Thursday, March 30, 2006
To Differentiate Your Business, Find Something Your Competitors Can'tor Won't Change
"In your most recent edition of PrintForecast Perspective, you ask, 'Where are the franchise printers?' in your discussion about distribute and print. As we've tracked in our client newsletter, the franchises cannot legally engage in some of the activities you discussed in the lead article. In the middle l990's, Xeikon tried to follow through on its promise to create a network of its installations after a critical mass had been achieved. Of course, only independent print companies were involved. At that point, the Justice Department raised the issue of collusion and price-fixing, intimating that only the U.S. Postal Service and Kinko's were within the law.
"Franchises are independently owned. It is clearly collusive if a franchisor tries to organize franchisees and establishes pricing. Since the mid-1990s, Staples, Office Max, Office Depot, and others have become factors. They do meet legal standards for a national distribute and print operation."
I hinted a little bit at this last week. Dick is absolutely correct. I encountered a similar situation in the late 1990s when working on a project with a major color printer manufacturer, explaining how they had to open new online and telemarketing channels for their equipment to sold to the then-hot graphic designers, small agencies, and commercial photographer markets. I was told “but that would invalidate our existing office equipment dealer agreements.” Epson promptly killed them using these new channels. The dealer agreements we left perfectly intact. The documents were happy, the workers became unemployed.
Of all of the 4 p's of marketing (product, price, promotion, and place), “place” is often the most difficult to quickly change. Prices can be altered with a stroke of a pen. Ad campaigns are approved over lunch. The laws regulating distribution and dealer relationships can often be complex, and are delineated in long-term contracts, agreements and organizational structures. When these are created, they all make sense at a particular point in time and for some years thereafter. Marketplaces change, and I find that “place” decisions lag behind the most. Sometimes "years thereafter" is shorter than hoped. This is often the main advantage of new competitors in any industry: they lack the baggage of history.
There's a marketing lesson here. In competitive strategy, you always try to create differentiation using an aspect of a competitor's business that they cannot and will not change. One of the best examples of this kind of warfare is the old Burger King “broiled, not fried” campaign, mistakenly abandoned by the company many years ago. Broiling was something that McDonalds would never do, because their infrastructure of equipment would be too costly for them to change, and the risk of admitting that broiling was better would be too great. Frying things is also perceived as "bad" from a health perspective, an extra reason for BK to choose the strategy.
Whenever you want to differentiate your business, you have to find something that will let you stand out, and something that is not easily duplicated by competitors. For the office superstores, their standardization and the sheer number of locations is essential to their strategy. This is easily used against franchise printers for the reasons Dick Gorelick explains. For the franchises and all independents serving small and mid-size businesses, what choice do they have? Many. The bigger problem is choosing a very small number of attributes (like ONE) and having the tenacity to keep usining it.
What's the positive side of the legal restrictions against standardization? Instead of being shackled by standardization, printers become unique businesses run by small businesspeople with minds and business strategies of their choosing, targeting the specific needs of their clients. Promoting "personal and knowledgeable service" is a weak start, because anyone can say those words and it's not likely people would believe them anyway. After all, office superstores could point to their copy shop workers and say they give personal service. But the positioning of "we know what you need because we're entrepreneurs, too” is something that the office superstores would never do, raising the bar from dealing with clerks to dealing with owners. Superstores make copies, even copies of their own stores. Entrepreneurs seek and create opportunities, not copies. Let the superstore clerks say "How many copies do you want?" We should be saying "Tell us about your business."
There are numerous tactical options in marketing, and whatever is selected has to be reinforced by credible and demonstrable customer experience. When it comes to advertising strategy, I'm not not the best one to listen to in this regard. Good ad agencies get paid well for a reason. If a discussion with an ad agency doesn't include the development of a meaningful differentiation for your business, they're not who you need, especially when your range of tactical options may be legally limited. The printing business may be bound by traditions and trade practices that don't always play well in today's new media marketplace, but that doesn't mean we just roll over and play dead. We need to stop being our own worst enemies and leave the "worst enemy" job to our competitors. There are just too many opportunities in this environment, and recognizing them is the first step.
Thanks to Dick Gorelick for permission to reproduce his letter.Gorelick & Associates can be reached at (610) 436-9778.