Personalization: Data-Driven Print and Internet Communications

7 Transforming Printers and Publishers into Digital Service Providers

151 CHAPTER sEvEn transforMing Printers and Publishers into digital serViCe ProViders The digitization of electronic communications has created business winners and losers. As firms such as Amazon and Google are built on these technologies and flourish in this environment, entire industries such as recorded music, camera film, and printed reference books are in a steep decline. Print is the oldest information medium and today print services providers are under siege. Since the year 2000, over 10,000 printing establishments have closed in the U.S. alone.165 However, while some printers flounder, others are thriving. The 2007 Printing Industries of America / Graphic Arts Technical Foundation (PIA/GATF) study of profit leaders revealed that the top 25% of printers averaged a 10% profit versus 3% for other printers.166 How should printers grow and change to meet the challenges of the digital revolution? growth strategies There are only two ways for a business to grow by offering a new product or service: either sell the new product or service to existing customers or find new customers. The former is called product development strategy—the business grows by gaining new capabilities and then selling new products and services to existing customers.167 Successful digital color printing businesses have had a varied history of growth and development using this strategy. Many firms that originally started as commercial print providers or copy shops added digital color printing capabilities to serve their clients’ needs for print-on-demand or short-run color printing.168 Some advertising and direct marketing agencies that previously outsourced their printing needs to commercial printers now offer printing services themselves. Since the new digital color printing technology is capable of “clean” printing (minus the inks, fountain solutions, blanket wash, 152 personalization and volatile organic compounds that proliferate in an offset environment), these agencies can add digital production presses in-house to assist clients who want to take advantage of 1-to-1 marketing programs. The second growth strategy is diversification. Using this approach, a business cultivates new capabilities to appeal to a new set of customers.169 Start-up businesses do just that—they develop new services for new customers . Many printing firms with digital printing capabilities have used a diversification strategy by targeting new business clients who have good internal data on their own customers. Industries such as financial services/insurance firms, manufacturing firms, and retail firms have a long history of gathering data about customers and using computers to facilitate billing and buying transactions. Nearly half of the digital print services firms the Printing Industry Center surveyed for a 2004 commercial printer business model study had targeted these specific industries.170 Diversification can also be accomplished through an integrative growth strategy. Instead of developing a new capability internally, a firm might work with a supplier or a distributor to offer new capabilities.171 For example, a print services provider that buys a mailing and fulfillment operation from a supplier is applying vertical integration. On the other hand, a firm that actually acquires a competitor with unique capabilities is taking advantage of horizontal integration . For example, an offset print provider may acquire a digital print provider, or vice versa, as in the case of the 2003 RR Donnelley and Moore Wallace merger. In horizontal integration, the buying firm acquires new capabilities by purchasing the proven capability and clients of another firm. digital services strategy Printers can also pursue a product development growth strategy by offering ancillary services. According to a 2008 PIA/GATF report, printers’ revenues from ancillary services increased from 8.1% in 2005 to 10.7% in 2007.172 The report also stated, “Printers with the lowest proportion of total sales from ancillary services also had the lowest profit rates, and profit rates generally increase with increased ancillary sales.”173 Printers that specialized in direct mail had a higher percentage of revenue from ancillary services than all other types of printers. The most frequently offered ancillary services in the PIA/ GATF study are presented in Table 7.1. Transforming Printers and Publishers into Digital Service Providers 153 Table 7.1 Ancillary services offered by printers174 services percent that offer percent of revenue graphic design 57% — fulfillment 54% 2.8% mailing — 4.4% database management 31% 0.8% digital photo library 17% — digital asset mgmt 16% — “other” including webpage production 13% 2.7% Transforming a printing manufacturing business into a digital services provider business requires the commercial...