Approaching MPS with a Growth Strategy2 Dec, 2015 By: Tom Callinan, Strategy Development
It’s exciting to see a renewed interest in MPS. There was a period over the last couple of years where people seemed to give up on this offering, and I believe that is a mistake. Dealers need new growth strategies. Over the last few years many dealers have experienced significant growth in their core business of selling copiers but that will become more difficult.
The industry is projected to be flat in placements with declining revenue due to lower average unit selling price. Moreover, it is my opinion based on working with dozens of dealers across the US, that a great deal of the growth over the last few years has come from, what I term, the “meltdown” of direct operations. At some point in the not too distant future you’d expect these direct operations to get their organizations “down to a size they can manage,” while the large movement of customers to dealers will subside.
Finally, color aftermarket is getting down to a reasonable image charge so it will not be as easy to upgrade color devices faster than black devices, stretching out the average life in field and negatively affecting revenues from customer upgrades. That said the copier business is still a great business model with significant switching costs due to leasing and annual aftermarket increases.
A Strategy for Growth
Now back to MPS and your re-found growth strategy. I wrote about this many times during the period of 2006–2012: You didn’t focus on the sales strategy! That is the primary reason I’ve witnessed companies experience little to no success in MPS. I’ve worked with a few companies over the last couple of years that are rapidly headed in the right direction—they’ve had an “MPS reset” recently and they are doing great now—but the bottom line is that at this point, 10 years into the MPS initiative, if you don’t have as many printers under contract as copiers, you haven’t experienced success.
Most industry players spent far too much time focused on what remote monitoring software they were going to use and what printers they were going to service. Both of those are important decisions but if you’re six days in and still discussing software or service, you’re spending too much time in operations.
The failure has been in the sales efforts, and that really makes your software selection a non-event since you don’t have any devices to monitor. At this point you’re probably saying, “OK, so what do we have to do to experience success?”
Great question, so let me provide you with answers.
What to Do
You need to look at MPS in two buckets; less than 25 total devices, printers and copiers, and more than 60 printers.
With fewer than 25 devices, you have to use balanced deployment through your general line copier sales professionals. You don’t need a specialist for these sales, and balanced deployment does not decode to get rid of the printers and move all of the output to printers. It means you put the correct device based on the use, and you get paid for every image regardless of the device that produces that image.
This approach is sold to business owners or the CFO on a five-year lease. This approach requires cost savings as nobody is going to believe it is logical to pay more or the same when you are reducing their devices by 30% or more.
For over 60 devices you need to focus on an outsourced approach—you manage the printers even if you don’t sell them a single device—without trying to “consolidate” or deploy a balanced deployment out of the gate. You do accomplish those goals over time with the quarterly business review. This approach is sold using specialists, high quality sales professionals, on three-year agreements to IT.
This approach is sold on giving IT back support time, never price, as IT never has enough time to accomplish their goals and they are very accustomed to outsourcing non-core tasks.
In the more than 60 device opportunities, you have to service any cartridge-based printer. If you’re still debating that at this point, stop: There are vendors out there that can help you with service training and parts availability.
Over time, using the quarterly business review (QBR) you can replace the older or expensive-to-operate printers, but you can’t do a QBR until you have a contract, so get the contract on the printers they have.
On the under 25 device approach you are putting the customer on a five-year lease, so you’ll want to make all the changes up front. That is the value proposition you sold anyway—mapping their print infrastructure to their paper usage—so you’ll want to ensure they have the proper devices in place at the end of the sale. That doesn’t mean you have to replace all of their devices as they may have new devices that make sense to retain.
Let’s say they have 4 copiers, 3 MFPs and 16 printers, and after your study you determine they need 3 copiers, 6 MFPs and 5 printers. Let’s further assume that 2 of the MFPs and 3 of the printers are less than one year old and fit well in their environment. I’d keep those 5 devices in their fleet and sell them 3 new copiers, 4 new MFPs, and 2 new printers on a five-year lease, assuming responsibility for the 2 new MFPs and 3 new printers they already owned.
The over 60-device space is by far the better space if you want to add devices to your service base. But to go after those prospects you will need high quality sales professionals focused on this outsourced approach, and paid on gaining these contracts; not paid like a copier sales professional.
Another big mistake that I’ve seen dealers make is to believe that these sales professionals are more analytical. Sure, there is a lot of analytics involved, but you can hire somebody to support the sales professional in that area. You really need a person who can go in and talk to a high level IT professional and then get engaged with finance when required—this is a high quality sales professional, not an analyst.
If you follow these two distinct sales approaches with the correct value proposition, you will be successful in MPS. It wouldn’t be unrealistic to add 1,000 printers to your base over the next year, which will result in approximately $32,000 per month in additional aftermarket. Compound that for three years and you have a $1M plus business before you refreshed a single printer. Assume a refresh rate of 20% per year and by year three you’re selling 600 printers on top of that $1 million, for another $900 thousand in revenue. $2 million a year without a great deal of effort—that’s a good business!
Tom Callinan is the Managing Principal and President of Strategy Development, a management/consulting advanced training firm for the office technology and outsourcing space. Tom was an executive at IKON Office Solutions, and founder/CEO of Copifax, Inc., an award winning dealership later acquired by IKON. Tom graduated with high honors from The Wharton School, University of Pennsylvania. Visit http://www.strategydevelopment.com for more information.