PrintForecast Perspective Archives

PrintForecast Sold to WhatTheyThink.com

2007-03-01T05:15:00.000-08:00

The announcement of WhatTheyThink's purchase of the assets of Global Forecast Group and my becoming the Director of WTT's brand new Center for Economics and Research is on PrintCEOblog this morning.
http://printceoblog.wordpress.com/2007/02/28/whattheythinkcom-to-launch-economic-and-research-center-dr-joe-webb-to-direct/

The formal announcement will be on Monday, March 5.

You can access the audio of my recent interview of Randy Davidson where we talk about WhatTheyThink's acquisition of Electronic Publishing, PrintPlanet... and my new role. http://members.whattheythink.com/home/wttnews070305.cfm

My industry blogging will move over to PrintCEOblog.com and also a special blog being set up on the WTT page that will be devoted to the new Center. http://www.whattheythink.com

The free newsletter, PrintForecast Perspective, is being discontinued. The podcast PrintForecast Contrarian View is being reformulated and redesigned for delivery at WhatTheyThink. At this time, the format that we will use has not been determined.

This is quite an exciting time for WTT. For years, I believe, what has been going on there has been underestimated by the industry old guard, and it's building up quite a brand, reputation and business. I have been pleased and honored to be part of that, first with "Fridays with Dr. Joe", since moved to Mondays, the economic webinars, and the GraphExpo and Print events. I was dragged kicking and screaming into the Internet by my then business partner Jim Whittington, and I have to say... he was more right than he even suspected at the time. Now that WTT's base is over 50,000, it's quite the industry heavyweight. I'm excited to be part of it.

Thanks so much for your support for PrintForecast Perspective.

Why Telling Businesspeople to "Embrace Change" is Meaningless

2007-02-08T07:13:00.000-08:00

Go to an industry seminar, a trade show, or read a trendy business book, and you'll undoubtedly hear something like “you have to embrace change to be successful.” How trite. How simple. How misguided. How lucrative, if you're on the speaking circuit.

Its corollary is “change or die.” The advice does little to improve businesses or improve businesspeople. We will die whether we change or innovate or not. We're sorry to break the news to you this way, but it was the only free newsletter we were sending you at the time. When you choose to embrace something, it also means that you can choose to let it go. Whatever you embrace does not necessarily become organic to the organization. It is just embraced. What kind of value can it have if you can choose to let it go?

They must be telling us to embrace change for a reason. What is the goal of this advice? It is to have businesses, their owners, and managers, recognize that they are in a dynamic marketplace. The advice assumes that they are ignorant that marketplaces change, even though the signs of change are all around them. Because the marketplace is dynamic, managers need to be constantly aware of how those unstoppable forces create opportunities, make current products and methods obsolete, and more importantly, affect their customers and prospects. They already know that. Can you imagine an industry seminar or event that was promoted as "Come to find out how our industry will stay the same"? People read industry magazines, visit web sites, go to trade shows and seminars precisely because they are concerned about change.

The advice is also myopic and not as generally applicable as it sounds. There are things that should never change. Strong financial controls. Good employee recruitment and relations. Emphasizing long-term and sustainable profitability. Performing your work well. Understanding your costs. Knowing your customer's needs and goals. A reputation for being reliable and trustworthy. Change? Why would we want to change these things? What kind of change is it that we are supposed to be “embracing”?

Many small and mid-size businesses were started by owners who had a particular vision for themselves and their businesses. Over the years, circumstances, market forces, and trends, affected the nature of that vision's implementation, and the owners navigated them accordingly to their capabilities. Eventually, the business looks nothing like it did when it started. That's good... that's because it changed. For businesses to survive three or five or ten or twenty years, it had to be able to confront change. Telling a business person to “embrace change” is like telling them to “embrace breathing.”

The central process that businesspeople use to navigate the marketplace is planning. Too often there is a regular admonition about the inability of printing businesses to plan, but nonetheless they manage to survive and outlast the seminar programs about planning and the people who admonish them. Planning in small businesses tends to be more culturally-based and transmitted by actions, not by documents. The issue becomes whether or not that culture can detect changes in its customer prospect base and its overall market, and profitably adapt. It's not whether or not it embraces change. Planning is a process by which we prepare for anticipated changes to our businesses, customers, competitors, and the marketplace. This is why it's so important to conduct the planning process effectively.

Business owners deal with change every day. They hire salespeople to go into the market with the job of changing the ingrained purchasing habits of their new sales prospects, and are willing to make changes in their business to accommodate the new customers. An employee quits; a new employee joins. A customer is gained, an old customer goes out of business. New equipment is purchased, old equipment disappears. Remember, we're the industry that went from letterpress to offset to digital, from hot type to cold type to desktop publishing, from black & white to process color to digital color, from press proofs to off-press proofs, to digital proof. Name the function, it's changed.

A problem arises when managers ignore the changes around them or are not sufficiently tuned into how those changes might affect them. The issue is not whether they embrace change. Not a single manager or owner whom I have ever met does not want their business to change, to be more successful, to be more efficient, or to satisfy its customers better. To want things to improve is to want things to change. Yet, sometimes managers have a deaf ear to the marketplace or even to their own business. This is not a problem with change. This is more a problem with the ability to detect change or the ability to create change.

We should not misdiagnose a lack of desire for change as an inability to embrace change. Desire for change always needs to be accompanied by capital and knowledge. Managers and owners are faced by so many options that it is usually hard for them to choose, and that is always complicated by other considerations of people, customers, timing, and other resources. Some business owners may seem to lack the desire for change, but what they really have is an inability to know what changes to implement, why they should be implemented, and may not be able to gather the needed resources and people. Some of these owners know that the cards for change are stacked against them, and for that reason decide to hold on to their business as long as they can until things turn in their favor, knowing full well that such circumstance may not happen.

What is the right advice? It's definitely not to “embrace change” because businesspeople deal with intended and unintended changes every day. The right advice is to make sure that whatever planning process is employed, even if the most informal, that it is more robust than it was before and is capable of detecting change sooner and point to the best long-run options for a profitable and proactive response. That planning process must include good controls and the ability to act decisively to be sure that the desired results are attained. No one should be creating opportunities that satisfy your customers' emerging needs other than you. If your planning process does not enhance your ability adapt to a marketplace and provide renewable and superior value to your customers, then it's not worth planning, or being in business, at all.

Embrace change? Sorry. We're business people. It's part of everything we do.

In Creative Destruction, the Media Reports only the Destruction, Especially About Itself

2007-02-01T05:00:00.000-08:00

As a reminder that you have to look at the data and the methodology to interpret what's really going on, last week's press reports that were headlined “Planned Media Job Cuts Up 88% in 2006” was one of the best we have seen lately. More importantly, it's a lesson that when markets change through the forces of creative destruction, only one side of the story seems to get reported, and that's especially the case when the reporters see death, destruction, plagues, and layoffs all around them.

Challenger, Gray & Christmas, the company that compiled these data, is not responsible for the context of how it eventually gets reported. CG&C is a famous outplacement firm that handles searches for the world’s biggest companies, and its top executives. Years ago, they started to track announced corporate layoffs. That is, any time a major company would report downsizing activities, it would track them and issue a press release. It brings them great publicity, and they use it very well, supplying talking heads for all kinds of news broadcasts. In this case, there were “17,809 job cuts, up sizably from the 9,453 cuts announced the prior year, according to the job outplacement tracking firm.” The press automatically went into sky-is-falling mode.

Let's look at the real data, compared to last year:

excluding newspapers, publishing employment is up by 12,000, according to the Bureau of Labor Statistics
total publishing employment including newspapers is essentially flat, up about 700 employees
ad agency employment is up by more than 11,200

Even more interesting is self-employment and microbusinesses in publishing. In 2001, there were 68,000 of these entities. By 2004, the number had increased to 80,000, according to the Commerce Department. We suspect that the number in 2006 was in the range of 88,000.

Blame technology, desktop publishing, the Internet, aging of the workforce, or whatever. This is the creative force in “creative destruction” and it's never reported in the media at all. Markets are a constant give-and-take of growing and declining trends and businesses. When growth occurs in small businesses, or in the “new economy,” no one seems to notice, though the figures are just fascinating.

Self-employment and microbusinesses trends in other content-creation businesses is booming. Between 2001 and 2004 there were 16,000 more self-employed and microbusinesses in advertising, and 29,000 more in design services. Of course, some of these people might be considered unintentional entrepreneurs, but if this kind of employment is rising at the same time payroll employment in these industries is also rising. This is a sign that for most of these workers, being self-employmed or in a microbusiness is now the manner to which they have become accustomed.

More astounding is that when we compare this kind of employment to the total number of employees, self-employment in publishing was 7% of the publishing workforce in 2001. By 2004 it was 9%. In 2006 we estimate it was 10%. By 2010, we expect it to be 12%.

In graphic design, the percentages are even more eye-opening. Employment in microbusinesses or self-employment began to outnumber payroll employees in that industry starting in 2000. In 2004, there were 40% more designers in freelance mode than there were in payroll mode. We expect that this number will continue to grow.

In the end, it seems like lots of these jobless publishing folks are finding jobs in their own publishing industry, and often a different corner of it. One company’s layoff is someone else’s new hire. Remember, these employees can also exit the workforce, change industries, but usually end up working for a smaller and more nimble company in the same or related industry. Many of them, it seems, become self-employed.
This is a longer term trend that started in the 1990s; it's not new at all. People who follow “big media” or live in that environment have to come to terms with the creative part of creative destruction, and realize that it's the bad news that is no longer newsworthy. The revolution has started without them.

Planned Media Job Cuts Up 88% in 2006
http://news.yahoo.com/s/nm/20070125/bs_nm/usa_economy_jobs_media_dc
creative destruction (in the first paragraph)
http://en.wikipedia.org/wiki/Creative_destruction

What Will 2007 Hold for Printing Shipments?

2007-01-18T05:00:00.000-08:00

The recent bullish rise in industry shipments has changed the outlook in our different forecasting models for 2007 and 2008. Forecasting is sometimes viewed as guesswork or a black art, but there are numerous tools that forecasters use, and we use as many as we can find. Through the years, we have found that the use of statistical models helps to focus the discussion and immersion in anecdotal accounts are used to enrich prognostications.

Every day, we review forecasts, and sometimes we joke there are often more forecasts than there are real data. There is one aspect of forecasts that continually befuddles us: the “consensus forecast.” This means that someone has taken all of the forecasts that were available and averaged them together. If there were true consensus, the forecasts would not have to be gathered in the first place. And if forecasting was something important, why would one want to average a bunch of bad forecasts together hoping that something good would come of it. One can't make a good stew with tainted meat and rotting vegetables.

Forecasts that are statistical in nature use historical data to forecast the future. The data are just numbers that resulted from business activities at a particular point in time. The conditions of that time are probably different than what will be in the future. While all trends have historical roots, it is much too simplistic to just extend past trends into the future. There's something comforting about “predicting the past.” It ignores that marketplaces, in the long term, are dynamic. There is one benefit, however.

