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Toner and Paper: More Than a Convenience for Your Customer

7 Dec, 2004 By: Bob Sostilio imageSource

Toner and Paper: More Than a Convenience for Your Customer

Despite years of predicting a paperless workspace, the consumption of paper continues to increase. From 1985 to 2002 U.S. paper consumption grew 57 percent, according to the USDA Forest Service. On a per capita basis that’s 1.7 percent per year. Looking forward, the rate may decelerate, but due to mandates about record retention it is not about to decline anytime soon.

According to IBM, a typical information office worker prints 13,000 pages annually. Holding IBM’s premise of prints per worker and multiplying it by the 63.1 million white collar workers means an excess of 830 billion pages are made on printers annually within U.S. workspaces. The research firm IDC claims that MFP copiers within those same workspaces produce 450 billion pages per year.

Add together copies and prints, assume 200,000 sheets of uncoated paper weighs one ton and it equates that the U.S. consumes 6.4 million tons or more of office paper per year. Despite the notion that networking of printers and MFPs with scanners results in less paper consumption in the workspace, the sale of cut-sheet paper has actually increased over the last couple of years. By 2006, it is estimated that copy and print output alone will increase by 45 percent.

Now ask yourself, just how many of those millions of pages are made on your copiers or printers? Are your customers using toner purchased from your dealership to put marks on those pages? Do you have a long-term strategy to meet the growing demand for toner consumption as the number of pages increase in your customers’ sites? We know that as more production-type functionality and networked applications migrate down into the workgroup space where you currently are selling Segment 3 and 4 MFPs, the marketing of supplies is a worthwhile endeavor.

The workspace in mid-market or small and mid-sized businesses (SMBs) has a range of employees from 1 to 100 (small

company) and 101 to 1000 (mid-sized company). These companies account for half of all private sector employees and are

generating 60-80 percent of net new jobs annually. Therefore this constantly churning segment becomes the new battle ground of potential prospects for Segment 3 and 4 copiers and 25 to 55 ppm printers. These SMB companies that traditionally rely on VARs for software solutions, upgrades and training are more apt to seek copier/printer hardware and after sales support from local copier dealers, but tend to shop elsewhere for supplies.

Currently, dealers enjoy a significant share of black & white and color copier hardware sales, but less of the printer sales. More than 75 percent of black & white copiers and more than 40 percent of color copier sales belong to the dealer channel, but the office superstores edge out the dealers in color printer sales. This will ultimately impact after sales supply annuity as our research bears out.

Recently, Sostilio & Associates International, Inc. sought to quantify how the SMBs and small workgroups were managing new applications such as color output and productivity via connectivity. At the same time we sought to uncover drifts to key trends within document-centric workgroups since the introduction of MFPs, including purchasing patterns.

We did find that when it comes to buying supplies the dealers who have sold the hardware are not getting their share of the after market residual. We queried end users in a number of vertical markets, including real estate, healthcare, finance and insurance, government, and education as to where they buy toner and paper for copiers and printers. The results are shown in Figures 1-4.

It’s obvious, as shown in Figure 1, that dealers enjoy half of all toner sales but receives almost no annuities from paper sales. When it comes to color copiers, the dealer gets no paper residuals and just one out of four toner sales within our sample. Staples, Office Max and Office Depot seem to enjoy a substantial revenue stream from mid-sized companies, as shown in Figure 2.

When we asked our sample base where they purchase their supplies for their monochrome printers, the office equipment dealer was shorted and again office superstores prevailed, as shown in Figure 3.

When it comes to color printers, the responses showed less of a consideration given to the office equipment dealer channel to purchase their supplies, as shown in figure 4.

Another finding from our survey quantifies that networked or connected devices, our sample had a 44.7 percent connect rate, are generating the same or more throughput volumes than in previous years. If we examine the responses just for copiers we found that, connectivity aside, overall output was the same or increasing for 82 percent of connected copiers and 73 percent of the standalone units.

We noticed that within certain vertical segments there was wide divergence. More copiers were connected in universities and less in the health markets. There was a higher connect rate based on the number of units owned.

The survey confirmed the premise that copy and print volumes were increasing within the workgroup space in a number of document-intense markets. It also illustrated that office equipment dealers are still only considered for copier sales and toner sales and not for printers or color devices.

So what steps can a dealer take to start capturing some of the annuities? The biggest and foremost factor to consider is that customers want quick and complete responses to their requests for supply. The second biggest factor is they want the ordering process to be simple and convenient. Can your customers call an 800 number to place a supply order? Do you offer a 1-800 fax-back service? Do you have a secure website where a customer can easily fill out an order form or download a purchase order? Does the site generate an email confirmation of

the order? Does your automated phone service route supply calls speedily and with minimal intervention? Do you offer a delivery service just for supplies?

One of the first steps in implementing a supply marketing strategy is to develop an offense that is designed to inform your customer base just what you are capable of offering. If you carry more then one line of products and supplies, it should be noted since companies might consider you a sole source vendor. And don’t overlook selling paper along with the toner. Granted, many dealers sell cost-per-copy agreements that are all encompassing, but by adding other supplier’s toners and papers, you could generate additional revenue. Knowledge is paramount, so your sales and service reps should be trained and knowledgeable about the supplies you offer. Emailing monthly reminders and following up with telephone calls are all vital steps in creating a marketing offense to sell supplies.

As our survey data quantified, workgroup users are buying supplies from a number of sources that more than likely maintain websites and customer lists that get tickled with coupons or purchasing incentives. There is no reason that a dealership cannot do the same. The only difference is that superstores’ market supplies and many dealers seem to offer toner and paper as a convenience. The research confirmed what the USDA Forest Service predicts, namely paper consumption will continuously increase, and if you lack a strategy of putting toner on those pages, your aftermarket annuities will evaporate.

Someone once taught me that you can never make the sale if the customer doesn’t even consider your company as a source. Therefore it’s important to become proactive in marketing your dealership’s ability to supply toner and paper for copiers and printers. Become the sole source for your client base and nurture it by implementing an outbound marketing strategy. Sell supplies as hard as you sell hardware—the margins are better.

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