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The Five to Focus On In '05

15 Feb, 2005 By: Dick Norton imageSource

The Five to Focus On In '05

So, it’s already a month into
2005. How are those New Year’s resolutions coming along? You know those promises
you made to improve your dealership just hours prior to the end of ‘04.

With each passing year, the
expectations from your customers, and the need for your business to evolve,
grows. What plans have you developed to advance your business? If you haven’t
devised a strategy, here are five things you should focus on in ’05. And if you
have mapped out a plan, check it alongside the below list; there is something
you may have missed.

1.  Color—The commotion
surrounding color will continue. There was a great deal of activity in color in
2004. There were more than a half-million new sales of color laser and solid ink
printers for the corporate office. These products, which have a relatively low
acquisition price and a reasonable running cost in black and white and color,
make them ideal as a general purpose printer in the office.

Color-capable, network-connected
MFPs also hit the market strongly in ‘04. All of the manufacturers market at
least one machine that enables the user to have a productive black and white MFP
that allows for color output as needed.

What’s gratifying, but not
unexpected, is how fast these products are catching on. Some manufacturers claim
that color-capable MFPs accounted for 30 percent of unit sales in the segments
they were sold in. Although these machines are sold as replacements for
monochrome MFPs and one might not expect huge color page volumes initially, an
average of 30 percent of page volume for these products is in color. I
understand it’s even higher for Xerox.

So, jump on the bandwagon.
Attempt to sell color at every customer engagement, and don’t stop at color MFPs,
sell color printers as well. You may not get the margin on the hardware, but the
supplies side is terrific. Remember, every color page is roughly four times the
revenue of a monochrome page.

Many manufacturers believe
color-capable MFPs will exceed monochrome MFP sales in the next few years in
those segments in which they compete. Some manufacturers are already speculating
about the day that color-capable MFPs are all that will be offered. In fact, you
can parallel the shift to color to the shift from analog to digital. The
companies that were aggressive from the start ended up with higher market share
than those that waited and tried to milk the analog market till the very end.

2.  Software—You’ve read (often
in the pages of imageSource) that selling software solutions will be nothing but
a positive for your business in the long run. I certainly subscribe to that
point of view for several reasons.

First, there is a market
opportunity. As you sell more and more connected devices, you’ll come into
contact with IT managers. They are accustomed to buying software and related
services as part of their normal operations. In fact, they will often retain the
reseller to service the software they provide.

Secondly, you can top the
competition. Although the opportunity to sell solutions has been available to
the dealer community for quite some time, many dealers have not taken advantage
of it. The reality is, according to most manufacturers, less than 10 percent of
unit sales are accompanied by software sales. The market, however, is ready
based on the emerging power of IT managers.

Finally, there is the need for
self-preservation. All dealers have expressed concern about margins. There is a
steady drop in margins on machines and less service revenue available with each
sale. Simply stated, these trends will not support your overhead and required

This leaves you with two
options: You can sit back and wait for things to change, or you can seek out
complimentary products and services for your business. Look for software that
compliments your hardware products and can be used for every type of customer.
This includes scanning, cost control, file back-up, and document management.
These all fit with your MFP products and make them, and you, more valuable to
your customer.

Although the penetration of
software sales through dealers is small, dealers who have embraced this business
are prospering. Some dealers I have interviewed report that software sales and
services account for 30-50 percent of their profits and the sales have the best
margins of any aspect of their business. In many ways, these dealers are much
less dependent on equipment sales for their livelihood.

3.  Production Printing—A couple
of equipment manufacturers have had moderate success in selling high-end
printing products and services to customers. Since this involves software, if
you are not into solutions, this may not be for you.

Although nothing in this aspect
of the business is a slam dunk, there are applications for production printing
that can be opportunities for dealers. Specifically, I am referring to the AS400
environments where small to mid-sized companies do production printing on a
regular basis. Engines from companies like Konica Minolta and Ricoh, especially
with its newly acquired Hitachi products, can be low cost alternatives to what a
customer may be using today. These applications are more complex than office
network printing, but they can be managed by dealers. So, look at the
opportunities to branch out into new areas where you have not competed before.

Ricoh is a good example to
follow. The company talks about the total document strategy. By this they mean
any environment where they can pick up more page volume. If you’re like most
copier dealers, you’re competing for the page volume associated with copiers and
MFPs. This market is not growing fast enough to support significant growth for
your business. Ricoh’s strategy is to find and exploit new markets where it
hasn’t competed before and open new opportunities by chasing the pages in these
markets. This is good advice for everyone in our business.

4.  Security—New Names and
abbreviations are now flying around the industry. HIPAA and Sarbanes-Oxley are a
couple of those now familiar titles that didn’t exist a couple of years ago. Any
medical care company or mid-to-large-sized publicly traded company are very
conscious of these rules and regulations. It leads them to ask about all levels
of document security for them and their customer records.

Most equipment manufacturers
provide security software as part of the functionality of their machines. In
addition, new requirements in the market can easily translate into new
opportunities for you.

5.  Customer Analysis
Programs—There is a generation of sales reps who seem to only know how to talk
cost-per-copy to their customers. While this has sold machines, it has not
really done much else for dealerships because it reduces your value to the
customer to a few mils per page. One way to move beyond this is to get to know
the workings of documents in your customers’ offices.

An effective way to do this is
to conduct more professional surveys of your customers every opportunity you
have. I don’t advocate using site analysis for every customer. It wouldn’t be an
economic use of your rep’s time to try to analyze workflow in a two-person
office. But, I do believe you should insist that reps spend time getting to know
their larger customers.

There are programs available
that provide a consistent guide to your reps as they approach their prospects.
Systems like Toshiba’s Encompass or the independently sold DocuAudit provide a
guide to reps to step them through an analysis of a customer’s operations. One
benefit to you is that your reps will understand their customers better. The
best news is that the rep is better positioned to sell more products and
services to the customer. So, instead of leading every conversation with mils
per page, have your reps engage their customers in a more professional manner.

We also don’t advocate choking
your reps with this requirement. Perhaps, you should require them to perform one
analysis every quarter for the next year and start with their largest customers
first. This would not be a terrible strain on their time and would yield results
for you. Dealers tell us that this approach to customers leads to a wide range
of new sales—including printers, software, facilities management, and color—that
they weren’t prospecting for at the start of the customer engagement.

As you plan your business
direction for 2005 and beyond, I hope this list of items will serve you well.
They represent opportunities for new business and a chance to move your
dealership in a new, more profitable direction. Above all, don’t stand still in
a changing world.

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