When in high positions, executives can find it difficult to distance themselves from the daily heat of the corporate battle. Some managers fall into a habit of assuming the last thing that they heard was correct and was the most important thing they will hear affecting their business.

For that reason, having a statistical forecast of trends that might be embedded in one's business or market ensures a sense of detachment required for good planning.

PrintForecast.com runs three different models on the industry shipments data series we maintain. One is a straight-line model. Another detects seasonal patterns. Yet another fits an exponential curve equation to a data series. They are nothing more than arithmetic exercises, no matter how sophisticated they seem.

By constantly reviewing the literature of the markets that feed communications demand, such as what is happening in direct marketing techniques, publishing, advertising, graphic design, photography, telecommunications, broadcasting, and other fields, one arrives at a general understanding of what is happening in our industry today, and what forces will impact it in the future. It's easy to let the hyperbole of technology and its marketing affect forecast decisions. Again, including a basic statistical forecast in the process helps one to better understand the issues.

Good forecasts require a combination of approaches, but someone, sometime, has to put a stake in the ground and proclaim what the forecast is.

Our forecast models for 2007 show three scenarios. For comparison, this past year's inflation-adjusted shipments will be about $91.4 billion. Model 1 estimates that shipments in 2007 will be $92.9B. Model 2 says $92.7B. Model 3 says $82.3B. We can say with great confidence that all of the models will be wrong. But that's the first step.

Models 1 and 2 have formulas that more heavily weigh the recent past than distant history, just like that executive who values the last thing that was heard in a casual hallway conversation. Model 3 has a longer term view, and in light of the past five years trend, and not the last five months, forecasts more pessimistically—about -11% less than the other two forecasts. The consensus of the models would be $88.6B, if one takes comfort in that. It almost sounds reasonable.

So what forecast should one use? $91.4B? $92.7B? $82.3B? $88.6B? All of them. A company needs to prepare itself for whatever the marketplace can hurl its way. Knowing that Model 3's forecast of an -11% decline in shipments is part of the mix should create a process of asking and answering hard questions.

We should also remember that not a single statistical forecast produced in 2000 would have projected a scenario of industry shipments decline as it actually occurred. Any planning exercise should include the possibility of a totally unlikely industry scenario. Sometimes that's called disaster planning. No, it's part of any thorough planning process, not just disasters.

What's the official PrintForecast.com forecast? $89 billion. Any resemblance to the consensus forecast is purely coincidental. It's actually where our dart landed.

Industry Consolidation: Not as Simple as it Looks

2007-01-11T05:00:00.000-08:00

Cadmus was bought by Cenveo. Cenveo chased Banta, and then R.R. Donnelley outbid them. Donnelley then bought Von Hoffman. Cenveo is a product of mergers. Donnelley is becoming one as well. There's more to come. The fact that mergers and acquisitions exist in the printing business should not be a surprise: they have been going on for decades. The 1980s had their “greying of the industry” wave, as owners sold because their grown children had careers of their own, many deciding that printing was not for them. The 1990s had a growing stock market and Wall Street analysts who saw commercial printing as a growing business (remember how the Internet was stimulating print volume and that it would never end?), filled with inefficiencies, easy money, and a great opportunity for fees for managing whatever deals they could, even if they didn't make sense. Investment bankers don't make money on the stocks...they make on the fees for handling the deal, especially when the companies are public. When the deal is done, they're usually out of the picture.

If prior consolidations were primarily waves of generational or monetary exuberance, today's are generally defensive. There is a desire for synergystic retrenchment, as businesses combine, eliminate redundancies, cherry-pick equipment and personnel. These mergers do not contain an ingrained desire to create new markets or new opportunities or to ride new waves of demographic, economic, or technological change. They are a search for ways to adapt familiar tools to a confusing marketplace.

Big name consolidations are how the other half, or more accurately, the other five percent, live. The rest of the industry consolidates by the forces of the marketplace. Printing businesses go bankrupt; or, they close one business, and join another printer in a new venture; or, they close up shop and become print brokers. Trade typographers closed and became desktop publishing businesses or service bureaus or graphic design studios. This small business turmoil does not get much attention, but it is of greater volume and frequency than most realize. Department of Commerce data consistently show in the range of 3,000 print businesses closing and 2,000 print businesses opening every year for more than a decade. These are not “newbies” to the printing industry, these are signs of an industry that is always restructuring itself, under the radar. The bulk of these businesses are long-time industry workers and owners closing one business entity and starting another, cleaning up their financial and marketing sins, believing that a fresh start with a new partner or in a new place or with a new name, and better yet, a new strategy, will keep them in the printing game where all their experience resides.

We've often used the old phrase “things take twice as long and cost twice as much” when describing market adoption of new products to our clients. The same holds true for the synergies companies announce at the times of their deals. The fog of enthusiasm later becomes impatience.

As far as “big” consolidations go, Harvard professor Michael Porter offered an interesting observation years ago, based on his research. More than half of all acquired companies fail, and end up being divested or closed about five years later. Consolidation has risks, and they are beyond the normal risks one encounters in day-to-day business. Many of the mergers are financially successful after a short time, but do not have a strategic resilience to them. Getting things re-organized dominates strategic thought, not the marketplace. There is a point where all the rewards of balance sheet clean-up and reconfiguring are essentially complete. Then there's the next step: facing a changing marketplace with a winning long-term strategy. Sometimes that's two years or so into a merger before it gets properly addressed, and often the company gets sold again to someone else who can supply a strategic base when the financial gurus jobs are complete.

By consolidating, companies add significant transition risk to their businesses. These do not appear on their financial statements, but the results of the unmanaged risks do. An indecisiveness invades the business, especially among middle management who are unsure of their own jobs, but unsure of the strategies that guide their decisions. Is it the strategy of the acquiring company, do they follow the guiding principles of their prior company? Or is there a new strategy based on the assumed strengths of the new combination.

Indecision and lack of resolution often costs more than making bad decisions. Bad decisions are obvious, but their cures are just as obvious. Lack of clarity from top management, however, is corrosive, and only feeds informal political structures that do as they please until someone tells them otherwise. Fear of making bad decisions in front of new management only makes things worse.

There are other transition risks. These often materialize as undone work, customers ignored, new initiatives that are delayed, executives unavailable to direct their workers because they are tied up doing transitional "things." New budgets, new forecasts, and especially, new staffing plans take time away from running the business.

Transition also creates upheaval among the employees...many of them leave and go to competitors. This is good and important, from an industry vitality perspective, as many of them go to smaller companies. While it's hard to shift from working for an industry behemoth to a smaller company, these employees often do well there, bringing a level of experience that the smaller companies could not normally attract. Many times, they bring customers. Because management in merged companies cannot give their employees immediate straight answers about the viability of their jobs, they will start looking for employment elsewhere. Often, it's not that management doesn't want to give a straight yes or no answer about the jobs of their underlings...it's that there are no answers to give at that particular time. The managers themselves may not even be certain about their jobs.

Transition uncertainty also weighs on the customers. It's hard to have employees, concerned about their jobs, working with wary or confused customers.

How does one deal with this? Starting out with a vision for what that newly merged company looks like in a marketplace at least five years from now, and then directing the reorganization toward that end. If cuts are coming, better to make them swift and hard so that the new business gains a footing, even an uncertain one, early. There's nothing worse than a constant parade of "black Fridays" where people look in their check envelopes for the legendary pink slip. Providing timetables with goals reduces some of the anxiety that can undermine productive work. Admitting mistakes, or even admitting that there will be mistakes, certainly helps. Getting the focus off the company and onto the clients and the competition is essential. For that, speaking and acting with clarity and decisiveness is necessary. When your own company is in upheaval while navigating a changing marketplace, the presence or lack of management talent becomes evident. Is your business up to the task?

Reader is Skeptical of Printers Getting into New Media, and with Good Reason

2006-11-30T05:49:00.000-08:00

In the most recent PrintForecast Perspective, there was a discussion titled “More Print Than Not,” and its conclusion suggested that printers would do well to understand where the next wave of creative destruction would hit.

Ray Roth of High Volume Printing magazine sent this note:
“...I can't envision very many commercial printing companies making a profitable leap into video and e-book production. The answers to success and increased profitability for a majority of midsize and large printing companies is much closer than a video editing room. In fact, for the last several years, GRAPH EXPO and PRINT visitors have had an opportunity to see first-hand demonstrations of practices and processes that not only are closely related to what they currently do but also command significantly higher margins than a typical print job. Although PIA/GATF, NAPL and GASC blow their horns about large-format printing and mailing and fulfillment, too many printing companies turn a blind eye to these opportunities. Besides the nice impact these services can provide to a company's bottom line, most printing companies already have customers that [are] buying these services from another source. Until I learn otherwise, printing companies are better off fulfilling more of their customers' needs with additional services more closely aligned to what they presently do.”

Ray is absolutely correct from a printing business perspective. The print business must continually innovate in its core business. Printers are not in control of market prices, but they are in control of their costs, hence the need to emphasize productivity and new ways of approaching the marketplace that changes costs and creates new benefits for clients. In the longer run, however, the print business owner has to deal with the realities of marketplace demand. There is a time when the core business proposition no longer provides what clients desire, and those businesses die and are replaced by others that do.

This is what separates owners from entrepreneurs. Let's assume that the advice given to printing businesses to define themselves as being in the communications business is fully correct and in the spirit of Ted Levitt's classic Marketing Myopia. (It's not, but let's assume that it is). There, Levitt implores business leaders to define their businesses broadly. The famous example is that railroads were not in the railroad business, that they should have defined themselves as being in the transportation business. If one believes that redefining a business requires allocating resources to back that up, then one must insist that these businesses invest in the technologies and capabilities of the innovations that will put them out of business.

The skills and business knowledge of a print business owner are directly tied to what they know best. This is, like all specialized knowledge, a blessing and a curse. The blessing is that the knowledge and experience is what uniquely suits them to run a business well at a certain time and place. The curse is that those skills and competencies exist in a changing environment. Railroads would not have been competent at running airlines, even though a reading of Levitt suggests that railroads should have seen the airline opportunity. Investor Warren Buffet has cited that even airlines can't run airlines, with his famous quip that “any right-minded capitalist who had seen the Wrights' contraption take to the skies in Kitty Hawk might have shot it down and saved investors 100 years of agony.”

All executives have a core technical competency that makes them excel at what they do; and all of them find the need to change and hire people or buy companies with different competencies because of marketplace change. But there is never a guarantee of success in this endeavor. So the skepticism that printers can handle a leap to video is well-founded. In fact, straying into odd businesses can lead to the risk of starving the healthier core business of needed capital investment, and that should not be taken lightly.

So the thrust of the close of the piece was not to encourage abandoning print and making a rush to video embedded in e-books or whatever the future holds. Instead, it was intended to inspire a look at the technologies and dynamics of the communications business as it unfolds. There are many new media products that require a mastery of graphic implementation for which print experience is an excellent foundation. The print business that can offer a communicator the ability to deploy content in various channels will still often be, in its heart, a print business. Over time, those new abilities would open new markets and new customer bases that could be built on top of that foundation, ensuring its long-term survival.

