Revenue Strategies for Imaging Dealers: Don’t Leave Money on the Table3 Mar, 2014 By: Sarah Henderson, West Point Products
Who doesn’t want to increase their businesses revenue in the coming year? For the leadership teams of imaging dealers and resellers, I can’t image a time when owners are not staying vigilant on maximizing a business’s financial position each year. I recommend dealers review their business model and identify what goals are on and what areas there may be money left on the table. While Managed Services and MPS continue to be the headline grabbers, an area often overlooked is the category of imaging supplies.
I spend the majority of my time as Director of MPS Operations at West Point Products providing analysis of Managed Print Services contract performance, which is essential to maximize revenue. Acceptance and increased sales of remanufactured supplies became a necessity for most dealers with the growth of their MPS business model. For many dealers, the best way to provide a competitive Cost-Per-Page on laser printers was to place a remanufactured mono cartridge. But not all cartridges are created equal, so it is important to understand some key points that affect revenue.
Dealers placing remanufactured supplies need to select cartridges that are designed for the installation type. For MPS contracts, dealers should select MPS ready and high yield supplies. These cartridges have a higher acquisition cost, but a lower Cost-per-Page. A dealer will need to understand not only the published yield rate of the cartridge, but also that the remanufacturer tests the yield performance to ensure it is accurate and meets print quality output standards. If the cartridge doesn’t perform at yield, they are leaving money on the table every time. While failure rates are important, a quality remanufactured imaging supply company is going to stand by and replace that cartridge anyway. So instead, consider adding yield performance as an area to measure when selling supplies on MPS contracts. (Demonstrated in the option chart / graphic)
A “soft cost” that often goes unmeasured is time; aka the amount of working hours a dealer’s staff spends on ordering supplies and the processing. Supplies fulfillment is not easy, especially related to MPS contracts. Common issues include misordering or misbilling, excess and expired inventory, improper supply use and early replacement, little to no predictability on supply usage rates, expense associated with rush order, and all the administrative burden. Dealers are missing out on revenue recapture if they do not examine processes and look for partners with automation and integration into various software platforms. Investing in new software features can often help redeploying staff hours to other business functions. So dealers should be partnering with a company that offers integration to save money long term.
Expand Your Portfolio
I also find myself going back to the basics and reminding customers that remanufactured supplies are not a product category that only belongs in MPS mono machines. If dealers have not looked beyond just mono cartridges they will be missing out on some great opportunities to sell additional products. I encourage dealers to review areas where remanufactured color toner cartridges can fit within MPS or be sold as a transaction. The color category is a key growth area dealers cannot ignore.
This is not just my opinion, InfoTrends published that the US imaging supplies forecasts a reduction to $6 million for mono by 2016, while the color category is growing to over $5 million. If you ignore color supplies you are missing out a key growth category. This is also reflected in an InfoTrends survey where 64% of respondents reported their next device purchase will be a color machine. The color supplies category has traditionally been dominated by the OEMs and presents a significant opportunity for resellers of high quality aftermarket color. Today the aftermarket currently has only 6% of color vs. 24% of mono. The opportunity is there for resellers with high quality and a high performance solution to capture more of this marketshare and a higher profit margin.
An objection I have received to this strategy is that some dealers report a less than positive experience with remanufactured color in the past. My advice is to select a color aftermarket provider that can demonstrate excellence in their R&D and manufacturing processes to present the quality you need. Seek out customers who are open to a less expensive color printing option and take the challenge to dare to compare the print output within a customer environment. You may find within MPS contracts a mix of aftermarket color on specific business applications can be a game changer to capture higher margins on the CPP.
Dealers need to also review their entire supplies portfolio and look for applications of ink. Business ink jet is also a growing category and a dealer cannot ignore these machines. Too often, ink jets are seen as a nuisance machine within MPS contracts. Don’t ignore them and instead offer to be the ink supplier on a transactional basis, while optimizing the fleet over time.
Other categories to understand are the placement of MICR cartridges and postage meter supplies. If dealers are not offering additional supply categories to accounts, they are not only leaving money on the table but also allowing a competitor in who may use that foothold to win business as the MPS, servicing or equipment supplier. These supply categories also represent high margin sales; while still presenting the customer significant cost savings over the OEM.
My advice to dealers this quarter is to take the time to review supplies selection, management and overall portfolio within their dealership. This review goes beyond just cartridge pricing and instead looks to overall category and process opportunities. And if you are a dealer who only looks to your remanufacturer for mono supplies, it is time to move into other categories. ##### Sarah Henderson is Director, MPS Operations, for West Point Products, where she plans, develops, and manages the implementation of MPS programs and key infrastructure tools in multiple channels in North America through the Axess program. Since joining West Point in 2011, she has helped launch the industry leading MPS TCO costing calculator and a national service dispatch center. In addition, Henderson serves on the Board of Directors for the Managed Print Services Association (MPSA). Prior to WPP she was the Director of Strategic Marketing, GreatAmerica Financial Corporation (formerly GreatAmerica Leasing Corp.).