While today’s business model has worked extremely well for more than 30 years, the continual decline in page volumes and the likelihood that such declines will accelerate make it incumbent upon OEMs and, to a lesser extent, dealers to consider alternatives.
Personally, I am a proponent of extracting page volume from the business model equation. If COVID taught us anything, it’s that factors well beyond our expectations can appear in the market and virtually destroy a major component of the business model. Yes, many OEMs and dealers have placed minimum page volume levels in their agreements to guard against downside risk, but is this really feasible as the industry continues to commoditize? Is there anything preventing OEMs or dealers from moving in this direction? Not as far as I can see. Today’s industry players have all the data needed to effectively integrate pages into their core pricing while maintaining adequate protections for those customers who print “too much.” In fact, taking this approach would ultimately simplify customer transactions and administrative burden.
So how should the model change? Changing business models is never easy and moving from a model that has been the lifeblood of the industry since its inception is that much more difficult. That being said, we already have a window into a potential business model that offers both OEMs and dealers with the same revenue/profit opportunities as today’s model but lessens the risks associated with variability in print volume. What model am I referencing? It’s a model that is now the standard for software delivery and one that could easily be used for selling print – the subscription model.
A subscription-based business model, whether offered on an annual basis or tied to a longer time frame, can include the three major components of today’s business model: initial sale, maintenance and consumable supply. The beauty of this model is that it can be offered at a fixed monthly price, which is easy for customers to understand and simple to transact. Because the model provides for fixed recurring revenue, OEMs and dealers can more easily predict revenues, cash flows and earnings. Although the model can be structured based on fixed monthly payments, it doesn’t preclude customers from financing, thereby maintaining today’s financing operations. The model also has the potential to lock customers into genuine parts and supplies, another important source of revenue and profit, particularly for OEMs.
Are there risks? As with any new model, risks exist. Some of these risks include customers who print well beyond the expected volume range for a given device as well as customers who may elect to cancel their subscription. Mitigating these risks is quite easy through charging for excessive prints beyond a given range and requiring customers to maintain their subscription for at least as long as it takes to depreciate the equipment involved in a given transaction.
As the industry evolves, there is little doubt that the industry’s business model needs serious introspection. With more people working outside of traditional offices, continued digital transformation lessening dependence on paper, and long-term improvement in digital collaboration systems, forecasting the future of print and, in particular, printed pages is becoming more and more challenging. While it is evident that pages will continue to decline, the questions are how much and how fast?
As the industry continues to change it also raises questions concerning the most efficient path to reach the customer. Is the office technology industry suitable for e-commerce? There is no question that many low-end print technologies are being sold in this manner, even many targeting the general office. However, the internet as a channel is still very underutilized. With margins for OEMs on lower-end models continually being squeezed and A4 devices becoming more popular, is there any reason to believe that e-commerce wouldn’t become a significant selling vehicle for industry players? If so, can the current business model support e-commerce business at scale? The complication inherent in the current business model doesn’t make it an ideal candidate. A more simplified model that provides for simplified customer pricing and transactions may very well be the key to e-commerce taking off.
Dennis Amorosano is the president and founder of Dendog Strategy Insights LLC, a management consulting firm focused on strategic planning, new business development and go to market execution. Providing services in the areas of strategic business planning/execution, new business development, content creation/marketing automation and technology sourcing support, Dendog Strategy Insights brings 30 years of technology marketing, sales, product planning, software engineering, and professional service experience to help clients implement strategies that yield success.