“More Print Than Not”
http://pfcperspective.blogspot.com/2006/11/more-print-than-not.html
Marketing Myopia
http://en.wikipedia.org/wiki/Marketing_myopia

More Print Than Not

2006-11-21T04:36:00.001-08:00

Here it is, with 2007 almost upon us, and we're still feeling the effects of the desktop publishing revolution. The Internet tends to get the headlines, but all those web pages would be pretty dull without the breakthroughs of the desktop publishing revolution. Those advances stand on the shoulders of too many computer technology developments to count, but they all seemed to coalesce from 1984 to 1986.

Desktop publishing is more than software, it's a series of connected events that make Moore's Law so interesting. It's the incredible decreases in prices and sharp increases in capabilities of equipment that have made it so. A $1000 scanner is almost considered “high-end” in today's digital photography world, and has features and capabilities when combined with modern software that are far more capable than a $200,000 scanner of 1980. The range of equipment has certainly expanded. A 5-megapixel camera can often be found for less than $200. A 1 megapixel camera in the 1980s was $25,000 and was virtually limited to industrial applications.

These changes are small compared to the destruction of barriers to the costs and time involved in content creation that they caused. Designers just used to design. They'd need a prepress practitioner to translate their work into print, and the costs involved seeded the market conditions that would make desktop publishing explode, and be taken for granted today. Of course, it needed an enabling platform, and that turned out to be the Mac, introduced in 1984 to great fanfare. I remember sitting in on an interview with a big New York ad agency in 1990 that saved $100,000 in typesetting costs their first year after adopting desktop publishing.

There were other transitional aspects that proved interesting. Designers who used desktop publishing found that their clients were getting confused. Desktop publishing output of job mock-ups created to test ideas or layouts looked like they were almost final. In the past, clients were given drawings and sketches, often colored using markers, so it was obvious that they were getting ideas-in-process. Now they were getting output that looked final, and would start nit-picking fine design issues or complaining about text kerning, when it was too early in the process to even consider those items as the final concept had not even been settled yet. Designers had to be careful. Other designers found that their ability to create near-final mock-ups quickly was actually landing them jobs. As clients were auditioning a parade of designers to work on a new campaign, the ones that showed up with near-final looking mock-ups rather than rough drawings and sketches appeared to be more skillful, thoughtful, and time-efficient. Because pitching a new client was risky, the amount of time and effort to allocate to prepare for a meeting had to be carefully weighed. Clients felt that because the designer took the time and the effort to make the mock-ups was a sign of their potential commitment to the project. The fact that the desktop published images looked “more final” was a competitive advantage against “traditional” designers. In fact, those desktop-produced mock-ups were produced in far less time. Some designers used the “extra” time to produced mock-ups of yet more alternative approaches for the prospect client.

Printers and typographers had similar experiences. A typesetter found a simple solution: output work in process on blue paper just to remind clients that what they just received was not final. Clients were used to getting bluelines as proofs in the past, and this was a subtle message that the desktop publishing output at that stage was similar. Just think, however, that a job had to go all the way to film to even have a blueline. Jobs took time, and time was money, and things took twice as long and cost twice as much as expected, too often.

By the time the project got to the blueline stage, the supposedly last round of changes and revisions were identified and approved. Then the final proofs would come in, with yet another reminder of how much further changes would cost in time and dollars, and those would be substantial. Author's alterations could become contentious as to who's fault it was, client or printer, but good printers prided themselves on how they always had signed-off proofs at each stage of the process. They could charge appropriate rates to go back and restart the work or augment what had already been done. Some older typographers would claim, privately, that author alterations were half of their billings, and the most profitable part of their business.

These topics are brought up now, because it is often assumed that non-print activities comprise more of the print shipments dollar than ever. This is now part of the industry's common wisdom. It is clearly not true to anyone who can remember all of the time and monies clients would have to spend just to enter the print process at all. All of the camera work, paste-ups, mechanicals, proofs, scans, more proofs were not billings for ink-on-paper, even though that was usually the job of printers. Because desktop publishing has extracted the equivalent tasks from the printing industry and put them in the hands of designers and non-printers, it is actually more likely that ink-on-paper actually comprises a greater part of the value of commercial print shipments than ever before. None of the “value-added” services that are frequently discussed in the business come close to the costs of design, production, and other prepress that were naturally embedded in all print billings of the time.

When one studies the productivity of the industry, there is a curious crossover period in the 1990 area. Prior to that time, our industry's productivity exceeded that of other manufacturing businesses. After that, it has been consistently lower. It is not a coincidence that significantly improved versions of Adobe PhotoShop and Illustrator hit the market at that time. The loss of high-margin prepress tasks is something that the industry still seeks to economically replace. Most of the “non-print” or “value-added” billings that are regularly referenced in today's industry literature and publications do not have the same economic impact, nor the reliable flow of daily revenue.

So here it is more than 20 years later, and we're still feeling the effects of Aldus PageMaker, even though the product has long ago been replaced by QuarkXpress and Adobe InDesign. Desktop publishing is now such a natural part of the printing business one wonders what we would do without it. There would be no digital printing without desktop publishing, and neither would there be computer to plate systems, except in the most extreme circumstances.

But what's next? It's clear from Adobe's recent acquisitions that video, especially mobile video is at the top of their to-do list. We may not think that holds any future for us, but e-books with embedded video have to be created, produced, and managed by some business entity. The management of images and design elements that work in media of all types have to be coordinated as well. These were all at the heart of that old prepress business, but we didn't know it at the time. That workflow that we had, and the trade practices that were built around it, was a barrier to the creation of print jobs. Desktop publishing smashed that barrier down, reducing production costs and creating a more flexible and richer creative environment, despite the obvious and notable problems with standards and consistency it had, and essentially solved, along the way.

Economists sometimes refer to what happened as “creative destruction.” That's a strange phrase, in light of our industry, as desktop publishing's creative destruction elevated the capabilities of creatives to the point where once sophisticated and costly prepress tasks are now almost thoughtless mouse clicks. It actually created more creatives. There are more creative businesses, workers, and freelancers than before. More is expected of designers, in terms of their skills and creativity, and their access to imaging technologies, than ever. It's our task today, as entrepreneurs and an industry, to find where the next opportunities of creative destruction will be, and lead their charge.

LINKS
Desktop publishing revolution background
http://desktoppub.about.com/cs/beginners/f/when_dtp.htm
Moore's Law
http://en.wikipedia.org/wiki/Moore's_law
1984: Apple's Super Bowl commercial announcing the Mac
http://en.wikipedia.org/wiki/1984_(television_commercial)
bluelines
http://web.mit.edu/psb/resources/forms/reviewing.html
Aldus PageMaker
http://en.wikipedia.org/wiki/Aldus_Pagemaker
background on “creative destruction”
http://en.wikipedia.org/wiki/Creative_destruction

What a Difference a Point Makes

2006-11-09T05:00:00.000-08:00

Last week, we reported about September printing industry shipments, and noted that the September to November period is the busiest of the year, starting that they were 26% of the year's annual shipments. We received some notes that were along the lines of “So what? If three months is 25% of the year, what difference does that little percentage point really make?”

That's a very good question. Facetiously, the answer is about $900 million dollars for a year. We didn't explain why it's important, or how these months, and others, have changed over time. This September-November represented 26.56% of industry shipments from 1992 to 2000, but this dropped to 26.17% in the period of 2001 to 2005. In 2005, it was 26.02%. The historic seasonal variations between months and quarters is lessening considerably to create a flatter shipments pattern.

Over time, even the calendar quarters have changed. The fourth calendar quarter (October-December) used to be 26.7% of the year's shipments. In 2005, it was 25.4%. The first calendar quarter (January-March) used to be the weakest, at 24.1%; last year, it was 24.9%. The weakest three months of the year were traditionally May through July, at 23.89%; last year they represented 24.28% of shipments.

January was typically the least active month of the year, at about 7.7% of the year's shipments. Last year, January was 8.1%, and July became the slowest month, with 7.8% of the shipments. The strongest month has always been October, but even that has slackened. From 1992-2000, it represented 9.15% of shipments. Last year, it was 8.88%. March is growing in importance.

Each month of the calendar is about 1/12 of a year, or 8.25%. The best way to show the difference between the months is to calculate how each month differs from 8.25%. The average variation was + or -0.27 percentage points in 2005, or from 7.98% to 8.52%. That's very small. From 1992-2000, the average variation was + or -0.41 percentage points, or from 7.84% to 8.66%. That's not even half of a percentage point, but the change shows that the months are becoming more alike.

What is the reason for this change in seasonality of printing shipments? It's quite simple, or at least the hypothesis is simple. Print's product mix is changing, and it's primarily the change in printing purchased by retailers that has affected the seasonal pattern. Just this past week or so, there have been many reports about the decline in newspaper circulation. These declines are even in Sunday circulation, which had been steadier circulation than the other days of the week. Declining Sunday circulation means that there are declines in the number of newspaper inserts needed. The rise in direct mail, though a boon to some, is a sign of the rise of e-commerce, resulting in many catalogers have reducing frequency and page counts of their editions, in favor of direct mail promotions. The result is less printing of one type, more of another, and it nets out to an overall loss in volume.

The real change is not a surge of volume in any month, it's a reduced volume of end-of-year printing related to retailing that has given other months a greater piece of the shrinking pie of printing shipments. Retailers have also be spreading many of their dollars throughout the year because consumer spending is changing. Note how Halloween has become the second biggest “holiday” for spending on decorations and the like. Also, as the population has gotten older, Christmas gifts are more likely than ever to be “experiences” and not hard goods. Gifts of vacations, travel, and event attendance are consumed year-round. Generally rising affluence, and smaller families, also means that Christmas is less of a focus for spending. The rise in self-employment and changes in corporate pay policies mean that Christmas and holiday bonuses have become less important to many households as part of their total income and plays less of a role in the timing of their spending. The rise of the credit card business also means that Santa can work his special magic at any time of the year.

What's the new print year look like? March is gradually becoming our new October. That is, as end-of-year printing recedes, other months are becoming arithmetically more significant. But it's just numbers. What they indicate is that the print business continues to change and that old rules of thumb and common wisdom about strong or weak parts of the year are out the window. That's what caught many people by surprise in 2005, as they kept saying “but the year always finishes strong,” and then, unfortunately, it didn't. Now the pattern is gradually becoming “one month or quarter is just like another.” Anyone who complained about how difficult it was to cope with seasonal swings in their volume should now be happy. Those seasonal swings helped define our industry. It's like having the hiccups... once they're gone, we miss them.

