PSPs have struggled for years to differentiate themselves from their competition. As a first year MBA student is taught, there are only three positions by which a company can differentiate itself: price, superior service or niche offerings that competition does not produce. Let’s look at these positions with regards to today’s PSP marketplace:
Price: As the biggest printers have the most equipment with the capability to print the most number of impressions per pass, price is not an option for anyone but the biggest PSP. The big player’s M & A department is alive and well and going about the business of buying up the book of its competition. If you consider yourself a small or middle sized player, then price isn’t the option that you can pursue.
Service: Many printers carved out a customer service offering in their past and continue to believe that this is a clear differentiation from their competition. This rings true for loyal relationships, but not with new prospects. Today’s new print buyer has thousands of options available to them and there is no place for this play any more. Their perception is “anyone can put ink on paper”. Seasoned PSPs know this isn’t true, but to battle with procurement or purchasing departments with logic or the customer service play has become a losing battle. These people answer to the CFO and their motivation is to trim expense either to buy more for less, or buy the same with a smaller budget. When price is priority one, there is very little respect for any vendor, let alone PSPs. Thus, the only option left is “niche”.
Niche: The niche differentiator that was sold to the PSP marketplace was big equipment. The credit explosion of the last 10-15 years created an era that has never before been realized. Credit was extended to anyone hanging out a shingle in just about any vertical. Fancy, high capability presses and big equipment became ubiquitous across the PSP footprint. HP, Heidelberg, Xerox, EFI, Kodak, Komori, Mitsubishi and dozens of others seized the opportunity to entrench themselves deeply into the PSP’s business. As they discovered how to incorporate automation, color control, CTP and much higher output speeds, they mastered the art of owning the PSP. For a while, the niche differentiator became the equipment. Whether it was unique capabilities, low cost output or the ability to produce jobs in record time, the PSP has come to rely heavily on the equipment manufacturer and their advice. Iron was their niche.
Results: This created a perfect storm to the likes most PSPs had never before experienced. The “niche” sell by iron hawkers worked on every PSP in the region. Their view of spending the majority of their budget on the best equipment was to make their lives easier, decrease their payroll, increase their profits all while outperforming the competition. All of this backfired. The PSPs were blinded not from one direction, but from three! Firstly, the cost of these new machines forced them to have to sell more in order to keep the cylinders moving and thus protect their people from abandoning the small shop for the higher wage big provider. The average printer resorted to lowering the cost of print thus lowering the overall cost of print to the marketplace. Secondly, as credit was extended to all of their competition simultaneously, it meant that they had no choice but to buy the new expensive equipment or get left in the dust. And finally, with all of the competition offering pretty much the same print for the same cost, coupled with the convergence of the information age of the Internet on every print buyer’s desktop, commoditization of the industry moved into the fast lane, obliterating any semblance of “value add” by print buyers. All jobs were now about price and turn only. If you cannot match the pricing on the Internet, then you lose.
The 64,000 question has now become: What is a printer to do to survive? Is there something out there that will allow me to differentiate myself from this “price and turn” perception in the marketplace? What can I do with my company to survive this “race to the bottom” that every PSP is now experiencing? What is my niche to be?
Defunct Differentiators: Every press manufacturer and consultant from the old era is selling the old differentiators that are now defunct for the commodity-minded print buyer. Whether it’s a new capability, a new product that a press optimizes or a bigger piece of paper by which to get more impressions per pass, none of them matter to today’s print buyers. They don’t care. Selling them a new fold or new substrate isn’t going to render enough profits for any conventional PSP. It might work for niche printers who are digital only, but it doesn’t work for the PSP who must move millions through their plant to stay in positive cash flow. PSPs cannot create a new market. They are not in the gadgetry business. They service people who need large amounts of ink on paper.
Real Differentiators: When industries become commoditized, the only way to differentiate one’s self is either to eat the competition (not an option for the majority of PSPs) and thus take their book or, become more efficient in producing the same product sets with less cost. This means less cost in payroll, equipment and especially logistics (internal and external). This means learning about your organization’s inefficiencies and how they can be improved upon. It means tearing apart your processes and rebuilding them to create better ones. W2P is but one of those tools one can use to create automation and better execution in producing jobs that otherwise would be loss leaders. This is extremely disruptive and foreign to PSPs. We are all resistant to change. I believe everyone is POLR. We all pursue the Path Of Least Resistance when it comes to accomplishing just about anything. It’s the nature of convenience we’ve all been raised in. This is why many PSPs are using MIS systems from the dark ages, have too many people on payroll and resist having to learn new ways of doing things because, “if it’s not broken, don’t mess with it”.
PSPs have never before had to look in the mirror. They have been convinced that the solution is in more or better equipment. The urge to buy more equipment and buy what the manufacturer is selling no longer pans out. Just as General Motors produces more cars with less plants and fewer workers, PSPs must do the same in order to survive. I believe the PSP who learns to examine their own internal processes, question each and every one of them, and move towards building programmatic and automatic systems product offerings, will be the only survivor.