Decreasing Demand Driving Printers to More Value-Added Services

Written by Howard Fenton, Senior Technology Consultant at NAPL
The printing industry is struggling with cyclical and structural changes, which are reducing the demand for printed products and changing the products offered. The cyclical change is tied to the economy, while the structural changes are from technologies that are disruptive to the printing industry such as the Internet/email, cell phones, and e-books, among others.
While a portion of the demand will return as the economy returns, the effects of the structural change are more profound and the declines due to those changes may never rebound. According to the Harvard Business School web site, a company’s health depends in part on the structure of the industry in which it competes. An industry’s structure depends on five forces of competition: the intensity of rivalry among existing competitors; the threat of new entrants; the threat of substitute products or services; the bargaining power of suppliers; and the bargaining power of buyers.
The one force that is having the most profound and disruptive effect on the printing industry is the threat of substitute products and services. In the most recent NAPL State of the Industry report, we asked the printing panel participants which structural changes are affecting them the most.
The results of these cyclical and structural changes are companies that are merging, consolidating or going out of business. There is a constant decline in the revenue from traditional products such as offset lithography, while there is an increase in the revenue of digital printing and other value-added products and services.
Along with the decline in revenue of traditional products and the increase from digital printing, the same trend is occurring with the profitability. There is a decline in the profitability of the traditional products and a greater profitability with digital printing and other value-added services.
But this does not mean that traditional products and services are going to disappear. All indications are that traditional products and services will remain an important part of the industry. This is important in the creation of the curriculum because it shows that both the traditional and new products have to be included.
Which services a company decides to add depends on their customer base and application mix. A company that specializes in long run books sold through a publisher might consider shorter run, digital, on-demand books sold directly to the customer. Smaller companies that sell to local businesses might consider adding design, cross media services or large format equipment for signs.
Expanded value-added services include creative design, e-commerce; photography, web page design and hosting; large format printing; mailing and fulfillment; multimedia: and a host of services that support horizontal products well beyond the core printing business model. As we discussed in previous blogs, one of the challenges in the graphic communications industry is that the need for training is more important than ever and is more scarce (http://digitalprinting.blogs.xerox.com/?p=2431).
What new value added services are you going to bring to market in the next 9 months?
Howard Fenton is a Senior Technology Consultant at NAPL. Howie advises commercial printers, in-plants, and manufacturers on workflow management, operations, digital services, and customer research. He is a paid contributor to this blog.

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One Comment

  1. Alin Jacobs May 24, 2011 -

    Sounds to me like the evolution of new marketing continues to have an effect on the print industry. Without a doubt, business as usual won’t work in today’s marketplace.

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