Regarding the recent increase in print volume and its possible attribution to political spending, we have this to add. A client brought this question up as they looked at charted data as saw some rises in even-numbered years. There aren't that many years to analyze, since the data series that we use start in 1992. What we can say is that up until 1998, there were no significant monthly changes in shipments compared to odd-numbered years that could be solely attributed to political printing. From 2000 to 2005, however, there appears to be upward bumps in the share that election months have in the year; but it's not that easy. In even numbered years, the entire period from July through December is stronger than in odd-numbered years, including a robust December. This is where the statisticians say “that's interesting,” and then go onto the next topic.

Right now it's just a statistical curiosity. The political season explanation is plausible, because the decline in retail printing may make political spending more pronounced and easier to detect, and therefore it may be an important factor to consider in prognostication, when in the past it was not. It's like the analogy of a river: when the water level decreases, you can see rocks and formations that were previously hidden from view.

To be certain of the validity of this new pattern requires more data than we have. That statistical disclaimer is, of course, absolutely no help to executives who have to make decisions today. This is definitely one of those “sounds good, let's run with it until we learn otherwise” situations that experienced executives, and good consultants, know quite well. The honest ones are always on the lookout for “otherwise” and those things that go against common wisdom. Among other factors that play into a short-term rise in print are the shortage of experienced new media personnel, the shortage of good Internet properties on which to advertise, and the price increases that many new media properties have demanded for ad placement for their best viewing. The lack of local new media properties that could address political needs may have sent more money to print in some extremely contentious races; national races may benefit most from online advertising. The dollars end up going to the payback of least resistance, and temporarily, that may be print. It could very well be the case that both trends are creating the recent print increase.

Online media and political advertising
http://www.clickz.com/showPage.html?page=3623858

Random Events Hide a Consistent Pattern of Opportunity

2006-10-26T05:20:00.000-07:00

The other day, a news item about Adobe's acquisition of software developer Serious Magic reminded us that mobile, personal video is on its way to the marketplace. Combined with their purchase of Macromedia and its Flash product, Adobe is moving aggressively in this area. Get used to the phrase “mobile media” because it will be hot buzzword as the wherever, whenever consumer-in-charge media really starts to sink into the minds of content creators of all types. We're a couple of years away from its being useful and common. YouTube is just a tiny beginning. We're not far away from having e-books regularly containing video, especially e-textbooks, which today are mainly computer reproductions of hard copy books with minor enhancements.

A Canadian newspaper is now doing a streaming video broadcast of news. Is there any wonder why newspaper conglomerates are selling their broadcast properties? The barriers to entry to video markets are falling fast, much like what desktop publishing did, a 20-year old trend that we still feel today.

The change in media habits has been felt by network TV programmers. Verizon Wireless, it is reported, has its peak use of streaming video is during evening rush hour, between 4pm and 7pm, as people commute in cars, trains, and busses. For AOL, 3pm to 5 pm is the peak. Many of these are downloads of network shows that were missed during the day, the evening before, or even days before.

The reminder of this comes from the author of a book mentioned recently, What Sticks. He was speaking at a magazine conference this week, and he said “As a marketer you maximize ROI when [you] use all media.” Why? Because you never know where or when someone will access the information, and even market segments that used to have strong media preferences are in flux.

Computer and services company Unisys had an interesting, hypertargeted campaign, described in the Wall Street Journal. The first line of the article is “Around 20 high-ranking executives at corporations such as Subaru of America, DHL, Citigroup and Northwest Airlines will get a surprise when Fortune magazine arrives on their desks this week. Each will find his or her own face gracing the cover.” Unisys is after very large contracts, and because of that has a very well-defined list of sales targets. It's worth it for them to do something out of the ordinary to get the attention of high-level decision-makers and bypass various gatekeepers. They even did research in the likely commuting trip of the CEOs they are attempting to influence, buying ads and billboards along those routes. This is data base marketing. The list is only 20 records long. We're used to thinking of data base marketing in grander terms than that, when the opportunities might be in much smaller situations.

Every item mentioned above hides an opportunity for print. Mobile media deploys content from print customers in unique ways. They need to deploy that content efficiently and manage it effectively. The change in peak times of viewership is a sign that all traditional rules of thumb for all media are subject to change and rethinking. Are we part of those discussions? How do content providers influence media choice and participate in those new media-use venues? How fluent are we in aiding our clients to use other media? Since you don't know where or when information will be needed or accessed, you have to work to be everywhere in a context that supports the goals and objectives of the communication campaign. That brochure that we print, with all of its core elements of data files, design layout, and raw content, is a springboard to other media. It's time to look at things differently if we haven't already. We're not in the communications business. We're in the deployment business. Are we up for the challenge?

LINKS
Serious Magic http://abcnews.go.com/Technology/print?id=2586807
mobile media http://internetweek.cmp.com/news/193401692;jsessionid=MXQFSFWSWJUNSQSNDLRCKHSCJUNN2JVN
Canadian newspaper http://www.durhamregion.com/
and its video broadcast http://www.videodurhamregion.com/newscast.php
Network TV adapting to streaming video http://msnbc.msn.com/id/15365611/site/newsweek/
What Sticks http://www.amazon.com/gp/product/1419584332?ie=UTF8&tag=drjoewebbcom-20&linkCode=as2&camp=1789&amp;creative=9325&creativeASIN=1419584332
Wall Street Journal article on Unisys http://online.wsj.com/public/article/SB116165243559401530-BpNz2cj4YySTN5X2T_XI1NSa694_20071024.html

Free Downloads: Latest Reports About Media Use

2006-10-12T03:21:00.000-07:00

Arbitron has a free report about Internet and media use that is highly recommended. Consumers use of “on-demand” media like the Internet increased sharply, and they now consider cell phones and broadband Internet access the most “life-changing” new technologies. Households with broadband Internet access now significantly outnumber those with dial-up, 13% of consumers now having three or more working computers in their homes. Given a choice between never using the Internet or never watching TV, 4 in 10 would now choose to keep the Internet and eliminate television. These changes, of course, ripple through to print, especially to young consumers. A recent USA Today report described the college campus life of “digital natives” the generation that has not known a time without the Internet... and they'll be in the workforce soon and making media decisions. It's essential our industry be prepared for them.

B2B businesses are now placing 40% of their purchases of goods and materials online. That's according to a press release by Abacus, a division of DoubleClick. The executive summary is available for free download. According to the company “...significant is the report's finding that b-to-b customers make online purchases nearly 10% more than b-to-c customers, with 40% of 2005 b-to-b sales occurring over the Web, compared with 31% of consumer purchases. Abacus' report said the statistics highlight what most marketers already know: 'Business purchases exhibit a different dynamic than consumer purchases.'” These trends are also aiding in the adoption of Web2Print technologies.

The Newspaper Next project of the American Press Institute has released a worthwhile report, titled “Blueprint for Transformation.” Go to this address, fill out the form, and you can download a PDF at no charge. The situation analysis and the “game plan” sections are well done, and have direct parallels to print. The difference is that commercial printers do not create content... but their customers do, and that's where the opportunities are. The report introduction says “Successful new business models are emerging, providing new ways to get and give information, buy and sell, create and maintain relationships, and convene communities. Many of these offerings supplant traditional newspaper functions, adding new dimensions of value, convenience and interactivity. Consumers and advertisers are eagerly adopting these new solutions to get key jobs done in their lives. The innovators creating these solutions are seeing dizzying growth rates. Why can’t newspaper companies do the same? Newspaper Next’s conclusion: They can – but not without dramatic changes in the way they think, the strategies they adopt and the innovation processes they use.” Sound familiar?

What does the commercial printing industry do to reposition itself in the modern media world? Two recent “Dr. Joe” columns from WhatTheyThink.com have been moved from their premium to free access side so that more industry executives can access them. The first discusses what needs to be done on an industry basis, and the second reviews what print business owners need to do. The idea for the two-column commentary started when a media advisor said at a conference of leading corporate marketers and communicators: “print can be a legitimate spinoff of the web.” There it was; those nine words put the media shift in full perspective. Print had a run of 500 years of world-changing participation, and now its relegated to being a “spinoff.” This will not change. The first step to adapting is to recognize that electronic media are here to stay, and we have to start aggressively using it ourselves.

LINKS
Arbitron
http://www.arbitron.com/downloads/im2006study.pdf
USA Today report
http://www.usatoday.com/tech/news/2006-10-02-gennext-tech_x.htm
press release - Abacus
http://www.abacus-us.com/News_and_Events/Press_Releases/default.asp?p=115
executive summary - Abacus
http://www.abacus-us.com/News_and_Events/Press_Releases/The_Abacus_2006_B-to-B_Industry_Insights_Report_Executive_Summary.pdf
Blueprint for Transformation
http://www.newspapernext.org/2005/09/report_availability_1.htm
first WTT article
http://members.whattheythink.com/home/drjoe161.cfm
second WTT article
http://members.whattheythink.com/home/drjoe162.cfm

“Long Tail” May be Great for Publishing, but Not for Printing... Unless Printers Act to Make It Otherwise

2006-09-28T05:15:00.000-07:00

A hot book this year has been The Long Tail by Christopher Anderson. He initially wrote about the concept in an article of the same name in Wired magazine about three years ago. Basically, he uses a concept of the statistical dispersion of observations to describe a world where “big hits,” like best selling books or the blockbuster movies. This large amount of sales is the head of the curve. Anderson's thesis, illustrated by examples ranging from the creation of the Sears catalog and its impact on early 20th Century rural consumers to today's examples of amazon.com and NetFlix, among others. It's no accident that Apple's iTunes is thriving and that retailer Tower Records has declared bankruptcy. Rather than the “big hit,” the back catalogs of older offerings and specialty and niche products will have greater total sales than the “big hits” but dispersed over many, many products. This “long tail,” or the longest, flattest, and lowest, part of sales will have the greatest return.

Anderson does a superb job of making his case, acknowledging the contributions of decades of business and demographic innovations. This is contrary to the stereotypical Internet book which starts off with the assumption that these times are different than any other, and if you don't get on board now, you're dumb and you'll be out of business next week, or sooner.

There's only one area where I feel that Anderson is neglectful: there is virtually no mention about the revolution in logistics that companies like FedEx and UPS have created, where almost anything can be shipped for next day delivery. The connectivity of the Internet aside, which is a near-miracle itself, if a product can't be digitized, then you need these companies. Without them, for example, amazon.com would be just an interesting order entry process, and then a plodding delivery system. The idea that you can track your package with a few keyboard strokes and mouse clicks is incredible.

The book reminded me of the calls I would get whenever a printing plate company had a new controller or CFO. Predictably, I would get the question “Do we need all these plate sizes? Can't we standardize on a few plate sizes?” The answer would be negative, of course; the variety of press vintages, models, modifications, and operator preferences all conspired to create finishing and inventory nightmares for plate companies and their dealers. They all found ways to cope with these problems through the years, but this would indicate that not all products can be “long tailed” with the beneficial effects that the concept offers in other categories, but even Anderson is aware of that.

