Market Intelligence: Trouble in the Middle

I recently read a great article by Robert Sher who writes a lot about mid-sized firms. In his article he makes the case that “Operational meltdowns are more common and disastrous at mid-sized firms than at small companies because they take much longer to notice and resolve. And unlike large organizations, mid-sized firms don’t often have the organizational and technological talent to stop the bleeding quickly. There are a few things that mid-sized firms tend to overlook until it’s too late: an overbearing sales force that over-stresses the supply chain, outdated IT and physical infrastructure, a shortage of talent in key areas, and an over-reliance on just a few big customers.”

This message hit me because recently we did some survey work in the wide-format digital print market in the UK that presented some troubling findings on mid-sized wide format print shops. The data illustrates that mid-sized wide-format shops are having trouble maintaining market share and achieving profitability more than shops at the bottom and at the top of the market. If we look at shops that are small, say less than $500K per year in annual revenue, they typically work with local clients that place a lot of value on the fact that their chosen printer is close by and therefore frequently able to produce and fulfill wide-format graphics print jobs very quickly as they are often needed. The local/point-of-need production that small shops offer is hard to displace, which is a nice advantage over national suppliers, but local market competition tends to spring up in areas of the country where a lot of printing is done. The shops at the top of the market, around $10 million per year or more, are able to maintain growth in several ways, they can grow sales by using their scale to satisfy the demands of large accounts on a national level, and they grow profit by using that same scale to manage prices and demand terms from suppliers that smaller shops can’t get. Large shops are able to spend more on production capacity so they never have to say “we can’t do this”. Servicing large accounts, such as national and global brands, is probably why large shops are, by comparison, the most likely to have undertaken color certifications such as G7, or some type of sustainability initiative, both of which in turn can help them attract more new clients.

Where does this leave mid-sized wide-format print shops? Well, one thing we learned from the research is that shops of all sizes are trying many of the same things – adding new services, looking for new niches and areas of higher profitability, restructuring the company’s sales and marketing – to grow sales. This emphasizes the importance of execution for any shop, but it is even more imperative for mid-sized shops because they don’t have the inherent advantages of being big. What shops have to do is constantly think about execution and performance, but also think about ways to develop new “hooks” into their customers business by trying to help them solve the problems they are trying to solve. This is really a new approach to selling. Business owners should be trying to connect with customers to ask them what some of their business issues are, to see how the services that mid-sized companies offer and CAN offer, are able to help solve customer problems. This is true for your customer sand for new prospects by the way.  What could some of their problems include? Well for starters it will seldom be about “printing” – usually if you get them to open up your customers will talk to you about problems they have that are related to their branding, or they need to grow revenue, or they need to reduce costs, or they need to save time, or they have issues with compliance, they have logistic issues, or they need to target more effectively, or they need to measure their ROI more effectively, or all of these.

Here’s an example, one shop we’ve worked with talked to their large retail customer who told them they had a big compliance issue. The customer knew that many of their store managers weren’t having store personnel install the graphics they spent thousands of dollars on when they were supposed to. The print shop suggested they add a bar code system to the graphics, so that when they were installed it automatically reported to headquarters and presented the data real-time. Corporate headquarters could see whether the graphics had been installed and if for whatever reason a store hadn’t done it, because of weather or personnel or just because they were too busy, corporate headquarters could help get the store in compliance. The shop that I am describing has taken that model and not only sold it to other retail customers, but has expanded the installation and management side of its business based on that set of common customer needs. This is not the kind of solution that only a large shop can develop.

Going back to Sher’s article, he wrote about “an overbearing sales force that over-stresses the supply chain”. This applies to this wide-format business especially, where the need to evaluate revenue in terms of profitability is critically important. Another wide-format print shop we have worked with had a large and strong sales force that continually sold products into a market that is getting increasingly competitive. Over a period of years the company’s profit margins were eroding because the sales force was under constant pressure to bring in more business, which they continually had to do at lower prices, by offering more aggressive terms, or by adding services at no cost. Ownership took a new look at this business and its capabilities and determined that, by investing in some new equipment, some new sales people, and some (shameless plug coming) InfoTrends’ sales training, it could leverage its strong fulfillment capabilities to find new customers and enter other segments of the wide-format market that would grow revenue and offer enhanced margins.

Sher also wrote about “outdated IT and physical infrastructure” and its impact on a mid-sized business. This speaks to the need for wide-format printing companies to look for ways, through IT, that they can both grow their business or improve operations to increase profits. Sadly, what we saw in the data from that study in the UK was that mid-sized wide-format print shops are considerably less likely than large shops to invest in workflow and Print MIS software that would improve their operation, and almost just as likely to invest in web-to-print software or on-line ordering capabilities which may just further drive down pricing and profit margins since many buyers use the Internet to comparison shop between print service providers.

The wide-format digital printing business remains a growth market, but the “rising tide” does not lift all boats equally. It doesn’t matter if you are small, medium, or large, the companies that are customer-centric will be the ones best positioned to grow in this exciting segment of the market. Investments must be made with an eye on not just growing the top line, but on improving performance that helps wide-format printing establishments become more operationally profitable.

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