Your New 2015 Growth Strategy: MPS6 Jan, 2015 By: Tom Callinan, Strategy Development
It’s a little scary that I’ve been in the “copier business” for 30 years. Over that period there has been a lot of change: Product extensions that have us now selling high end production devices; color going mainstream, and copiers transforming into print devices. We saw the period of the roll-ups, all since acquired by the manufacturers. We experienced the period in the 90’s when the research firms said that if we weren’t in the networking business you’d be out of the copier business. They said whomever controlled the network would control the output. And 10 or so years ago, MPS came on the scene as the next big revenue opportunity for the copier dealer.
Looking back over the last ten year, I ask myself, “What happened to MPS”? I ask that question because so few dealers actually realized the revenue potential of the business model. There are certainly pure play MPS providers out there like FlexPrint, FloTech, and ImageOne that have been very successful in MPS. There are the copier dealers like Marco, MOM, Impact Networking and Applied Imaging that have grown substantial MPS businesses while also growing their traditional copier business. But more frequently than not, I find that many copier dealers have not succeeded at MPS.
Eight or nine years ago I did some simple “back of the napkin” math and stated that the aftermarket revenue (service and supplies) from printers was 5X the aftermarket revenue from copiers; let’s assume half of those printers are in commercial settings so the aftermarket revenue opportunity to our industry is 2.5X copiers. If you asked Leo Bonetti from FloTech or Frank Gaspari from FlexPrint, I think they’d agree that my calculation is in the ballpark of what they experience.
John Konynenbelt (JK), the vice president of sales for Applied Imaging, a highly successful copier dealership, recently said to me that any decent sized pure play MPS account would automatically make it into one of their largest 250 accounts as measured by aftermarket revenue.
If you’re wondering about JK’s statement, then think about it this way: an 80 printer account would bill about $2,400 per month in aftermarket (at an average of $30 per printer, which is a very accurate figure). Where would a $2,400 per month aftermarket account rank in your customer base? Would it be in the top 250 of your accounts?
In the last nine years of consulting, I’ve seen just about every mistake made with MPS. Some of the mistakes result in lower gross profit then can be achieved but other mistakes simply make it virtually impossible for the dealer to achieve MPS success.
Critical mistakes made:
MPS specialists are not deployed to specifically focus on accounts with 60 or more printers. It is almost impossible to be successful in MPS without this approach.
The primary focus is placed on selling equipment rather than selling large aftermarket agreements. The close ratio drops precipitously when an equipment led approach is used in prospects with more than 60 printers.
MPS contracts are sold into small printer populations rather than using a balanced deployment strategy into accounts with fewer than 25 total devices. It is far too expensive to support an account with 4 or 5 or even 10 printers and these are the accounts where the equipment led approach should be used, wrapping the printers into the five year lease.
Assessments are conducted in accounts with more than 60 printers without a strong case for getting the internal IT department out of the printer support business. The most frequent concept I hear for justification of an assessment is that the “company doesn’t know how much they are spending on printing.” I for one don’t know what I spend a month on gas for my car but I really don’t care because I have to drive and I don’t believe I pay too much for a gallon of gas given I can simply go to a different gas station if I wanted to. If you want to spend your time to calculate what I spend a month on gas, go for it; you made me curious and I guess you’ll now satisfy my curiosity. But since I had no pain from what I was spending after I knew, I’ll keep buying my gas.
Long assessments are conducted on small accounts, with fewer than 25 total devices. The focus in these accounts needs to be on workflow—who is printing what to where—and then deploying the correct device, whether that device is an A3 MFP, A4 MFP, or single function printer (SFP). Simply print a configuration sheet and divide the total count by the life of the device. With fewer than 25 total devices you don’t really have a lot of risk and workflow is your most important focus.
- Quarterly business reviews (QBR) are not conducted or conducted incorrectly. The focus of the QBR is to continuously improve the use of the output devices so the focus needs to be on refreshing devices and adding software/application solutions where they make sense. If there are fewer than 25 total devices there isn’t a lot of value in the QBR. If there are more than 60 devices and you spend 90% of the QBR going over service stats or volumes by device without suggestions for refresh your wasting your time and an opportunity to sell something.
Are you making any of these mistakes? Possibly making all of these mistakes? If you are then I’d take an educated guess that you not only aren’t experiencing MPS revenue equal to 2.5X your copier aftermarket revenue but you probably aren’t even experiencing MPS revenue of 20% of your copier aftermarket revenue. If that is accurate you are leaving substantial revenue for your competitors. You are also allowing your competitors to enter you most important accounts with a strategy that, executed well, will have them displacing you as the copier vendor.
Other things have changed in the MPS business over the last ten-years. The most critical change is that enterprise level accounts now understand MPS better than the majority of dealers that sell the model. The RFPs I have seen lately are well written and are being won by the few companies that do understand the MPS model, like those that I mentioned above. This knowledge will trickle downstream and will provide those that take MPS seriously with even greater market share.
Although the window is closing, there is time for you to get serious about MPS and to capture some of that revenue you are missing. Simply use the six bullet points above as your guide to a successful MPS program. 2015 could be your year.
Tom Calllinan is founding principal of Strategy Development, Inc., a leading industry consulting and management firm. For detailed information visit http://www.strategydevelopment.com