The “long tail” is creeping into the things that we do and the way we look at business practice. For example, magazines have always touted their circulation and readership, broadcasters have referenced the reach they have with audiences. In a long tail world, targeting to very narrow audiences is all the more possible, and all the more essential. Micro-niches aren't “sexy” from an advertising perspective, and they challenge implementation tactics and budgets. We should remember, however, that the ultimate small niche marketing is the traditional one-person/one-client sales call. If sales people have been tailoring their pitches to customers based on the unique requirements of that specific client, then question is how to multiply that capability with other communications methods.

To do that requires that marketers create situations for individuals in microniches to become entities that facilitate efficient communications. Sometimes these are events or other promotions. The development of e-communities is an obvious one. Trade associations and users groups are others. Do these entities exist in a manner worth supporting to the ends you need as a marketer? If not, work to create them. This is one of the reasons why public relations has gained in importance in the Internet era.

Publishing is probably the most obvious focus of The Long Tail. Because audio, video, text, and graphics can all be in digital form, the cost of maintaining them is constantly declining and means of accessing and transmitting them is always improving. Content creation is the ultimate “long tail” business.

In a recent interview in Folio:, Anderson, still an editor at Wired, responded to a question about the “long tail” concept as it applies to publishing with “...I don’t look to the publishing industry for guidance. I look at what the readers are doing. Once upon a time I used to compete with magazines and newspapers. Now I compete with magazines and newspapers and 20 million blogs. Readers have choices out there—some of them professional, some of them amateur. The name of the game is attention and I’m fighting for attention share with a vast, increasing number of competitors.” The lesson is one that marketers have known for a while, and one that I have used many times in presentations: ignore your competitors, stay ahead of your customers. It's hard to implement in a market that is so reliant on its “big iron” investments in presses. The press you buy, its size and capabilities, is an expression of where a print owner believes opportunities will be for the next ten years. To ask printers to be willing to walk away from their hard-won purchase in an attempt to satisfy every twist and turn in a fickle marketplace is certainly asking a lot.

In the same interview, Anderson reminds us that the nature of the Internet distribution of information has changed dramatically: “The day when you could shovel your stuff onto the Web site and people would bookmark it and come back are pretty much gone.” Most people visiting sites today are referred from somewhere else. Google has changed the whole concept of branded portals. Audiences can't be taken for granted, and the serendipitous audience traffic from search engines puts new pressure on communicators to make sure that one visit they might get from that person makes positive, satisfying impression. The search engine phenomenon means that more people are being delivered to a specific web site page, and not to a home or landing page. It also means that site visits are topic-driven and not event-driven. Not that there isn't interest in news, of course, but the “long tail” looks at news as the daily addition and enhancement of topic-accessed archives.

An article in The Wall Street Journal applied significant scrutiny to many of Anderson's claims in the book. Some of them poked holes in the book's data, which Anderson defended and refuted. It has to be remembered that The Long Tail, like many other business books point out trends and concepts. It's for others to take them up and run with them if they see fit. The marketplace is constantly changing: Anderson is not writing a history, but expressing ideas about things as they have happened so far. As business people we have to walk with one foot in the past, another in the present, and a hand reaching for the future. All of our future sales will come, by definition, sometime in the future, and we have to remember that the technologies that make the “long tail” possible also affect the costs in the head. Competition from the products in the tail, affect the nature and design of the ones in the head. Business is not a lab experiment where we can control one variable. The business environment is almost chaotic, which is why such a premium is placed on good forecasting. Anderson's are just his ideas, and there will certainly be others opposite his. The world economy is so large and diverse that conflicting paths to success can always be found.

What does all this mean for print? Again, knowing why and how people use print, and ultimately the information contained in print media, is a valuable service that printers can provide. When there are no printed materials, the printers can be creating the electronic versions for clients, hosting them on their servers, but also providing wise counsel about how to provide the right access on web sites. It's obvious that the “long tail” concept is an underpinning of ondemand book production and all ondemand documents. If you've ever thought of getting into those businesses, this is a must-read.

As stated earlier, The Long Tail might be considered by some to be a warning of the demise of the printing industry. But printers who understand the concept can start building the capabilities and innovative services that their customers will need as the “long tail” continues its slow integration into everyday business practice and life. Instead an eerie premonition, think of it as the foundation for a blueprint that can be used to create a print business' next strategic leap forward. We have to stay ahead of our customers, don't we? Otherwise, the tail wags us.

Get the book The Long Tail at Amazon.com
http://www.amazon.com/gp/product/1401302378?ie=UTF8&tag=drjoewebbcom-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=1401302378

The original article http://www.wired.com/wired/archive/12.10/tail.html

Tower Records' bankruptcy http://www.cbsnews.com/stories/2004/02/09/entertainment/main599008.shtml

The Folio: interview
http://www.foliomag.com/viewmedia.asp?prmMID=6456&prmID=1

The Wall Street Journal that questions the book
http://online.wsj.com/article/SB115387606762117314.html?mod=todays_us_marketplace

Anderson defends himself
http://www.longtail.com/the_long_tail/2006/07/factchecking_my.html

Is Media “Fragmented” or Is Something Else Going On?

2006-09-21T05:03:00.000-07:00

For many years the phrase “fragmentation of media” has been used to refer to the splitting of communications budgets across different media. An important part of this phrase is the assumption that the same total dollars are being spent on media (as best as I can tell, that is correct), and the main reason for the use of the phrase is that those dollars are being divided up differently than before. Perhaps you have heard it as the phrase “the changing media mix.”

Through these years, the phrase has made me uncomfortable, but I could never explain why; now I can. "Fragmentation" is a media victim's word.

It reminded me of the old fairy tale about Humpty Dumpty falling and no one could put him back together again. Thank goodness for plastic flower pots: I've dropped clay ones, and I know they can't be put back together very well. There are fragments all over the place and there is no way of finding all of them.

The words “fragmented” or “fragmentation” imply something that is not as originally intended, is broken, or is missing pieces. That is, there may have been a precipitating contrary event causing the fragmentation. There are only fragments of the Dead Sea Scrolls remaining, inflicted by centuries of storage under harsh conditions. People spend years studying them and grappling with what is there and making educated conjecture about what might or might not be missing. Fragmentation is usually unintended. Dead Sea Scrolls scribes had no intent to produce fragments. Neither do media planners.

If it's not fragmentation, what is it? It's called media planning. If a medium is allocated less than was historically, that is referred to as fragmenting; the media that get more refer to it as a media shift. Fragmentation is how an outsider describes it, especially the media on the losing side. Fragmentation is a word for media allocation victims.

The primary case against using "fragmenting" is that the overriding goals of the media planning process have not changed: effective and consistent branding, messaging, that create audience awareness (and reaction) across media. The search is for synergy, to get the best return for the least cost, a greater ROI for the package than can be produced by a single medium.

The measurable effectiveness of media has traditionally been difficult. If sales went up, the ads must have worked. If sales went down, the ads must have been bad. Companies carry out many simultaneous activities to stimulate sales, such as have sales people with incentives, or add dealers, improve product quality, or act to deal with competitive action. Any claim to a single act causing an improvement is likely bravado and not empirical. No executive is likely to run an experiment to find out what the primary causal activity was from a scientific standpoint, especially when doing the research can be expensive.

A new book, What Sticks, attempts to determine how one part of media, advertising, is best deployed by consumer marketers, by extension helps explain the change in the demand for print and the use of printed products like magazines, inserts, and others. John Wanamaker's quote that “half of advertising is wasted but I can never find out which half,” is now out of date. The authors have determined that it's actually 37%, at least of the companies studied. The biggest problem they found was spending too much in a category, usually broadcast TV, beyond the point of economic return. The same budget, they were able to demonstrate, was to reallocate “extra” budget dollars to other media, and achieve better returns. The authors studied marketers whose total budget in advertising was $300 billion; of that, $112 billion was considered wasted. One of the underlying reasons for cross-media, therefore, is that each medium in a media mix has its own diminishing returns. Spending more is not the approach, spending differently is.

Fragmentation is not something decision-makers seek, but synergy is. Maximizing ROI is something that applies to the whole budget, not just one medium. Communicators are trying to find the “Goldilocks” allocation to media where everything is “just right.” Unfortunately, this allocation will always be changing, because the marketplace will always be changing as well. Competitive actions, technological change, innovation, targeted geographies, consumer preferences, and other factors, are dynamic, so skills in creating optimal media mixes are bound to be sought aggressively by agencies and marketers alike.

Most of all, marketers have realized that multiple media are more effective than just one. As the authors write about their research “...we found that an exposure to one TV ad, one magazine ad, and one online ad preformed better than seeing three ads concentrated in any one media type...” They also state “Seeing a consistent pattern across media creates a more powerful pattern in consumers' brains than the mere repetition of the exact same message in the same media.”

What does this mean for print and commercial printers? It means that printers have an opportunity to get into this fray by finding ways to dispel confusion about the effectiveness of media, and especially print, even the most basic print. First, printers must understand that the print orders they get are only a brief glimpse of what its customers are doing in their overall communications. Be curious: have casual discussions with client decision makers that fill in the gaps and provide a sense of the overall plan, if there is one. Printers can play a role in suggesting media mix alternatives and making sure that clients get the most out of what they do. Most printers have customers who are not sophisticated in media allocation. They may not even be aware that they should have a media mix.

Ask questions when exploring their needs: Is there a business reply card that is part of a product brochure? Can direct mail stimulate e-commerce activity? Does the client web site capture the proper information for sales leads or a follow-up mailing? Do trade show lead forms capture the right information for print and e-marketing follow-up? Can text of printed materials be available on a web site, or as a PDF, or have an e-marketing campaign built around them? Is there a consistency in the graphics and overall design that makes the communicator's message appear consistent in the media they use? It's easier to repurpose images and content of a job at the outset rather than later. There are obviously many more questions that can be asked depending on the client.

The extent to which printers can be proactive in media mix decisions, even for small clients, is actually up to the printer, and not the client; “proactive” means that you take the first step, not the client. Small clients may not even realize that they have a media mix or should have one, and that they should measure the results they get. Imagine that: printers helping customers measure effectiveness of what they do. Cultivating greater media savvy among clients who are not as wise to the media reflects positively on our industry.

The What Sticks data demonstrate is that media allocation without data to support looks like “black art” but is probably more like guessing. If 37% of advertising expenditures is wasted for the largest and best of marketers, one can only imagine how high the percentage might be for others. The decline in commercial print volume since 2000 is not just competition with other media, but a dissatisfaction with print. If people were satisfied with their results, they would not have been reallocating budgets.

Our industry can become a valuable resource in improving the effectiveness of all communications spending, but only if we take the time to understand that there is a media mix and the search for communications synergy. If not, we can be on the side that blames our failures on something called “fragmentation.” Seeing it from the communicators side puts the whole question in richer perspective.

