Market Intelligence: 2012 Opportunities & Challenges

Recent wide-format print service provider and print buyer research indicates both the opportunities and challenges in the wide-format signage and graphics printing market. On the one hand, PSPs are generally pretty optimistic about how the market will grow in 2012, while recognizing that doing business in this segment has substantial challenges. At the end of 2011, InfoTrends executed a survey with FESPA wherein we asked print service providers what their expectation was for their wide-format printing business in 2012. Figure 1 illustrates the mix of results, but the average among all respondents was that they expect their business to grow by almost 15 percent in 2012.

One of the key drivers of wide-format digital print is in point-of-purchase advertising. Brand marketers and retailers often don’t consider wide-format signage and graphics as part of their advertising budget, it may fall into the merchandising category, so some of these measures are not perfect, but we’re seeing organizations that forecast advertising expenditures suggest that ad spending is likely to grow by less than seven percent in North America. So is the 15 percent growth expectation irrational? I don’t think so. Here’s why. While the overall ad spend may grow by seven percent, InfoTrends believes that wide-format PSPs will see healthier growth as advertisers and brand marketers are shifting their advertising dollars into channels that are both more effective and more measurable. In the study we did last year with wide-format print buyers we found that 87 percent of the companies that buy wide-format graphics reported that it is an effective way to deliver their advertising messages. (See Figure 2 below.)

Another key element is measurability. Here is where you, as the PSP, can help. Most brand marketers and stores measure the effect of advertising using a simple sales lift, but there are additional aspects of signage that can impact the way consumers and shoppers interact with brands. Why not offer some interactive elements such as QR codes that can help improve the measurability of a wide-format campaign. The tools for creation of QR codes are either free or very low cost, and the ability to offer such services can help your customers recognize that you understand what they need from you. By the way, in one of our recent surveys, over 90 percent of the wide-format print buyers that have used those interactive elements on their signage and graphics reported that they would do it again.

In terms of overall opportunity—it may also help reconcile the difference between the seven percent reported growth in advertising spend and the 14.5 percent business growth expectation to report that people who buy wide-format printing expect their wide-format print buying to increase by an average of 17 percent. Of all of the applications identified, the strongest growth expectations were for key applications such as vehicle wraps and graphics, window graphics, and textile-based applications.

Business Challenges

When asked about what the biggest challenges are related to the signage and graphics business we found that PSPs are highly concerned with the pace of technological change from the supplier side. Users are very worried about buying into older technology which leaves them with lower levels of capability compared to shops with the latest technology that provides the best combination of quality, speed and operating cost. There are definitely different ways to think about this because I have interviewed shops that deliberately buy multiple pieces of the same equipment so they have the ability to run twice the volume when their customers need that, or they simply have the efficiency that comes with the expertise in running these printers, so one person can run multiple printers.

The second biggest challenge that PSPs indicated was the overcapacity in the marketplace—with too many printing companies chasing too little business. Again there are strategies for dealing with this trend. We’re seeing a lot of wide-format PSPs evolve their business by investing in new products that get them into small but profitable niches. We think this is why products like the HP Latex printer, the Mimaki 3042, and the Roland LEF printers are having a lot of success right now, because companies in the conventional signage and graphics business are looking for something new they can do that is adjacent to the signage and graphics business such as package prototyping, indoor décor, textile printing, and the printing of novelty items from mobile phone cases to pens and golf balls.

The third major concern companies expressed was the buyers that shop exclusively on price. Honestly, I think everyone in every business suffers from this, but in the signage and graphics market the sheer number of sources of printing services and the transparent pricing that is available from some on-line suppliers makes this a particular challenge. We have found that there are print buyers that are required by their internal policy to obtain several price quotes whenever they buy signage and graphics. Indeed the print buyer research we have done indicated that price consideration ranked as either the number one or number two reason a print buyer selects a print source. The cliché here is to recommend a relationship selling approach—which in many cases is appropriate. A more cavalier approach would be to adopt the “fire your customer” approach made famous by those who would say to focus only on customers that are profitable. Yet another approach is to take a more manufacturing oriented approach to the signage and graphics business and set some defined limits on what you will produce and stick to them. So, for example, you offer products in sizes and on substrates that allow you to be much more efficient than service providers that treat every order as a custom job.

Compared to the top three issues, concerns about regulatory issues that might impact either the production of or the display of signage and graphics are relatively low. This is an area that industry resources such as Wide-Format Imaging, of course, but also trade associations such as ISA and SGIA do a really good job of keeping membership and readership informed, but it is a consideration that is very local. Still, if we step back and combine these responses, almost 10 percent of the market consider regulatory issues the biggest challenge to the signage and graphics market. (See Figure 3 above.)

Conclusions

There is no doubt that the signage and graphics market continues to evolve and grow. Signage and graphics providers have substantial challenges that require them to be steadily agile, aggressive, and opportunistic, but also strategic and data-driven. InfoTrends is working on some ways that PSPs can measure their performance versus their peers in some key performance indicators. In my next article in June I will get into the results of that research.

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