Eight ways to improve printing profits
At Heidelberg in the late nineties we developed and ran some seminars around the country entitled “the eight ways to improve profits”. The seminars were very well received, and upon discussing the content with a printer last week, I found they were just as relevant as when we presented them.
I discuss “the eight ways” below, with the intent of challenging some present practices and hopefully fleshing out some ideas that might a little dormant. It isn’t supposed to be a definitive list, there are of course, other ways to improve profits, but generally they are outside the normal day to day running of a printing establishment. Maybe you could suggest some more.
Market Development:
- 1. Entering new segments. This is where we decide to take our existing market offering to different segments of the market which we have not yet explored. Analysis of your existing customer portfolio’s products and services offering may uncover potential to market the same or similar to other segments.
For example you may be a printer who identifies the superannuation market is expanding and that you could put forward, from your experience is servicing the SME financial services sector, a product / service range that is superior, or at least very competitive to the present opposition.
Alternatively as a Sydney printer you may identify excellent opportunities in Queensland or rural Victoria to market your service.
A little research may uncover some fruitful segments. Think outside the square.
2. Converting non users. Here we talk about converting other media users to use print, or more specifically if you a commercial sheet-fed printer, to convert them to your type of print.
Where could you source these non users from? Tune into a commercial radio station and ask the question “why did that advertiser chose to use radio instead of print?” Could your print have provided a more cost effective alternative? Have a look in the newspapers, regional and local, and ask the same question. What about TV, e-mail newsletters and catalogues. Are there opportunities to convert non users?
Wouldn’t this be a different sales strategy than just trying to knock off the printer next door on price? You’re actually forced to justify your media against another. What would the client think if you got the call “Hi Jack, Billy Printer here, I saw your ad on TV last night, and I thought I’d give you a call to discuss the personalised print alternative. We’ve had some terrific results of late that have saved TV advertisers a lot of money whilst increasing response rates . . . Could I arrange a time to come in and see you?”
I don’t think this strategy is used by many printers, perhaps because it can be a more difficult sales task, or requires some real strategic planning. However the rewards may be a lot greater. What would happen if this was your only sales strategy?
Market Penetration
- 3. Taking from competitors. Ask yourself how hard is it to grow your business organically? Traditionally many in the print industry would answer “very difficult, but what are the alternatives?” Hopefully you can see from this list of 8 ways to improve profits that there are other alternatives.
Taking from the competition doesn’t have to include the easy price cutting option. If you look at the competition and do things consistently better than them, then I’d argue that growing business organically is not only achievable, but a most worthwhile strategy to consider. I’ve seen some great growth from firms who offer targeted strategies which don’t cut prices. For example, personalised direct marketing costs more, but often cost per response is less. Are you selling on price or what the print you produce will return for your customer?
Don’t sit back and subscribe to some pundit’s arguments that growing business organically is nigh on impossible.
4. Increasing the usage from existing customers. We’ve all heard that it is a lot easier and cheaper to keep existing customers than to find others. Why is it then most of our focus is on attracting more customers rather than trying to keep and increase the usage from our existing clients?
Building dollar volume from each customer (share of customer) does not always have to be from print. Add on services could include storage of their jobs, designing their PDFs, putting a Mac and a scanner in their premises, print management of their complete print operation and printing of their documents. It may be time to take the printer’s hat off and find new ways to service the customer. If you don’t someone else will. Print Management Companies may be the king of this strategy, many don’t want a slice they want the whole pie.
Improving Asset Utilisation
5. Reducing costs. I had a look at a franchise operation the other day, “Expense Reduction Analysts”. Their market offering is to analyse a company’s expenses and identify ways to reduce them. They take no fees, only a percentage of the savings.
I ask myself if these guys can identify savings and can build a business on it, why can’t we? Perhaps we either don’t make the time or we don’t have the skills. Perhaps we are too busy working in the business rather than on the business. We use our accountants and professional advisers sparingly in order to save costs, whereas perhaps they should be engaged more to identify cost saving measures.
A few areas to consider – debtors, financing options, shift structure, costs to outsource, staff costs, overtime, standardizing on paper, waste management, group buying. All offer big potential paybacks.
Reducing the cost to manufacture is a major area where big savings can be made. In previous articles I have argued that printers need to either aim at becoming the cheapest cost manufacturer or finding niche markets. There are not many other alternatives to long term survival.
6. Improving asset utilisation. We know that asset utilisation is very low in the printing industry, the problem is with static growth, no one wants to dispose of their assets and use someone else’s.
Is it time to review your capacity utilisation, confront the brutal facts and consider the alternatives? A quick analysis may uncover some home truths. What was the income you derived from each machine last month? How much did you pay the operator to run the machines slow and / or do menial, non profit generating tasks?