What Sticks
http://www.amazon.com/gp/product/1419584332?ie=UTF8&tag=drjoewebbcom-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=1419584332

The Incongruity of Seemingly Unconnected Things

2006-09-14T07:30:00.000-07:00

Years ago, when I worked in a bureaucratic graphic arts multinational, I was accused of not fitting in because I was too “flip.” I have even had people shake their heads in presentations wondering how I can make light of some things which seem so dire. Long ago, I learned that the definition of humor was “the recognition of an incongruity.” Later, in reading Peter Drucker, I learned that being a successful entrepreneur requires one to find “incongruities in the marketplace.” Coincidence? I think not. Most successful entrepreneurs I have met have a different, sometimes warped way of looking at things that rendered them dysfunctional in organizational settings and performing heroic business acts once outside them. Not everyone sees incongruities, and if they do, they can't always make sense of them when they do.

An interesting aspect of the U.S. economy is that it is so large and dynamic that it has room to support two totally opposite trends, in other words, a trend and a countertrend, at the same time. At the same time Wal-Mart grows, people buy $300 iPods. The Internet can replace print, but that's how we send our PDFs to the printer. People drive for miles to save a penny on gasoline, using more gas than the savings. I write about the printing industry... on the Internet. There's no humor in these things? We are immersed in incongruities.

This week, the Wall Street Journal had an article about the billing practices of printers, which was also picked up by Reuters. Reviewing the story reminded me how years ago, some typographers could make more than half of their income from “authors alterations,” something that was killed by word processing and desktop publishing. It was common for additional charges to print jobs because of problems detected in various proofing stages; many of these are gone. In financial printing, which is what this article was about, last minute legal rewordings and data crunching on close deadline are common, and often document creators are more concerned about making submission deadlines than they are about the costs of their tweaking. This particular case looks pretty adversarial, unfortunately. Much of Wall Street's perceptions of the printing industry are based on their own experiences with printing financial documents.

An Advertising Age article described a meeting of GM's media “partners,” with the goal “to forge more cross-media deals and integrated, multiplatform marketing opportunities.” Already, the Publishers Information Bureau has reported a 14% decline in magazine advertising pages by the automotive sector for January through August 2006. Just-released Commerce Department data shows an increase in advertising agency revenues for the past year in inflation-adjusted terms of almost 7%. Those dollars are going somewhere. Invitees to the GM meeting, by the way, included Time Warner, Viacom, Universal, Walt Disney Co., Google, NBC Universal and Hearst Corp. Did I read that right? Google? Really? Google? Yes, Google.

But wait! There's more! Copywriter Arthur Schiff, famed for his role in the creation of the informercial, who brought that phrase and the “Ginsu” knife to television, died recently. People complained about his sitting in his office, staring into space, doing nothing. When someone complained, he said “I am working. You pay me to think. What do you suppose thinking looks like?”

International consulting firm McKinsey has posted a book up on their website, for free download, that discusses the difficult jobs marketers have today. The title of the book is about the issues in marketing today. It's called “Profiting from Proliferation.” Reaching audiences is more complex than ever. As they put it, “An explosion of new customer segments, sales and service channels, media, and brands is challenging marketers to reinvent themselves so they can simultaneously prioritize opportunities in a more sophisticated way and increase the consistency and coordination of their marketing execution.” Remember how years ago Marshall McLuhan told us that “the medium is the message”? It's more clear than ever that the message is the message, and content creators don't control the access environment of their target audience.

So what's it all mean? We don't need to be reminded that satisfied customers reduce marketing costs and contribute to the long-term survival of a company. When this process gets into court, it usually means that there were a long pattern of failures and clashes leading to that point. Dissatisfaction with the status quo leads to a search for new ways of doing things, alternatives explored, and questioning whether or not something needs to be done in the first place. GM, a media client so large that throngs of media suppliers can be commanded to attend a meeting on short notice. The attendees represent the marketplace and its alternatives, and an indication of GM's dissatisfaction with what it's been doing. Even the Ginsu knife ad communicated a sense of value to its audience, a value worth acting upon. Was it hucksterism? Sure it was. But anyone who had the annoyance of dealing with dull knives could replace their dissatisfaction with delight.

And that's how it all ties together: dissatisfaction is a gateway to change. I was taught long ago that the marketing definition of a problem is “a perceived difference between the actual state and the desired state.” Dissatisfaction is the first step to looking for new ways of doing things, whether it's to stop working with a supplier, or inventing a new approach.

The way to discover problems to be solved is to look for incongruities. Clarify what the problems are, because others may not see them at first; perception is critical. Develop a plausible solution. It will be interesting to see how those financial printing companies diffuse a festering problem into a viable solution. Or how media companies deal with GM's desire to increase response by finding an optimal media mix (which others will attempt to imitate). Whatever the case, the purpose of entrepreneurship is to solve other people's problems.

“Proliferation” is an opportunity for our industry, because viewing communications that way allows us to enter the discussion of media in a new way. Such a report reflects rampant confusion or ignorance about media selection and deployment in today's marketplace. Are we up to the task of making the case for print?

LINKS

WSJ article
http://online.wsj.com/article/SB115793345655058978.html?mod=hps_us_at_glance_markets

Reuters article
http://today.reuters.com/news/articleinvesting.aspx?view=CN&storyID=2006-09-11T120144Z_01_N11142822_RTRIDST_0_FINANCIAL-PRINTERS.XML&rpc=66&type=qcna

Advertising Age article
http://adage.com/article?article_id=111750

Publishers Information Bureau
http://www.magazine.org/Advertising_and_PIB/PIB_Revenue_and_Pages/Revenue___Pages_by_Ad_Category__monthly___YTD_/18280.cfm

Commerce Department data
http://www.census.gov/indicator/qss/QSS.html

Ginsu ad
http://www.adpunch.org/entry/arthur-schiff-the-unseen-king-of-the-infomercials-dies-of-lung-cancer/

Arthur Schiff obituary
http://www.washingtonpost.com/wp-dyn/content/article/2006/09/01/AR2006090101777.html

McKinsey book
http://www.mckinseyquarterly.com/PDFDownload.aspx?L2=16&L3=20&ar=1810&srid=27&gp=0

Marshall McLuhan
http://en.wikipedia.org/wiki/Marshall_McLuhan

The Average Chief Marketing Officer is Replaced After Two Years: Why That's Great News for Printers

2006-09-07T05:44:00.000-07:00

It's not always great news, but it certainly can be. The industry has been advised for many years to concentrate its selling efforts outside corporate purchasing departments and go directly to marketers and communicators. This can be a problem as executive recruiting firm Spencer Stuart reports that the average tenure of a Chief Marketing Officer is now only 23.2 months. The rule of thumb, in my experience, has been that it takes six months for a new executive to become familiar with their environment, a year to accurately diagnose problems with all of their subtleties and implications, and eighteen months to show progress. Five months later it seems, they are gone.

There are many problems with this, of course, but we'll limit the discussion to how it affects printers and the content development and production businesses.

First, if you are a new vendor, it takes considerable time to start the selling process of introducing your company and breaking down pre-existing business relationships to induce them to try your offering. Sometimes you have to wait until current suppliers fail before you get your own opportunity to work with that client. (Reminds me of the old saw about the bad sales rep who said “I've never messed up one of your orders. All I want is a chance.”)

Second, the players are always changing. Because selling outside the purchasing department requires knowing decision-makers, influencers, gatekeepers, and others, a more complex network of relationships needs to be maintained. Understanding that network and nurturing those relationships takes time and effort. Many printers feel that they should keep selling to purchasing departments because they perceive that there is greater stability and certainty in those relationships, and the costs of selling using other strategies may have greater risk and higher, uncertain costs, with longer sales cycles. What they give up in lower selling prices, they feel, is balanced by lower and more predictable sales costs. (What some in the industry consider to be a lack of sophistication among printers in selling and marketing may actually be an economic decision based on a realistic acknowledgment of their inability to execute a grander strategy; but that is a topic for another time). Indeed, the marketplace rewarded such production-oriented management in the past, but things are not that way anymore. The marketplace does not reward such activity today. In fact, multi-tier selling is critical in this environment, because it offers a more balanced view of the client and provides for additional relationships that maintain communication when there is a change of command. This can benefit the incumbent as well as a new salesperson, when the changing of the guard opens the window for new opportunities.

Why is short CMO tenure “good” for the printing industry?

It's only “good” if the opportunities that are created are taken. There is intense pressure on new CMOs to perform and have early successes. They need ideas. They need a mix of continuity from the prior office-holder, and they need to stop things that were no longer working (which is presumably why the prior CMO was replaced). Most of all, they need to have a measurable, almost immediate, positive impact on their company's sales volume.

Knowing past communication campaigns, even those worked on by competitive printing companies, and their effect is important. How well do you know the range of printed materials used in the marketing departments of prospect and client companies? Do you have a sense of what the client's competitors are doing? Your role as a supplier can be immensely helpful to a new CMO.

A change in CMO is often the precursor to a change in ad agency, public relations firm, and the company's network of freelancers. How well do you know those resources? Can you recommend new ones to the fresh CMO for them to consider?

Finally, a change in CMO often means a change in media. How equipped is your company to discuss the use of print? ...how print works with other media? ...new uses of print? ... effectiveness of print? ...the ROI of print? Can you supply the links to non-print media that the company may need?

All of these questions can only be answered when the printing business is viewed as an expert in these areas. Competence in graphic communications has to extend well past the production floor for the printer to be viewed as a credible advisor in these matters. Value-added is not a task performed for an extra fee; value-added is an established mutually profitable relationship between peers.

Marketing is supposed to be a long-range strategic activity that permeates an organization. Yet, with the average CMO tenure at less than two years, it is clear that marketing is far more tactical today. Print is a superb tactical medium. Printers who actively participate in the transitional changes when a new CMO arrives can have a significant advantage over competitors who do not. And, since that CMO may leave for a new position in two years, that former CMO may take the proactive relationship that was created to their next assignment. In that case, what you do today is preparing you for a new relationship two years from now where you'll never have to make a cold call. And if you're having trouble getting into a company today... don't worry, that person will be gone, on average, in 23.2 months.

A Good Sign for Print Volume?

2006-08-24T05:31:00.000-07:00

Key content creation markets employment is up compared to 2005. The latest The Bureau of Labor Statistics reports show these changes in the number of employees for June 2006 compared to last year.

Graphic design employees, +3.8%
Graphic design, production employees only, +7.9%
Advertising agencies employees, +2.6%
Public relations employees, +5.9%

What does this mean? While print's summer is traditionally slow, the season's dog days are usually quite busy for design and advertising shops as they work on communication programs for the Fall, especially for retailers. The recent increase in current dollar commercial printing shipments for May and June correspond with these rises, as they usually do. This implies that content creation is up.

Especially interesting is the nearly +8% rise in graphic design production employees. This, suggests a positive indicator for the rest of the year. But, there's a catch. There is a media shift that is still going on, and many of these jobs are directed toward the production of non-print media. Nonetheless, these give us a reason for guarded optimism about print volumes in the short term. Not that they will increase, but that the steep declines of last year may be behind us. The last time that the number of graphic design production workers was this high was December 2001; the data do not include freelance designers.

