Message to Independent Dealers18 Jun, 2004 By: Dick Norton imageSource
Message to Independent Dealers
cling to the notion that they can’t make money selling printers simply because
the margin is so low. They fail, however, to get the point. They should adjust
their perception to include the entire customer engagement. You don’t make money
on the printer sale, but you certainly do make money on the sale of accessories
and service too.
In the case of color
printers, every color page printed is basically four times the revenue as a
black and white page. At any given margin rate that adds up to increased
profits. If you followed this logic, as margins on copiers and MFPs continue to
slide, will these same dealers stop selling color hardware as well because they
can’t make money on the equipment sale?
The world is getting
more colorful, however. There is a rapid and dramatic shift from basic black and
white to color. With the advent of affordable color printers, many customers are
no longer making do with black and white. They are now actively adding color to
a wide range of documents, especially any document that goes outside the
company. Customers are willing to spend a little more to improve the image they
project to outside contacts.
teams are not benefiting from the sale of the color machines. Any good sales
force is “coin operated”. That is, they will do exactly what they are paid to
do. A dealer doesn’t want a sales force that thinks for itself. A dealer wants a
sales force to do what they are told. Most dealers still use the old
compensation model, which is based on a percentage of gross profit on the sale
of the hardware. Not only does that drive the sales force toward the sales that
brings in less and less profit, it drives the team away from sales which can be
very profitable over the life of the machine (as stated above).
Whether we look at
color printer sales (or software sales—another topic we’ve addressed on these
pages), we realize that the compensation plan is not directing the sales force
toward the future; it is pushing toward the status quo, which will eventually be
the undoing of the dealer. Since color printers are profitable over the life of
the printer, it would be logical to have a compensation plan that pays over the
life of the product as well. We understand that a compensation plan based on
revenue over the life of a product is difficult to administer. It also might
fail to provide the immediate reward that a sales rep needs.
Our recommendation is
to provide an incentive for a rep on a quarterly basis if he or she sells one or
more (the target is up to the dealer) color printers. Of course, the target
should be raised periodically and frequently as the sales force sells more color
hardware. This plan will make a dealer’s sales transactions less profitable and
it certainly makes the dealer take the risk that revenue and profit will come to
the dealership during the life of the machine. But that’s how it should be. It’s
not too different from the sale of copiers and MFPs today.
A couple of manufacturers I have spoken with thought dealers were guilty of “old
thinking” and not moving with the times. They cited examples of new dealers who
had just started in the business within the last five years and are already as
productive and as profitable as dealers who have been in business for 30 or more
years. The manufacturers said these new dealers aggressively targeted new areas
for growth—color and connectivity—and went after it with real determination.
It’s sometimes difficult for any businessman to see the need for change; after
all, the status quo can be very comfortable. A dealer is often at work for 12
hours a day managing day-to-day operations—who has time for strategic thinking?
The answer is you. Every businessman needs to take the time to periodically
reassess where his or her business is heading. Some dealers do this at their
vendor’s annual meeting; others do it at trade conferences. The lesson is that
it should be done. Don’t expect the methods of the past to lead you into the
It was refreshing to speak with manufacturers who were not intimidated by
Hewlett-Packard. While HP is certainly “the name” in office printing, holding up
to a 75 percent share in some printer segments and having an excellent
reputation as a brand, the copier manufacturers had ready responses on how to
position their color printers against HP. The manufacturers said they start with
aggressive pricing in order to bring a value proposition to their customers. At
the Total Cost of Ownership of some of these color printers, it can make
economic sense for a customer to set up the color printer as the default printer
to handle both color and black and white output—setting up as a default printer
is used by a couple of dealers as part of the compensation program.
manufacturers go way beyond price. The manufacturers equip their dealers with
information about the low Total Cost of Ownership of their printers and the
reliability of their products (this is a big selling point because HP is
regarded as one of the most reliable pieces of office equipment). The
manufacturers say that a combination of proof sources—award and accolades from
industry magazines and testing companies—coupled with a trial usage program
(“Try and then Buy” in the words of one manufacturer), can put the dealer in an
excellent position to compete with HP. A dealer can set up color printer drivers
on a customer’s network in literally a few minutes. In many cases, this can be
done without disrupting the customer’s management of network devices because
most printers can be managed by HP’s JetAdmin; thus, the new printer can fit in
Ask About the
Printer at Every Sales Call
During my conversations with manufacturers, they talked about how some sales
reps stumbled into lucrative deals. The common thread usually involved a rep who
had struck out trying to sell MFPs and copiers and was about to leave the
customer’s office. As a parting comment heading out the door, the rep would ask
if the customer needed any printers, which would translate into color copier
sales. In a couple of these “war stories,” the deals amounted to more than a
million dollars in color printer sales (and remember that every color page is
four times the revenue compared to black and white).
While these are rare
occurrences, it does point out a problem. If we don’t ask the question, we’ll
never get the sale. The rep usually does not have the system or the discipline
to find out the workings of his customer’s business. It’s been proven many times
that you expand the potential for more sales if you understand the real needs of
the customer and enter the conversation with the customer with an open mind. If
a dealer can have his reps re-think their approach to a customer and, if the
dealer equips his sales reps with a broader product line including color, the
rep will have a much higher chance of success in every customer encounter.
Finally, if a rep is
talking about a customer’s needs for imaging, that need does not stop with
copiers or MFPs. If the rep has done the job and understands the customer, the
rep has a better chance to sell a wide array of products including MFPs,
copiers, printers and software—in color and in black and white.
Signs of color usage exploding are all around us. Xerox’s first quarter results,
which were recently released, state that Xerox experienced more than 20 percent
growth in color sales over last year. Moreover, new color printer placements
grew 23 percent last year after growing 30 percent in 2002, according to IDC.
While this is going on, it’s a surprise that less than half of a copier
manufacturer’s dealers sell color printers on a regular basis.
With products that
are more than competitive with the offerings from HP, existing relationships
with a large base of customers and an outbound sales force that can be directed,
it would seem that every dealer should be on the color bandwagon. It’s the
responsibility of both the dealers and the manufacturers to move this process
along. The manufacturers need to keep the flow of excellent, cost effective
products coming, and they need to provide more incentives to help the dealers
move product. And the dealers, in turn, need to move into a new way of thinking
in order to direct their businesses into areas of opportunity, not remain mired
in a mode that could eventually become a detriment to business. Color is here;
do everything (sell color printers, copiers and software suites) you can in
order to take advantage of it.