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Manufacturers must modify their distribution models or face going out of business.
There is a question on everyone’s minds these days that is gingerly discussed but deeply considered. That is how the business channels are changing—or need to change—for manufacturers to stay profitable.
Applications such as managed inventory, 1-to-1 print personalization, and enterprise-wide, tiered-access web-to-print archiving, customization and ordering require consultative and development services and long-term, program pricing that do not fit into the traditional sales model. As much as manufacturers might prefer to work around these market shifts, they must deal with the challenges of new product mix, capital investment and employee skill sets, as well as the more profound challenges of business strategy, pricing models, and—perhaps most challenging of all—distribution models.
Where to Go From Here
For most traditional forms applications, the traditional distributor relationship is invaluable. At the same time, manufacturers’ business survival depends on switching to new applications, many of which are outside the traditional forms industry. Decisions that distributors make about embracing these sales models can make or break a manufacturer’s profitability, or even its ability to stay in business.
There are several models for dealing with this challenge. None of these solutions, in themselves, are new, but here is a distilled version of some of the best practices offered by some of the most forward-thinking minds in the industry.
No-cost training for distributors. Distributors can’t sell what they don’t understand. The phrase manufacturers often hear is to help distributors “develop an ad agency mentality.” Distributors need to think more like marketing experts than salesmen, learning the end users’ needs and their challenges, and developing print programs that address those needs.
This can’t be done in an afternoon, so the manufacturer’s role goes beyond distributor training. It requires the development of sales and marketing materials for distributors to use to sell their products. This means producing case studies, white papers, sample programs, sales collateral and educational website copy, among other materials.
One manufacturer has undertaken an aggressive training schedule in which executives are on the road at airport conference rooms twice per week, holding training seminars around the country, discussing products, applications and markets. In the last year alone, this manufacturer held seminars specific to its products for more than 3,000 people. This year, its schedule is up 20 percent. Another manufacturer places permanent staff in key markets not to sell direct but to develop long-term relationships with local distributors. These reps conduct training and even go on sales calls with customers.
Charge for distributor training. Just because you train distributors doesn’t mean they’ll sell your products. Distributors face price pressure also. They could just as easily use your training to sell someone else’s products.
For some manufacturers, this is simply the risk they have to take. For others, it’s an incentive to add price tags to their training. One manufacturer recently introduced a program to train distributors to sell new applications such as web-to-print and 1-to-1 print marketing for a nominal fee and a $100,000-per-year commitment in future sales. It already has 30 distributors signed up for the program.
Find new distributors. If your current distributors resist new sales strategies, recruit distributors who don’t. These distributors tend to be younger, more technology-savvy, have marketing backgrounds and run their businesses more like agencies than traditional sales operations.
To find them, some manufacturers buy mailing lists, conduct internet searches and attend trade shows. Others utilize business locators such as Hoover’s or tear Yellow Pages from local telephone books in new markets. Marketing associations also are excellent resources. They offer new techniques for product marketing, and they’re attended by like-minded and proactive resellers.
Another approach is to analyze your existing customer base. See which customers sell the types of products you look to promote. Who sells to national accounts? Those are the distributors you want to target, because they have the customers most likely to embrace these strategies (if they haven’t already). Then do a select training initiative for them.
Find new reseller channels. Traditional distributors aren’t the only reseller channel to explore. One of the channels regularly mentioned by industry leaders is commercial printing. Commercial printers have become increasingly “one-stop shops,” but this also means that they may lack specialization. Eight-color web printing or the ability to do laminates, perfing and die-cutting for membership cards are services that many forms manufacturers can do more cost-effectively than commercial printers, so it makes sense to develop partnerships.
For manufacturers used to the traditional distributor model, going in these directions can be a stretch, but as your product mix grows, someone has to sell the applications that are going to keep them in business. As one manufacturer says bluntly, “Will I sell direct? No. I’ve always used the traditional distributor model, but I will make money at digital printing. The typical DMIA distributor will be one of the channels we use, but we will use other channels, too.”
Go direct. Selling direct is a taboo subject, but increasingly it’s discussed. If distributors bring print production in house, particularly short-run digital jobs, the ability of manufacturers to sell products directly that distributors don’t want or aren’t yet able to sell effectively is simply the other side of the coin.
Many manufacturers have gone direct already, even if they aren’t publicizing it. According to Re-examining Roles and Relationships, a white paper published by the DMIA in 2002, 61 percent of the manufacturers surveyed at the time had some direct sales. That number certainly has grown.
Selling direct is intimidating, especially to smaller manufacturers, since hiring a sales team is the most expensive way to implement direct sales. But it isn’t the only way. Manufacturers can explore direct selling through vendor programs or by setting up a separately branded online store. Direct sales has many forms, some more obvious than others.
Whatever the choice, manufacturers risk alienating their primary sales force, so how to avoid disaster? An option is for manufacturers to segment the business, selling direct only those products that distributors don’t want to sell. For example, a manufacturer who adds 1-to-1 print personalization might offer the ability to market and sell these applications to distributors first. If there aren’t sufficient orders, it might consider adding a direct sales force for these applications only. That way, its sales force does not compete directly with distributors.
Leverage the internet. Print procurement through the internet is more than a niche movement. It’s part of the sea change in the way end users think about print.
In addition to basic online ordering, print procurement also is moving from an isolated function to part of a larger document management strategy. What used to be restricted to ordering business cards and stationery online has become a larger movement to store, organize and manage all types of print to reduce redundancies, eliminate inventory, reduce costs and manage the brand.
This move is not restricted to short-run, digitally printed documents. Software and hardware manufacturers are adding functionality to their web-to-print systems so that they can manage everything from forms to database-driven 1-to-1 print personalization and large-format output. It might be a while before anyone sees 4-part poly packets with transfer labels as web forms, but re-orders can be taken over the internet, and simpler types of forms already have migrated to the web, if not gone entirely electronic.
There is also increasing pressure to integrate digital and offset workflows so that web interfaces can manage all types of jobs, regardless of their source.
Although many forms manufacturers are just exploring these interfaces, 26 percent of commercial printers already offer some type of web-to-print system, according to Web-to-Print: 2007, a special report released by The Industry Measure (January 2007). While most forms manufacturers think of these systems as being used primarily for static documents, only nine percent of commercial printers operate a web-to-print system for simple online ordering of static documents, while nearly twice as many offer one for customizable documents. Eight percent offer one for creation and distribution of print advertising. Growth is clearly on the side of more complex, program applications.
This doesn’t mean that printers (and forms manufacturers) aren’t taking advantage of the internet to offer basic online stores. End users will purchase printing online from someone, and for plants set up to process high volumes of short runs jobs, it may as well be them. Many manufacturers are rebranding these sites under new names to divorce them from their forms manufacturing operations, even though the same equipment is used to print them.
Not all web-to-print sites are set up for direct sales to end users, however. Manufacturers also encourage their distributors to sell and maintain ongoing revenues from these applications. Once the distributor sets up the account, the customer goes to the distributor’s site, clicks on his account and is transferred to the printer’s site, where the account is managed and products are ordered. To the customer, the shift is unnoticeable. The portal looks still like the distributor’s website, and the distributor gets credit for the sale.
This article is reprinted from the April 2007 issue of PERF Report, a newsletter focused on industry-specific research. Visit www.theperf.org.