In June 2001, the number of graphic design production employees was 62,300, according to the BLS. A year later, it dropped to 51,600 and stayed in that range for the next two years. In 2005, it went up to 53,000, which historically would have been a sign that the printing market would improve. Unfortunately, it was a false signal. This year, it's up to 57,200, and is twice the rate of real economic growth. Therefore, we have cautious optimism for print in case we get statistically snookered again.

Printing employment, however, is down about 8,000 jobs, a -1.3% decline. The shift of jobs from printing production to creative markets is a long term trend, and it is continuing. It's not the impact of the Internet though: this remains the effects of desktop publishing still rippling through the industry more than 15 years after it started. A reason for the decline in jobs in any market can often be attributed to increased productivity. The latest indicators we have imply that productivity in the printing industry is still unsatisfactory, and may have gotten worse, because good pricing is still difficult to achieve. The decline in jobs is more attributable to the decline in print volume. Since mid-2000, when print volume was at its most recent peak, printing employment went from 809,000 to 640,200, using BLS data, a decline of 168,800 jobs. The rate of decline roughly approximates the decline in commercial printing shipments in that period.

Productivity enhancement is our industry's biggest economic need. A bottom-up restructuring, involving major investments in computer technologies, as well as more efficient equipment is essential, all with a vision of a building a new role for print in a dynamic, and global, media market. These are not times for making small incremental changes in business operations, but for insightful revolutions that go well beyond the shop floor, with an eye toward what the industry looks like five or more years from now, not just what it will look like next week.

Electronic Documents Growing... and Growing... and Growing

2006-08-17T05:00:00.000-07:00

Last February, we ran a Google search to estimate the number of Adobe Acrobat PDF files that are available on the Internet. At the time, there were 315 million URLs that ended with the address ".pdf". Just six months later, that same search identified 684 million of them.

While this is not a perfect way of determining how many documents are on line, it is still quite informative. The popular use of the Internet may be just 11 years old, but this indicates that it's still bulking up on its way to teenagerhood.

What does this mean to the printing industry? It manifests itself in many ways. While many of these documents would never have been printed by a commercial printer, many of them would have been. The benefit to the content creator is that their initial print order can be smaller, and any need for reprints can be diverted to digital presses or to people's desks; that is, if the documents need to be printed at all.

The other aspect is an opportunity. As printers, and as computer users, how many times have we encountered poorly-made PDFs? When printers receive documents, especially on disk or by e-mail, they should ask if the client needs a PDF, and for what circumstances. These files can be optimized for the intended use, from posting on a web site, to being available as an e-mail attachment.

Sophisticated print buyers and content creators generally know the ins-and-outs of PDF creation because they use them in their workflow for proofing and job submission. Unsophisticated print buyers, especially small business owners, do not. It's not likely that they even think of the idea. Even consumers bringing resumes in for printing can use a PDF of their file for e-mailing to prospective employers. Do printers bring this to their attention? Probably not.

The job of shaping print users' perspectives that printers can be partners in their communications efforts often starts with simple ideas like this.

The Rise of Direct Mail Shows Change in the Use of Print

2006-08-03T05:03:00.000-07:00

The discussion of the increased use of direct mail has been common in recent years, especially as a source of growth for print service providers. This week, we focus on the present state of direct mail cards as tracked by the US Postal Service. The chart above shows the change in the weight of items mailed in the US Postal Service through this past March. The line with the upward trend is direct mail presorted post cards; the bottom line is periodicals. This direct mail trend line started to move strongly upward when the economy began its expansion in mid-2003.

Periodicals have not grown at all; while it seems from other data that the number of magazines mailed has increased, their reduced page counts and circulations have netted out to basically zero in terms of total weight that has gone through the postal system. Lighter weight papers, changes in size, are literally, just around the edges. If periodical shipments were to keep up with the economy's real growth, they should be back up at the 100 line or above. This is not the case, nor is it the long term forecast.

Why is direct mail growing? One of the factors is the growth in the number of small businesses. The latest measure, based on Bureau of Labor Statistics data that we analyze every month, there are now an average of 81,000 net new businesses (births minus closures) every month. Any wonder why Staples has been a solid performer among retailers? Or why Vistaprint continues to grow its business producing supposedly unprofitable specialty items like the most mundane business cards? Or why Staples is investing in its copy shop operations?

At the heart of the rise in direct mail has been the shift to e-commerce. We already have discussed in a prior issue how the rise of e-commerce correlates with very high statistical reliability the decline in commercial printing shipments. Direct mail, however, is being used to stimulate e-commerce use. On one hand, magazine advertising, catalog printing, and other print products have been negatively affected by the e-commerce growth. Yet, direct mail offers a reliable way to cut through communications clutter and get into peoples' homes for what the USPS has described as "the mail moment."

The global consulting firm McKinsey has recently reported that there is a shortage of advertising opportunities in electronic media. Advertisers cannot find enough reliable properties at this time on which to place their banner ads or in other e-media formats. E-marketing campaigns are still hindered by deliverability issues. These will change, of course. But there is no shortage of direct mail applications, and there won't be for some time, representing a continued, significant opportunity for print service providers. Direct mail does not have to be complex. A well-designed post card alone with a compelling offer encourages recipients to remember a brand or to visit a web site. Print has always been about creating conditions for action. With that in mind, we need to do put ideas for action in clients, and our own, minds.

What Will Commercial Printing Look Like in 2008? 2011?

2006-07-27T05:08:00.000-07:00

For the past two weeks, subscribers to PrintForecast Contrarian View were provided with a review of two dissimilar forecasts created by our proprietary forecasting models. Using the broadest measure of the number of commercial printers from the U.S. Department of Commerce, one forecast shows today's approximately 35,000 establishments declining to 28,000 by 2011; the other shows the number of establishments remaining about the same.

Forecasting models come in a variety of flavors. Some are very conservative and minimize historical changes and develop an average forecast. Other models, however, place significant emphasis on the most recent trends. The two models we used for this exercise occasionally result in surprising consistency; there are often two paths to the same destination in forecasting. Other times the models will produce markedly divergent projections. Understanding how they got there is quite revealing. The scenarios were presented to PFC-CV subscribers in greater detail and analysis over the last two issues.

But here are the highlights for 2011:
Forecast Scenario 1: 28,000 establishments, $66 billion in shipments
Forecast Scenario 2: 35,000 establishments, $53 billion in shipments

They are quite different, and they are both legitimate statistical forecasts. Neither of them will be right, most likely. The examination of alternative scenarios, however, is an important element of a beneficial strategic development process. No one can accurately forecast the future with great certainty. Most times, future trends are clear but the timing is not. The way management prepares itself to deal with changes in the marketplace is to create scenarios of differing market conditions and to think them through, company function by function. This aids in the creation of a robust strategy that can withstand market uncertainties. It also allows management to develop contingency plans that they can implement at the appropriate time.

Among the questions that this exercise can help explore are...
How many sales people do we need?
Do we need branch offices?
How aggressively do we pursue new markets?
Do we have to change our product mix?
Is it time to consider a merger with another company?... among many other strategic options.

The first forecast projects a decline in the number of small (<$2 million in sales) and mid-size (between $2 and $10 million in sales) establishments, and only a negligible decline in large ones (>$10 million in sales). Because most industry shipments are from large plants, the decline in establishments is somewhat mitigated. Overall shipments, however, are about 30% lower than today.

The second forecast projects a significant downsizing of the industry with large and mid-size establishments shrinking to become small and mid-size businesses. This is not so unrealistic considering the kinds of printing technologies that have become available that significantly reduce the amount of production staffing, especially important as costs need to be restructured in what will likely continue as a hostile environment for print demand and print pricing that demands significant productivity enhancement. Did we say hostile? A 40% decline in demand would definitely earn that category.

In coming weeks, we'll be taking PrintForecast Contrarian View subscribers through our thought process that leads to a final forecast of the commercial printing market. Whether you are a printer or supplier, understanding alternative scenarios and what they mean can lead to a deeper understanding of the industry, your business, and the strategic challenges ahead.

Before You Start Planning for 2007...

2006-07-20T17:14:00.000-07:00

It's summer and the printing industry is in its seasonal slow period, so printers and suppliers executives and managers are often on vacation or keep light schedules. Soon that will change. Many companies on calendar fiscal years are about to start their budget and planning process for 2007.

I've always found it interesting that companies will use the words "budget" and "planning" as if they are interchangeable. I've asked printers and suppliers "do you have a plan?" and then they tell me about their budgets, and nothing else. While budgets reflect how resources will be expended, they do not explain the reasons behind the deployment of those resources. These need to be expressed in words. Budgeting alone is not enough. Without a good planning process, companies, especially small ones, often get into a habit of working on an incremental basis, going from problem to problem, opportunity to opportunity, and don't have a true plan which is especially needed for businesses today.

Now, I'm not one for those bureaucratic processes that some companies call "planning." It's often a process of filling in boxes on papers with numbers created to get through an approval process, rather than the result of an introspective and proactive process. Planning sometimes includes the writing a high-sounding mission statement that no one really cares about. These are easily recognized because they include words like "mutual," "environment," "community," and uses the words "profits" in a manner that makes it seem like a secondary objective, or even less than that.

Most small businesses do not need a sophisticated plan; one sheet of paper will do. The owners of small business always have their reasons for being in business well-etched into their heads. It's more that others in those businesses need to know why things are done the way they are done. These small business owners must be sure to display that plan in the open, for all to see. Many family companies don't do this, and when they need employees to rally around their company, employees wonder "why do they talk to us only when they are in trouble?"

All plans are based on assumptions, and sometimes what was a reasonable assumption at an earlier time will not be at another time. When it doesn't make sense, change it; just don't fall into the "strategy of the month club." That can only make things worse.

In larger companies, the planning process sometimes becomes intensely political. Not that politics in organizations is bad, because those informal structures called "politics" are often quite efficient at getting things done, and must be there. Effective companies have strong political infrastructures that are directed toward shared goals. That's one reason why some companies do better in crises than others.

I'd be worried when politics goes bad, and includes the denial of obvious realities, the promulgation of odd expectations, or the underestimation of competitive action. All of these get companies into trouble. "No, you can't put that number down," I've heard in planning meetings, "because Executive X has already promised that it would be Y% higher." "Competitor A just underprices everything," I hear, only to find out that Competitor A makes money at those lower prices, and has managers who are decisive and are great implementers of tactical actions.

Many companies fail to separate goal-setting and true planning. They're not the same. I've seen too many situations where sales people are given high goals and told to "make it happen," only to find that they have no resources and no training to do so. Worse yet, that impossible Herculean performance was put in the budget as fact.

Basically, budgeting focuses where dollars go over a fixed, and relatively short, period of time. Yes, even five years is a short period of time in the history of a company. In a greater sense, planning documents determine where something more precious than money, time, will be expended, by whom and for what reasons. Time, it has been said, is the only non-renewable management resource. Once it is lost, it is gone forever. Planning exists not because dollars are scarce, but because time is scarce.

Go into planning for 2007 with these concepts in mind: the difference between budgeting and planning, and the difference between planning and goal-setting. They all work together, but confusing them only creates problems greater than any plan can solve.

