What is really valuable to your clients?
Tue 16 May 2006My mate Dugie had a minor whinge the other day about the cost of printer consumables. His story reminded me of a very clever lady I met a few years ago. She was one of the first Australians to exploit the high profit margin in printer cartridges. Her business was thriving because she had really worked out exactly what her clients needed.
Dugie’s first complaint was that he was forced to buy a new printer for no reason other than the manufacturer no longer made replacement cartridges. There was nothing wrong with his printer; it was even still within its “extended warranty”. Whinge-worthy.
His next shock came when he purchased a new printer and, planning ahead, priced a spare set of cartridges. A complete set of cartridges came to just $20 less than the price of his new printer. Dugie’s question was “Why would anybody ever buy a set of cartridges when you could buy a whole new printer and have complete hardware redundancy?“ Even more whinge-worthy.
But it gets worse. My answer to Dugie’s question is, “Read the fine print.” I’ve seen many printers where the cartridge(s) supplied “in-the-box” are only half the capacity of regular cartridges. Aaarrgh!
What do your clients really want?
All this highlights the fact that printer manufacturers worked out long ago that it’s not the printer that their customers actually want or need. What customers really want is ink on paper. The real money is to be made in that on-going supply of ink and, if possible, paper. The price (and margin) on printers has been shaved to almost give-away levels in order to lock customers in to that on-going revenue stream.
I’ll give you this razor for free if I can sell you blades forever.
How can you deliver it?
I’m reminded of a lady from Melbourne whom I met over a decade ago. Let’s call her “Mrs M.” She was one of the first to recognise and exploit this.
At the time, I was working for a “computer graphics” company. A significant part of our business was the sale of high-end colour printers. (OK, I know you can buy them in Harvey Norman or even K-Mart today, but 15 years ago, they were high-end.) Because of the size of the Brisbane market, we were fortunate to have an “exclusive” distributorship arrangement with a particular manufacturer. This was good for a while, but we knew it couldn’t last. We studied the Sydney and Melbourne markets where there were multiple distributors to see how they competed with each other.
In Melbourne, there were 5 distributors and Mrs M was one of these. Every time there was a tender for a high-end colour printer, Mrs M would offer recommended retail pricing. Of course, someone else would always under-cut her and she would lose the sale, every single time. She made nothing selling printers. But still, she was the manufacturer’s top distributor. How?
Mrs M’s killer strategy
After every lost sale Mrs M would show up on the customer’s doorstep with a big smile and sometimes even a bottle of bubbly. She would say, “Sorry you didn’t like my price on the printer, but no hard feelings.“ As a sign of good faith, Mrs M would then hand over an emergency supply of replacement cartridges, overhead projector film and glossy paper for the shiny new printer.
“This is my stock“, she would say, “but let me keep it in your stationery cupboard. If ever your own stock runs out, just break this seal and fax through this pre-filled order form. I’ll be around the next day to replenish it.”
Now I don’t know about you, but whenever I’ve had an important document to print or a major print job on, Murphy’s Law dictates that the printer will always run out of ink when the shops are shut. Sometimes this is late at night but often it’s on a Sunday afternoon.
Not surprisingly, every Monday morning, Mrs M’s fax machine was overflowing with orders for printer consumables. She cleaned up the profits.
Meanwhile the other distributors scratched their collective heads, pondered their near-losses on selling printers at a low margin and couldn’t work out why the consumable orders never flowed.
Mrs M had worked out exactly what her customers needed: not printers, but ink on paper, and now!
