Remotely Communicating with your Equipment9 Mar, 2004 By: Richard Norton imageSource
Remotely Communicating with your Equipment
traditional copier market has been in the “mature” phase as an industry for
several years now. Products are at parity from one manufacturer to the next;
margins are being squeezed because dealers have little other than price on which
to compete; and vendors are starting to consolidate. In these circumstances,
it’s important for a dealer to find opportunities that can increase his profit
margins and his chance to expand his revenue base.
The Cost of Business Approach
Discounts from list price vary by segment with generally higher discounting in
lower segments. In some cases, we believe that dealers make virtually no money
on the hardware transaction. Consider that discounting may be 25 percent off
list price in Segment 1 or 2. Add in selling expenses, administrative expenses
and installation expense, and the net profit on the hardware transaction may be
zero. Compounding the discounting problem are two other factors that are
interwoven. First, machines are getting more reliable, making the service cost
lower and second, many new sales (as high as 40 percent of new placements) are
on a cost-per-copy basis. The CPC emphasis makes it imperative that a dealer
discount as much as possible because he has no other value proposition to the
customer in a strictly CPC bid. Since service costs are declining, it’s natural
for the dealer to continue discounting the CPC further.
virtually all these CPC cases, the administrative costs associated with CPC
plans are not known and are probably too high. The unfortunate fact of life is
that CPC plans are usually administered through third party leasing companies
even though the responsibility for collecting usage data for these plans falls
to the dealer. In our experience, most dealers try to rationalize away these
expenses by saying that employees, who collect meter readings, are used for
other tasks around the dealership as well. But, the truth is that valuable time
is being used to collect meter readings and the cost of that time is being
absorbed by the dealer.
years ago, DocuTrends research found that it costs a minimum of $5 to $8 to
collect and process a meter reading. However, with missed readings, transposed
numbers, callbacks to customers for incorrect numbers, etc., this figure could
actually be as high as $20 per meter reading. A system that collects meter
readings automatically and transfers them directly to a billing system or to a
leasing company could be worth a lot of money. Try multiplying $10 per reading
by the number of machines you have on a usage plan (not just all-inclusive CPC
plans but also maintenance plans) and you can see the savings that may be
possible. In a margin pressured business, anything a dealer can do to automate
systems and insure accuracy can drop those margin dollars to the bottom line.
has been made of the opportunity to develop additional revenue streams by moving
product offerings and sales capabilities into the solutions area. With the
emphasis on cost-per-copy plans for the last decade, what could be more familiar
to dealers than the measurement of costs associated with each unit of output
from his copier fleet? However, there has been no easy way to gather this info
and make it compatible with the dealer’s billing, inventory and service
We’ve seen a couple of products—one of which will be shown at the ITEX show—that
can prove beneficial to dealers on two fronts. Electronics For Imaging (EFI)
will be showing their Intelligent Device Management (IDM) System. This system
starts with the basics of meter reads for any connected copier and increases in
capabilities from there.
believe that a meter reading capability plays right into familiar territory for
dealers. Since many dealers are still struggling with the right first step into
solutions, this could be a godsend. Meter reading can be easily thought of as an
extension to the copier itself. The dealer does not need to get into any
sophisticated system sales nor does the dealer need to move far afield from his
equipment manufacturer in order to sell a package to the customer that will keep
both the customer and the dealer accurately appraised of a machine’s usage. All
the dealer needs to do is package and sell a convenience program to the customer
that will read meters and transmit accurate data.
Because the EFI system will easily connect to a dealer’s existing systems such
as OMD, there is little need for additional dealer training or significant
additional investments to get into this area. The EFI system also allows dealers
to accumulate usage date in a number different ways because it employs both LAN
capabilities and HECON outlets that allow a dealer to use the system on
customers’ networked connected copiers and standalone copiers—even combining the
inputs from both types of installations into one customer record.
biggest benefit to the EFI system for the independent dealer is its copier
hardware independence—the system will work on all copier hardware platforms.
Since industry data indicates that the average independent dealer carries two
product lines, the EFI system is an easy choice for a dealer. In order to get
into this solutions business, the dealer only has to invest in a system once in
order to have a system that works on all his hardware—not a separate investment
for each copier product line carried.
is akin to the approach IKON Office Solutions took last year when they announced
their DocSend product. This is basically a scanning package that operates on any
copier hardware carried by IKON (coincidentally, this system is manufactured for
IKON by EFI). IKON positions this system as being their technology (this shows
their customer that IKON brings value to the customer over and above the
commodity hardware) and as providing a complete package for the customer to
solve any scanning application in his office. The EFI IDM product starts to
bring this technology and positioning to the independent dealer.
It seems logical that dealers should start their journey into systems sales with
a product like EFI’s. The reason is simple; at its most basic level, it
automates a feature of the dealer-end user interface that everyone is familiar
with—counting page usage. But, once a level of comfort is reached by automating
page usage counting, many other opportunities open up. Some of these are part of
the overall EFI package and some can be opportunities that the dealer creates
copier machines will be communicating with the dealer in order to count page
usage, the communication system can be used for other purposes as well. EFI has
added a feature that allows service alerts to be sent directly to the dealer’s
service department. Certain service error codes (which have been in copiers for
many years) can be transmitted to the dealer who can then quickly dispatch a
technician to fix a problem. And, since the tech will know the nature of the
problem, he can arrive with the right parts and equipment to make the fix. This
has a benefit for both the dealer and the customer—the both benefit from a
machine with more uptime and a system with less administrative hassles.
sounds a little like motherhood and apple pie, but the dealer can do two things
with this information. First, and most obvious, the system will make it possible
to fulfill service contracts by providing the quickest service in the industry.
Second, dealers want to hold onto customers as long as possible. Customer
loyalty is closely linked to customer satisfaction and customer satisfaction in
regards to copiers is linked closely to various aspects of service (response
time, fix on first visit, etc.) which can be enhanced with this system.
Employing this technology can afford the dealer the ability to create a new
positioning for his company—a more responsive, more technologically savvy
partner for his customers. Finally, we believe a system like EFI’s can be the
first step into a systems and solutions business for dealers—especially those
dealers who have delayed entering this business. Once a dealer derives benefits
from a value-add technology approach to customers rather than a cost-per-copy
approach that appeals to the lowest denominator in the customer relationship,
there is a whole world of systems products that are complimentary to copiers
that can lead to new and potentially more profitable engagements with customers.
Finally, to implement the EFI system, the dealer will need to work with IT
managers at customers’ locations. Once into a customer’s IT environment, dealers
can more easily expand into other product/services offerings by selling
solutions brought to market by the equipment vendors. As a start, these could
include scanning and document management packages.
Without going into too much other detail about the why’s and wherefore’s of
moving into the systems and solutions business (see November 2003 imageSource
magazine), we believe it’s imperative to develop additional values for your
customers, and not concentrate on the copier/MFP hardware as your value
proposition to your customers. For any dealer, but especially those who have
held back from entering this business so far, systems like the EFI product can
facilitate a relatively easy entrée into the business—it starts by measuring
page counts, which we already know dealers are comfortable with; it can cut
expenses on the administrative side of the business; and it can be expanded into
other types of non-hardware services for a dealer to sell to his customers.