Making Office Color Profitable & Relevant28 Feb, 2014 By: Kim Beswick, Memjet Office
Today our printing and imaging business can too often seem like a melting ice cube. The pervasive managed print messages, often proudly celebrated, state “eliminate waste! Reduce unneeded printing! Reduce your device infrastructure! Control color printing! Reduce print related costs by up to 30%!” While we could argue that all of these messages have some merit, I can’t help but think that the final end-point for all of these strategies is no printing business at all! It should not be a surprise, within this context, that printed page counts are shrinking and customer pressure to reduce printing and imaging infrastructure costs are ongoing. As a result, our revenue and margins are more difficult to protect, let alone grow. We can blame cool new smartphones and tablets – yes they are having an impact- but we should also look at the fact that our sales messages are causing the ice cube to melt.
Let’s Rethink Color
If we shift our focus from cost to value, it means that we start thinking of ways that the printing and imaging infrastructure(s) we manage can increase employee productivity, make the businesses we serve run more efficiently and/or increase our customers’ revenue streams. I love to hear dealers talk about their successes in document management services, business process re-engineering, as well as adding broader IT services as a part of their portfolio. All of these are value generating investments and services. Maybe the easiest change, however, is right in front of us! It requires essentially no new sales, service or delivery skills. It’s the shift to color and it’s being catalyzed by changes in color technology choices and value.
Today, 87% of the pages printed on A3 and A4 office laser devices, worldwide, are monochrome (the percentage is slightly greater in emerging markets, slightly less in the US and Europe). The numbers are surprising to many dealers. The larger A3 MFPs tend to print a greater percentage of color volumes, but the convenient workgroup and desktop segments are still dominated by monochrome devices/pages, and these drive many of the day-to-day pages printed. Color pages that could be printed are often controlled (and diminished) by management practices we recommend.
Most dealers offer monochrome pages at rates between $0.01 and $0.015 per page. Color pages are charged at higher CPP rates, often between $0.08 and $0.10 per page on centralized large volume A3 MFPs. Color pages can cost up to 15 or even 20 cents per page on distributed color desktop devices. The following table illustrates a sample of the supply costs of a few popular, distributed color printers, and their monthly costs based on print volume of 4,000 pages per month.
**See Chart in Embedded Mini Flip Book/March Cover Image, for:
ModelDevice Cost* --End User Monthly Supply Cost (4000 pages)**--End User CPP** --Dealer CPP** Costs for devices:
HP Color LaserJet Enterprise CP2025n- N/A $670 16.7 ¢ 13.4 ¢
HP LaserJet Pro 400 color Printer M451nw- $400 $658 16.4 ¢ 13.1 ¢
Lexmark CS410n- $450 $965 24.1 ¢ 19.3 ¢
Xerox ColorQube 8570n- $700 $495 12.4 ¢ 9.9 ¢
* Device costs, cartridge costs, and page yields are from officedepot.com, accessed February 4, 2014. Monthly supply costs and CPP assume page coverage of 5% black, 20% color; dealer CPP assumes 20% reseller gross margin.
Today, distributed workgroup and desktop devices outnumber centralized devices in managed print accounts 4:1 and are predominantly monochrome laser. The integration of four individual print engines into a color laser device brings with it cost and complexity. The impact of many more moving parts, expensive consumables for replacement, in addition to the manufacturing cost of high quality manufactured color toner, makes running costs high. Complicating matters, OEMs have used a strategy of low cost hardware to secure device placements and then rely on high cost supplies to recover revenue and profit. The 87% monochrome page volume statistic underscores just how badly this strategy has worked out. End users, as well as MPS providers, by and large, have not bought in to the value of distributed color laser devices.
Print What You See
It is this market reality that led to the creation of page-wide ink technology, such as Memjet. In order to drive color pages, it’s important to get color cost per page down to a level that will encourage color output at the desktop. The goal is to enable some portion of users to simply print their everyday (mostly color) content conveniently vs. having to grapple with the high cost of what they might want to print.
We know that color laser technology is unlikely to ever achieve a price level that will drive the next wave of color pages. If this seems too bold, take a look at HP’s cost-per-page for their OfficeJet Pro devices versus their own color laser printers. Look at the commercial print industry’s page and device growth rates for ink (double digit) vs. toner-based (flat – no growth) technologies. Consider that the commercial print industry is dominated by the need for low running costs. Ask your favorite color laser scientist what they have in their R&D labs that will cut color laser cost per page in half?
The fact is, new page-wide ink technologies are a much more cost-effective time-efficient, and lower energy way to deliver a color page today than laser technology… and color laser technology development has been in high gear for over 20 years. Memjet and other page-wide ink technologies can get a lot closer to monochrome page costs, close enough to drive the shift we want and to create new industry value:
1. Additional gross margin dollars for dealers
2. New cost-effective, color documents printed at convenient desktop locations for End users.
So how would your customers react if they knew that convenient color pages did not cost 15-20 cents per page, but were actually closer to 4-6 cents? Simple economics would indicate that the lower we can make the cost of color pages, the more likely people are to print in color. What if, in addition, you told them they could print at 1 page per second, expend less energy, and print an occasional high value glossy brochure? What if they didn’t have to walk down the hall or ask permission, but could just print?
Driving the Shift:
Having access to low-cost convenient color opens up four potential near-term selling opportunities for the dealer community.
1. One thing we know for sure is that users with access only to monochrome printers cannot print color pages. Upgrading aging monochrome lasers to low cost color will add profit to your infrastructure.
2. Replacing expensive color laser devices, with new low-cost color can help justify more color pages in your accounts at no additional cost to your customer, and will likely improve your dealer margins.
3. Complementing your color A3 MFP placements, with A4 devices at the same color “click” rate, will help you to add color devices and infrastructure without increasing your overall cost-per-page for color pages
4. Customers who are outsourcing full-bleed marketing materials or struggling with printing those in the office on much slower, legacy ink-based devices will benefit from a new fast way to print some of those materials in-house.
At what cost per page would your customers start to switch? If you extrapolate this impact across your customer base, what would happen if for every 1,000 monochrome devices you currently manage, you swap out 20%, or 30% or 40% to color?
The Broader Impact
Although the dominant talk track for managed print services has focused too much on helping customers reduce their printing costs, there is a way out. By switching the talk track to productivity and convenient color, led by devices such as the Memjet C6030 and C6010, we can fight back against declining financial metrics and help you deliver both top line growth and bottom line profits.
Kim Beswick, President, Memjet Office, will present at ITEX 2014: “Making Office Color Profitable & Relevant: New Strategies to Take You Beyond the Losing Game” on Mar. 12, 11am. Visit http://www.itexshow.com / http://www.memjet.com