costs while still satisfying the needs of the end user.With discrepancies as much as 300% when simply looking at the differences between user volumes within an office environment and a home environment, it is easy to see why identifying and then specifically targeting users with high-usage profiles can translate into millions of dollars per year for vendors. One thing is clear: Vendors that are able to utilize distribution, pricing and promotion strategies to target only the most profitable end users, while at the same time cutting manufacturing costs on unneeded specifications, are clearly the ones most able to increase the effectiveness, and profitability, of each SKU in the marketplace. In these times of extreme pricing challenges, and the high cost of taking products to market, selling to the right customer can make all the difference in the future of a printing vendor.