If the asset is paid for and underutilised, can it be disposed of and the cash put into more productive ventures? Can the space it creates be put to better use, help create a storage facility, a meeting room, sublet out the space etc.
Are there trade printers that could handle the sudden influx of work if we didn’t have that machinery? Could we change our business model, sell our back end equipment and become a spoke for someone else? Can we run more efficiently (and profitably) with less machinery?
Is equipment ownership the only option? I think not.
Increase Outputs
7. Improve sales mix (eg drop unprofitable lines). I’ve never seen a sausage machine, but I’m guessing it’s machine that makes only sausages, is easy to operate and has very few input and output variables.
That’s the problem with printing, every sausage is different . . . maybe, maybe not. The profitable printers I have met have worked hard at standardising their input and processes, because they understand if they can do this they will be able to develop ways to run their machinery faster, find new ways over time to stream line the production and reduce the costs of inputs.
Imagine an A2 multi colour machine ganging up business cards on the same stock, the same size, 24/7? That’s a sausage machine. The variability in jobs is next to nothing. These printers have managed to take away a hidden cost – variability. Standard stock, standard size, standard colour, standard shifts, standard workflow, standard layouts. What parts of your process can you standardize?
How often have you analysed the difficult jobs that come in and the amount of time that they take in production. Why is it that some repeat work just flies through the place, no problems, no hassles? The whole production team are used to running them, day in day out. Efficiencies are found. It’s a walk in the park.
The truth is most printers are very good at producing some jobs and not so good with others. Improving the sales mix means you are getting your type of work, finding your sweet spot. The key is to understand which are the sweet jobs, find better ways to run them, find more of them and work at ways to decrease the variability.
8. Increase Price. Impossible you say, the PIA benchmarking survey tells us that margins are the tightest they have ever been, so how can we possibly increase price in such an environment?
I know there are clients, perhaps the vast majority, where this can not be done, but shouldn’t it always be our aim to lift prices over time especially when our costs are going up?
Most printers will find that 80% of work comes from 20% of customers. We obviously want to hang on to the productive 20%, and increasing prices here may be difficult, but not always impossible.
But what about those smaller, infrequent clients that only buy once every six months, is there no chance here? What happens if they go elsewhere? I heard once of a printer who decided to get out of A3 work, he pushed up the prices 50% and lost 25% of his A3 clients. He found a new profit centre!!
A little left field here but could stricter credit policies be construed as lifting price? Can we get our collections down and save on overdraft facilities?
There are clearly other ways to increase profits, but this is not a bad starting point. Others may include selling up and playing the stock market, buying a tattslotto agency, having a fire sale, changing our business models, and merging or acquiring businesses.
However, for those that chose to stay in the game, there are choices. Rest assured it ain’t all doom or gloom, the truth is there are others in the industry making a good dollar. My bet is they have focused on one or more of the above eight strategies and are reaping the rewards.
Richard Rasmussen is the director of Graphics Marketing (Aust) Pty Ltd, marketing and business broking consultants to the graphic arts industry.
He can be contacted on 0402 021 101.
Email: Richard.Rasmussen@optusnet.com.au
For example you may be a printer who identifies the superannuation market is expanding and that you could put forward, from your experience is servicing the SME financial services sector, a product / service range that is superior, or at least very competitive to the present opposition.
Alternatively as a Sydney printer you may identify excellent opportunities in Queensland or rural Victoria to market your service.
A little research may uncover some fruitful segments. Think outside the square.
2. Converting non users. Here we talk about converting other media users to use print, or more specifically if you a commercial sheet-fed printer, to convert them to your type of print.
Where could you source these non users from? Tune into a commercial radio station and ask the question “why did that advertiser chose to use radio instead of print?” Could your print have provided a more cost effective alternative? Have a look in the newspapers, regional and local, and ask the same question. What about TV, e-mail newsletters and catalogues. Are there opportunities to convert non users?
Wouldn’t this be a different sales strategy than just trying to knock off the printer next door on price? You’re actually forced to justify your media against another. What would the client think if you got the call “Hi Jack, Billy Printer here, I saw your ad on TV last night, and I thought I’d give you a call to discuss the personalised print alternative. We’ve had some terrific results of late that have saved TV advertisers a lot of money whilst increasing response rates . . . Could I arrange a time to come in and see you?”
I don’t think this strategy is used by many printers, perhaps because it can be a more difficult sales task, or requires some real strategic planning. However the rewards may be a lot greater. What would happen if this was your only sales strategy?
