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 user 2008-08-26 at 12:32:08 pm Views: 57
  • #20625
    Canon fires at Kodak – and misses
    low-cost ink strategy for its EasyShare multifunction printer line
    seems to have ruffled a few features at Canon USA, which recently filed
    a complaint with the National Advertising Division of the Council of
    Better Business Bureaus.

    At issue: Kodak’s advertising claim
    that buyers can “Save up to 50% on everything you print” with its
    EasyShare line. Among other things, Canon claimed that Kodak didn’t
    make it clear that the savings claim was based on ink costs only. This
    week Canon it lost its challenge when the NAD ruled that Kodak
    “provided reasonable support for the advertising claim.”
    All of this
    would seem to be a tempest in a teapot. Why would Canon USA bother
    pursuing such a claim against upstart Kodak, which has less than 1% of
    the market for consumer-grade multifunction printers?

    The answer
    is that there’s a lot more at stake. First of all, printer
    manufacturers “give away” the hardware with little or no profit margin,
    but make a fat profit on the ink, which carries a very large margin.
    Secondly, Kodak’s ink is indeed cheaper – a lot cheaper, as my
    comparison test against an HP model demonstrated. It’s doubtful that
    Canon, which follows HP’s “give away the razor to sell the blades”
    model, would far any better.Now consider this trend: The amount of
    printing consumers do is already on the decline, according to IDC,
    particularly with photos, which use a lot of ink.

    Enter Kodak,
    with its printer line that breaks the business model for consumer
    printers by offering low-cost ink. Kodak is going after a select group
    of Canon’s most profitable customers: Those who do a lot of printing of
    photographs at home. These are also the people who are the most
    influential with other buyers.It’s a long shot, but grass roots
    adoption of EasyShare printers and word of mouth buzz about the
    advantages of using low-cost ink could – if it caught on – upend the
    established business model in the market.

    That’s a big if. One
    year after the EasyShare launch, Kodak faces some challenges. If Kodak
    is able to gain market share, that would put pressure on ink prices,
    depress margins and cause printer manufacturers to rethink their
    business model. But with sales of just 520,000 units in a market of 61
    million, Kodak’s strategy isn’t even a blip on the radar screen. And
    beyond its own online store and a few high profile retailers such as
    Best Buy and Wal Mart, Kodak doesn’t have broad distribution.
    Furthermore, while ink prices are a top complaint among consumers who
    have printers, so far they seem to pay more attention to purchase price
    when shopping for a new unit.

    So why should Canon care? Because
    Kodak doesn’t need to get a large overall market share to cause
    trouble. If 10% of consumers are responsible for 80% of printing, all
    it needs to do is capture a substantial portion of that elite group to
    put pressure on its competitors. Perhaps that’s what has Canon
    worried.Canon is appealing the NAD’s decision.