The economic recovery is less than robust, but for most distributors and manufacturers, things are better than they were a year or two ago. Most readers will agree on the "big picture" lessons of recent years: the customer is supreme, customers' buying motives are changing, and it's necessary to create perceived customer benefits and competitive pricing to build solid long-term relationships.
It's evident that competing on price is, in the long run, a no-win strategy. You may agree with me, but not everyone does. Some folks evidently have been hiding the last few years, and missed the sea change in buyer/seller relationships. Now, with an improving economy, some adherents of traditional graphic arts paradigms have re-emerged. Specifically, I'm referring to the idea that low manufacturing costs = low pricing is a winning formula. Yes, low pricing can succeed, but only in the short term. The appeal to the customer is based on a job, not a buyer/seller relationship.
If we've learned anything, it's that suppliers with superior pricing or manufacturing efficiencies are likely to enjoy that superiority for 15 seconds. But not everyone has learned from the reality of recent years. "Lean manufacturing" has been a buzz term, although it's difficult to discern what's new about it. Since the time of Gutenberg, printers and virtually anyone else in manufacturing have been trying to reduce costs. Now, there are advocates of "lean selling" who fail to understand that cost reduction, by itself, is meaningless. The issue is improvement in the cost/benefit relationship.
One industry study lists costs associated with a customer service department as "General Factory Overhead." When asked for rationale, the head of the accounting firm that conducted the study said, "Customer service is overhead. If everyone in a company did his or her job, we wouldn't need customer service reps."
This type of thinking simply feeds the commoditization of print, something you struggle to overcome daily. The chief symptom is price competition, and the only antidote is a supplier's ability to provide elevated value to customers throughout the supply chain. The concept of lean selling, with its core belief that the supplier of the lowest-cost products always wins, is antithetical to the concept that unique customer benefits need to be provided as well.
Lean selling, if it gains traction in our industry, will lead us to the situation in which manufacturers of detergents found themselves many years ago: a study to determine who had the greatest market share found the brand to be "40 Cents Off."
A simple equation describes the scenario addressed in this column: Perceived Buyer Value = Perceived Buyer Benefits / Price.
It's possible to elevate perceived buyer value by lowering price, but that's a short-term approach with economic limits. There is much greater opportunity and elasticity if the level of perceived buyer benefits is elevated.
Advocates of lean selling fail to understand that selling has a quality as well as a quantity. Additional time and expense invested in a particular account may, in the long term, yield referrals, access to senior management, repetitive work that provides regular cash flow, and decreased vulnerability to competition.
For instance, lean selling advocates would frown upon an annual, management-to-management review of process improvement with a high-volume or high-potential customer. After all, it takes time to prepare for such a meeting. Management may be tied up for several hours. There's no guarantee of increased business in the short term. There may not even be a short-term problem to solve. Yet a relationship review may be (and usually is) a sound long-term investment. The notion of lean selling, if widely adopted, would represent a triumph of the urgent over the important.
Having said all this, let me stress the need to operate as efficiently and economically as possible. But this must be balanced with consideration of effectiveness. In l962, Printing Industries of America commissioned the consulting firm McKinsey & Company to study the characteristics of the most profitable print companies. That research, which is remarkably pertinent today, found that pricing has five times the impact of overhead reduction on profitability, and three times the impact of increased sales. Remember, pricing reflects the extent to which a supplier takes the time to understand the needs of a buying organization and takes steps to provide unique value to that customer.
I fear that lean selling will be promoted as this industry's next fad du jour, the next "silver bullet." I urge you to stay ahead of the curve and be aware of its dangers and fallacies.
Contributing Editor Dick Gorelick is an award-winning authority on sales, marketing and business strategies for the printing industry. As president of the Graphic Arts Sales Foundation in West Chester, Pa., he travels extensively, consulting, writing and speaking on sales training.
