Presstek Perspective

Overcoming Market Inertia

By Klaus Schleicher

December 7, 2007 -- The printing industry has been through some tough years following the boom of the late 1990s. At present, from a macro-economic perspective, things are getting a bit shaky again. And while this puts pressure on any industry, printing is at least migrating in a positive direction. Although a macro-economic view is an important consideration in planning business strategies, it is also important to consider other indicators, including the local economic climate, competitive landscape and the portfolio of products and services being offered. It is true that the industry as a whole is growing in the low single digits --anywhere from 1.4% to 3% depending on whose numbers you look at-- but under the covers of that sluggish growth are some significant bright spots.

According to NAPL, industry leaders are growing in excess of 20% annually. And how are they achieving this? In NAPL's State of the Industry Report 2007, Chief Economist Andrew Paparozzi says, "No one succeeds in our business anymore by standing still. And no one succeeds only by cutting. We have to invest, innovate, and pursue new clients, markets and services."

Research firm InfoTrends states, "InfoTrends expects the U.S. Print & Publishing market to grow at a rate slightly below that of the GDP, showing a CAGR (compound annual growth rate) of 1.94% between 2005 and 2010. Competition from other media, the transformation of the industry, and high competitiveness within a mature market will all contribute to this projected growth rate. As a result, many print service providers must focus on process automation as well as growth opportunities in digital printing and value-added services to be successful.

If growth in the 20% or higher range is any indicator of an industry leadership position, we seem to have a high percentage of leaders among our customer base. Many are new owners of DI presses, which means they are investing in their businesses. The DI presses also bring them process automation and provide access to digital printing opportunities, especially for high quality, short-run printing. And they are leveraging this innovation to enter new markets and gain new clients.

Investing in Innovation

Universal Lithographers of Sheboygan, Wisconsin, is a great example. A company with 42 employees and annual revenues of about $6 million, Universal Lithographers is a high-quality 40" press shop, not the usual DI press owner, but certainly no stranger to investing in innovation.

According to Vice President Jerry Keller, many of the company's customers produce long-run catalogs and other projects with counts in the 40 to 60 thousand range, updating those pieces once or twice a year. "Quite often," says Keller, "they need an additional 100 to 1,000 pieces for trade shows, special events or sales presentations. In the past, our choices have been to run the work and take a financial loss, outsource it, or simply turn it down." Turning it down, as Keller points out, is the least attractive option, since it leaves the door open for competitors to take the account over. Universal acquired a Presstek 52DI press to meet this need, and is now able to profitably produce these short run, fast turn projects, increasing customer retention.

Universal is also leveraging the press to gain new customers. Keller says, "Many times customers are not willing to trust a new printing supplier with a very large job until a trusted relationship has been established. Using a DI press, it will be easier for Universal to use entry level sales people for new business development, acquiring smaller dollar value jobs that can be produced profitably with the ultimate goal of building a relationship of trust that delivers increasing revenue over time."

Mixed Environment

Another company that is an outstanding example is CSM Media, located in Calgary, Alberta, Canada. They began life as a prepress company and added printing to the mix, initially with a color copier in-house and using external print partners for outsourcing of color printing. The company, which now has 16 employees, saw opportunity to bring print in-house for higher margins and better control over the process, but was not interested in the complexity involved with conventional offset and its associated platemaking processes.

Print service providers must focus on process automation as well as growth opportunities in digital printing.

According to partner Steve Agar, the team had decided to acquire a Xerox iGen3 digital production press, but at the same time, noticed increased demand for longer runs that were not cost effective on the iGen3. "Clients would come to us," he says, "and ask for runs of 10,000 for the next day. We ran them on the iGen, or used competitors and added a mark-up. Clients were willing to pay extra for the rush work, but we knew there had to be a better way." Agar found that "better way" by adding a Presstek 34DI.

Agar reports that he prefers to use the DI press for jobs in runs of 2,000 or more, but the shop has run quantities as low as 500 and still made money. "By the time you turn it on and off," he quips, "the job is done. It literally takes longer to reset the paper size than to run the job."

Agar closely manages the production operation, looking at both overall gross margins and margins on individual jobs on a daily basis. At the end of the first month of DI production, revenues were up 40% compared to the same month the previous year. In the second month, August, revenues were up nearly 70%, September was double and October came in at a whopping 112% increase over October of the previous year. "We historically have paid for everything in cash," explains Agar. "With these acquisitions, we acquired a debt load that we planned to pay off within a year. We are on track to paying it off in six months, and the DI has made a significant contribution to that accelerated repayment rate."

These two companies are clearly positioned to play a leadership role in the industry, in spite of uncertain economic times--or perhaps because of them. They are investing, innovating, and adding process automation to their operations. They are leveraging innovation to better serve existing customers and gain new ones. And they are growing well in excess of industry averages as a result. If you are looking for a business growth opportunity, I hope that hearing about their experiences inspires you to reexamine your business and take advantage of the many opportunities for business success by making your company more capable, more profitable and more competitive, and better positioned to take advantage of today's markets.

Send your feedback to Klaus via email at kschleicher@presstek.com.