Taking from the competition doesn’t have to include the easy price cutting option. If you look at the competition and do things consistently better than them, then I’d argue that growing business organically is not only achievable, but a most worthwhile strategy to consider. I’ve seen some great growth from firms who offer targeted strategies which don’t cut prices. For example, personalised direct marketing costs more, but often cost per response is less. Are you selling on price or what the print you produce will return for your customer?
Don’t sit back and subscribe to some pundit’s arguments that growing business organically is nigh on impossible.
4. Increasing the usage from existing customers. We’ve all heard that it is a lot easier and cheaper to keep existing customers than to find others. Why is it then most of our focus is on attracting more customers rather than trying to keep and increase the usage from our existing clients?
Building dollar volume from each customer (share of customer) does not always have to be from print. Add on services could include storage of their jobs, designing their PDFs, putting a Mac and a scanner in their premises, print management of their complete print operation and printing of their documents. It may be time to take the printer’s hat off and find new ways to service the customer. If you don’t someone else will. Print Management Companies may be the king of this strategy, many don’t want a slice they want the whole pie.
5. Reducing costs. I had a look at a franchise operation the other day, “Expense Reduction Analysts”. Their market offering is to analyse a company’s expenses and identify ways to reduce them. They take no fees, only a percentage of the savings.
I ask myself if these guys can identify savings and can build a business on it, why can’t we? Perhaps we either don’t make the time or we don’t have the skills. Perhaps we are too busy working in the business rather than on the business. We use our accountants and professional advisers sparingly in order to save costs, whereas perhaps they should be engaged more to identify cost saving measures.
A few areas to consider – debtors, financing options, shift structure, costs to outsource, staff costs, overtime, standardizing on paper, waste management, group buying. All offer big potential paybacks.
Reducing the cost to manufacture is a major area where big savings can be made. In previous articles I have argued that printers need to either aim at becoming the cheapest cost manufacturer or finding niche markets. There are not many other alternatives to long term survival.
6. Improving asset utilisation. We know that asset utilisation is very low in the printing industry, the problem is with static growth, no one wants to dispose of their assets and use someone else’s.
Is it time to review your capacity utilisation, confront the brutal facts and consider the alternatives? A quick analysis may uncover some home truths. What was the income you derived from each machine last month? How much did you pay the operator to run the machines slow and / or do menial, non profit generating tasks?
If the asset is paid for and underutilised, can it be disposed of and the cash put into more productive ventures? Can the space it creates be put to better use, help create a storage facility, a meeting room, sublet out the space etc.
Are there trade printers that could handle the sudden influx of work if we didn’t have that machinery? Could we change our business model, sell our back end equipment and become a spoke for someone else? Can we run more efficiently (and profitably) with less machinery?
Is equipment ownership the only option? I think not.
7. Improve sales mix (eg drop unprofitable lines). I’ve never seen a sausage machine, but I’m guessing it’s machine that makes only sausages, is easy to operate and has very few input and output variables.
That’s the problem with printing, every sausage is different . . . maybe, maybe not. The profitable printers I have met have worked hard at standardising their input and processes, because they understand if they can do this they will be able to develop ways to run their machinery faster, find new ways over time to stream line the production and reduce the costs of inputs.
Imagine an A2 multi colour machine ganging up business cards on the same stock, the same size, 24/7? That’s a sausage machine. The variability in jobs is next to nothing. These printers have managed to take away a hidden cost – variability. Standard stock, standard size, standard colour, standard shifts, standard workflow, standard layouts. What parts of your process can you standardize?
How often have you analysed the difficult jobs that come in and the amount of time that they take in production. Why is it that some repeat work just flies through the place, no problems, no hassles? The whole production team are used to running them, day in day out. Efficiencies are found. It’s a walk in the park.
The truth is most printers are very good at producing some jobs and not so good with others. Improving the sales mix means you are getting your type of work, finding your sweet spot. The key is to understand which are the sweet jobs, find better ways to run them, find more of them and work at ways to decrease the variability.
8. Increase Price. Impossible you say, the PIA benchmarking survey tells us that margins are the tightest they have ever been, so how can we possibly increase price in such an environment?
I know there are clients, perhaps the vast majority, where this can not be done, but shouldn’t it always be our aim to lift prices over time especially when our costs are going up?
Most printers will find that 80% of work comes from 20% of customers. We obviously want to hang on to the productive 20%, and increasing prices here may be difficult, but not always impossible.
But what about those smaller, infrequent clients that only buy once every six months, is there no chance here? What happens if they go elsewhere? I heard once of a printer who decided to get out of A3 work, he pushed up the prices 50% and lost 25% of his A3 clients. He found a new profit centre!!
A little left field here but could stricter credit policies be construed as lifting price? Can we get our collections down and save on overdraft facilities?