Going Digital Means More than Hardware
Trends suggest that digital imaging helps print providers meet new customer demands, add value to existing services, and expand into new markets.
The wide-format-digital market remains a growth business. Growth comes from two major sources: the conversion from analog to digital and expansion in digital-printing applications.
It used to be said that digital printing was applicable for short runs based on the cost advantages versus screen printing for short runs. The average run length getting shorter is just one of the many customer-demand trends that is driving the conversion from analog to digital print. What we have found in a recent survey, wherein we asked hundreds of wide-format-print-service providers (PSPs) about what they are seeing in terms of customer-demand trends, is that many job characteristics and buying patterns contribute to the digitization of print.
The most prominent trend among print buyers is actually shorter turnaround times, with up to 60% of wide-format jobs needing to be turned around in less than 48 hours. There was also an increase in the use of versioning in order to improve the effectiveness of signage and graphics campaigns. PSPs are seeing an increase in the demand for online ordering and Web-to-print systems, which we believe is related to the issue of turnaround time, because customers want to submit orders when they know they need them, not wait until business hours when they can call their sales representative.
Another trend that we think has a huge impact on the entire market is that print buyers are asking for just-in-time production. Because this is the case, we know that many PSPs are embracing lean-manufacturing principles in order to reduce inventory costs. This likely goes back to one of the fundamental changes in the signage business, where historically sign companies would stock dozens of different colors of vinyl. The change to digital meant that now they only had to stock white, which in turn meant they had less cash tied up in inventory.
We see buyers demanding more of a link to digital media channels and more integration with other marketing collateral. Of the wide-format-print buyers surveyed, 43% reported that they have used interactive media elements in their printed signage and graphics, which is more than twice as many as when we did our buyer study just two years ago. So, print buyers see their printed signage and graphics as an on-ramp to high-level interactions with the brand. We think this means that we will see more of a focus on interactive elements such as QR Codes and Augmented Reality.
Buyers are asking printers to play a greater role in fulfillment by producing the signage and graphics, then shipping them in kits to the locations where they will be used. This is really important for print shops to consider, because many shops don’t give shipping and fulfillment enough attention in their sales pitches.
Our latest research shows that as many as 75% of wide-format providers are adding to and enhancing their services to drive top-line business growth, to improve profit margins, to differentiate their company from their competition, and to fill existing production capacity. The message here is that many PSPs are recognizing the need to do something different because commodity wide-format printing is getting increasingly competitive.
We think that the best print shops are investing in data-driven capabilities that will position them to work with print buyers at a higher level. They are investing in functions that will help them close the sale better by providing better information about responsiveness or by helping customers target their messages and marketing budgets more effectively. A new printer can’t do that. You might say that stuff is the ad agency’s job, but many agencies don’t see the line between agencies and printers, so in many cases, it is just fair play to move into these value-added services.
The fact is that many print buyers, even at ad agencies, are seeking these additional types of services to sell their capabilities to the end customer. They not only want you to develop these services, but many of them also need you to because they need to bring value to their accounts. Furthermore, these types of services can be the ultimate differentiator because, let’s face it, there are lots of shops that do an excellent job of printing and fulfilling. When that is all you can do, you are not competing on an entire project, because typically there are multiple other aspects that factor in to a buying decision. Consider expanding further into finishing, assembly, and installation on the print side and into strategy, research, creative, analytics, and programming on the services side.
One other aspect of developing digital capabilities is the ability to lock up business by getting your customers to work with you through an online platform. In a recent study, we found that in certain segments, as much as 23% of wide-format digital printing is ordered online, which buyers told us would grow over the next two years.
Doing this is much more than a matter of convenience; it is a matter of strategically migrating one-off or project customers into program customers. Taking a strategic approach means analyzing what customers are buying from you and trying to gain all of the information you can about these jobs to make yourself a better strategic partner.
The one-off and project sale is welcome, of course, but the more you are able to migrate those types of sale into program sales, the more you will find that your relationship with the buyer is solidified, because they view you as a strategic partner. And, as a pleasant by-product, you will find that your profit margins for these types of clients are considerably higher. By the way, an online presence is also important, because about 20% of the wide-format-print buyers we surveyed reported that they found suppliers on the Internet.
Historically, companies have used digital printers to create promotional and informational graphics, but one thing we’re seeing more of is the use of digital printers for environmental—as opposed to promotional—graphics. What’s the difference? A vehicle wrap is a promotional graphic. A banner informing passers-by of a grand opening? Promotional. A printed paper that sets the ambiance within a hotel or restaurant? Environmental. A printed fabric that covers the cubicles within an office environment with a beautiful sunset scene in order to break up the monotony of an office setting? Environmental.
Latex inks and totally clear UV-curable inks make environmental applications possible. Environmental represents one of the organic growth areas within wide-format digital. The other great thing about these this type of application is that it’s promotional—not part of a company’s marketing budget. The purchase of environmental applications typically is controlled by architects, interior designers, and space planners, and their sensitivity to price is much different from that of merchandisers and marketers.
Our research with print buyers and print-service providers indicates a healthy outlook for the digital business. The number of buyers who reported that they expect to spend more on wide-format digital printing outnumbered those that expect a decline by a ratio of about 6.5 to 1, with an average expected increase of more than 14%. The number of PSPs who expect their wide-format business volume to increase outnumbered those that expect a decrease by a ratio of 4 to 1, with an average expected growth of more than 10%.
So, as we are now in the middle of strategic-planning session for 2014 and beyond, we’re advocating going digital, because when we connect all of these findings, we get a new idea of what going digital should mean to printing organizations. Going digital once meant using a digital printer to produce the same kind of graphics that were screen printed, because there was a cost advantage for doing so. Now, we think it means that the company should use its resources to help its clients achieve their goals for revenue generation, experiential marketing, or operational efficiencies.