The Money's in the Making

2006-07-13T09:23:00.000-07:00

For decades there has been a concern about the graphic arts business attracting new workers to replace those who leave, but more importantly, to ensure that the industry is vibrant and innovative. One of the indicators of the attractiveness of an industry to workers is the wages that it pays. The printing industry often competes with its own print - buying customers for new workers. That is, many young workers find themselves choosing among industries such as publishing, advertising, graphic design, and printing. Now that the 2004 industry wage and salary data have just been released by the Commerce Department, we have a more current look at what those workers see. We dug into the historical industry data and we came up with some interesting findings.

We took the average wage for all workers in the broadest grouping of the printing and creative industries and adjusted them for inflation to make historical comparison possible. Since 1988, the first year that data are available to us, the average industry wage in the creative markets has gone up about 12%, while pay in the printing industry has gone down slightly. The best year for creatives was 2000, where the increase compared to 1988 was up to 17%, at the peak of the Internet bubble. Printing wages barely moved at the time.

Historically, the average creative wage is typically 50% higher than the average printing wage (binding and finishing workers wages keep the average print wage down, most likely). From 2001 to 2004, however, the difference in the average wage of a printing employee and a creative employee had crept up to 57%.

Content creation markets pay more, a lot more, plain and simple. The question is whether or not this is even relevant. Content creation businesses are vastly different than job manufacturing businesses. The nature of what is done is not always comparable. The skills of the employees are quite different. Sure, there is occasional overlap, such as the need to use desktop publishing software, and administrative tasks, but the essence of the businesses are not the same, and that is reflected in their overall structure.

During the Internet boom, we were often told that new media managers liked hiring printing industry personnel. Among the reasons they cited were that the print workflow was disciplined, and had a beginning, middle, and an end. In other words, our workers knew what needed to be done, and had a sense of deadlines and urgency that other workers did not always have. Part of that discipline was to understand how to react to last minute changes and still get projects done on time.

Making the industry attractive to new workers, as well as retaining the workers we need, is a complex issue. It's always up to individual print businesses to do what makes sense in the long run for their business, especially in hiring and training workers. Good workplaces attract good employees.

This is not an issue that will change overnight, or even a couple of years. The modernizing of the printing business is an ongoing effort, with constantly moving targets. It is clear that smart capital investment in new technologies and workflows are essential to improving the situation that these historical wage data so starkly indicate.

This list below shows wage differences when compared to the entire commercial printing industry. For example, book publishing employees earn 47% more than commercial printing employees; quick printing employees earn about 23% less than the commercial printing average.

80% Advertising agencies
65% Periodicals Publishers
59% All creative
54% All publishing
47% Book publishing
22% Graphic design services
14% Miscellaneous publishing
13% Folding paperboard box mfg
12% All packaging
6% Digital printing
6% Commercial lithographic printing
6% Commercial gravure printing
3% Commercial photography
0% All commercial printing
0% Book printing
-1% Newspaper publishers
-22% Commercial screen printing
-23% Quick printing

The Change-Resistant Printing Industry? I Don't Think So.

2006-06-15T10:35:00.000-07:00

I've always been amused by the contention that the printing industry is resistant to change, when in fact, the only thing that never changes is the lament that the industry is resistant to change. The following list shows the changes the supposedly "change-resistant" printing industry has gone through in the last 30 years.

Mid-1970s: letterpress to offset conversion
Mid-1970s to early 1980s: hot type to phototypesetting
Mid-1980s: phototypesetting to desktop publishing
Late 1970s: color separations by camera to color separations by scanner
Early-to-mid 1980s: photographic and craft-based color image manipulation to digital color workstations
Early 1990s: film-based page output to film-based imposition output
Early 1990s: quick print shift from ink-on-press to digital copiers
Mid-to-late 1990s: film-based platemaking to digital plate exposure
Early 2000s: digital color printing, variable imaging capabilities
Early 2010s: fully-automated, fully-networked, cross-media?

You will notice that a twenty-year production veteran could possibly have had to adapt to two or three major changes to their jobs during their career. The list above even "skips" the changes that products like QuarkXpress and Adobe Photoshop have brought to the market. These changes are rarely sudden, but are incremental, year by year, escaping detection until one decides to thoughtfully reflect on matters. So what hasn't changed?

Some would say that while the technology has changed, the culture of the industry has not. It is still resistant to change. To me, culture makes little difference. Market forces and opportunities are more important. It's far more essential to watch behavior, because people often say one thing and do something else.

We recently analyzed what the statisticians call the "establishment birth-death" data. What these data report are the business startups and closures in our industry; the latest data are for the year 2003 (it takes quite a while to compile these things). The decade and longer trend of losing 1000 printing businesses a year is still intact; in fact, it was 1300 this time. To me, that's not the important story at all. The long term trend is 2000 startups and 3000 closures a year. What's happening? Whether or not the culture of the industry is changing, the economics of the industry definitely are. When bigger printing companies consolidate they get lots of press coverage. But, there is a broad swath of the industry that is changing under the radar, especially in firms under $5 million annual sales. This is individual print business owners shutting their businesses and opening new ones, sometimes with past rivals.

The data are not reporting 2000 new people starting print businesses every year, they are reporting companies that are restructuring themselves but creating new legal entities to clean up balance sheets and change their managements. They're also cleaning up the various quirks of family business ownership in the process. Things such as jobs for family members, or benefits paid to family members, often make it hard to sell or merge the company. Life as a Subchapter S small business has its benefits, but there are often issues that make it easier to close and reopen than to change the existing entity. It’s often easier to restructure a print business that plans to offer itself up for sale by updating its legal form to make its operations more transparent to prospective buyers.

In larger companies, those consolidations lead to management changes. Even stable companies have management changes. Consolidation does not reduce the risk of being in business, in fact, it adds new risks of transition and coordination to the daily risks that the marketplace offers.

Sure, some companies are closing for good. Many close and reopen. Others lick their wounds and invest elsewhere. These kinds company adaptations do not occur quickly; they take years, many years. What's the bottom line?The printing industry is not exempt from economic, technological, or demographic forces that shape their markets; no industry is. The culture of the industry matters little, because behavior is far more important; culture reflects behaviors that are known to work. Change behavior first, and culture will reflect those experiences later.

The birth-death data that show the industry is changing. Consider this: these data show that there are 5,000 print business entities closing or opening every year. That doesn’t include companies that make changes in their management staff, which would make the rate of change yet larger. Using these statistics, this means that every six years, plus or minus, the industry is completely turning itself over, whether the industry culture at the time wants to or not. Resistant to change? Sorry, the marketplace is too ruthless for that. Those who can't change are quickly dealt with by dismissal or poor performance.And it turns out that change is actually a part of our culture. Just ask those old letterpress printers, hot lead typographers, and color separators... who became lithographers, phototypesetters, desktop publishers, design shops, and digital printers. Entrepreneurs find ways to survive when others say they can't.

The “Newness Crisis” Revisited

2006-06-08T08:25:00.000-07:00

Almost four years ago, I wrote about a "newness" crisis in the printing industry. I contrasted it with the "now-ness" of the consumer market. At the time, the consumer economy was being bombarded with technologies, like cellphones and the Internet that allowed consumers their first real taste of the "wherever-whenever" economy.

The "now-ness" trend is still playing out with growing use of broadband to access information and entertainment at any time,and wherever we want.

When products, even old ones, are introduced to new ranges of customers, they are perceived as "new." In the "now-ness" world, does anything really seem "new" anymore? Targeted campaigns built on narrow data bases, specialty magazines, and the "buzz" among small groups of communities are signs that the mass marketing of the past that gave a general sense of "newness" to consumers, is almost gone.

Four years ago, I contended that the amount of "newness" in the economy was a driver of print demand. The demand for printing is often derived from companies needing new support materials, new ads, new product literature, and just the general need for spreading information about new products.

Lack of "newness" has been a factor in disappointing print demand. "Newness" typically requires heavy transmission of information. If it's new, you've got to communicate it, because people use information to understand it. Newness has traditionally driven demand for brochures, training materials, advertising campaigns, and so many other uses for print.

New markets, new products, changing regulations, mergers and acquisitions constantly churn and create the need for new printed materials. Or do they?

The lack of economy-wide sense of newness served as an opening for alternatives and substitutes to sneak into our marketplace. I warned that we needed widespread newness to really stimulate demand for print, that it didn't look like it was coming anytime soon. I said that the seeds for widespread change in communications were being planted at that time, but we hadn't seen the sprouts come out of the ground yet.

I then offered advice. I noted that when there is corporate cost-cutting, printers needed to get into clients' offices with ideas and solutions that help them reduce costs, take over tasks, stimulate sales, and facilitate communications. “Now is a more important time than ever to realize that it's not a printing business, it's a persuasion and facilitation business. But printers often have to be persuaded to consider facilitating anything beyond keeping their presses busy,” I wrote.

While "newness" ain't what it used to be, it's essential to look for it where we can. In client companies it's things like:

new management
new ownership
new products

Despite the general sense that things are not as new or vibrant as they used to be, cultivating a sense of newness in a marketplace is still essential. Decision-makers, needs, wants, competition, technologies, and other factors are always changing. Sometimes, however, we tend to write them off and not recognize them. People are busy. People are being bombarded with communications all of the time, much of it ignored as "noise." That means that the communications task is harder and must be more skillfully implemented.How can one be vigilant for those signs of "newness" that create change and stimulate the need to communicate? Do you do any of these?

Subscribe to websites, e-newsletters, and publications in industries of your key and target clients
Put your clients company names and names of key executives as a Google news alert
Learn what trade shows are essential to your clients, and get plugged into the buzz of new products that clients and prospects are introducing, seminars they are running or speaking at, and other activities
Regularly check client and prospect information with Hoovers, D&B, and other data bases.

Then what? If you have nothing to propose to them, none of this is worthwhile. Are you suggesting pre-show direct mail campaigns to attendees? Working to fulfill information requests for brochures? Managing e-mail campaigns? Supplying PDF and HTML versions of brochure content for company websites? Provide compelling design and implementation strategies that get noticed? Offering template driven web to print services?

Opportunities to leverage newness are always there if one knows where to look. Clients may not even be aware that they have communications opportunities they are leaving untapped. Sometimes they just don't have the time to deal with all of them. Clients have trouble implementing their communications in a market where "now-ness" is so critical. Who says printers don't have opportunities any more?

One-Stop Shopping, No; One-Stop Implementation, Yes

2006-06-01T13:57:00.000-07:00

It was recently announced that data base provider Harte- Hanks purchased a digital printing business, PrintSmart, located in Southeastern Massachusetts. For all of the talk about printers getting into the data base business, this is a data base business getting into printing. PrintSmart is not a big printer, but this step may foreshadow that other data base providers like InfoUSA, Dun & Bradstreet, and numerous others, may move down this path. Data bases are not really content, and they’re not information until they are directed to a purpose. Data bases are representations of a marketplace. In essence, Harte-Hanks and others sell access to a marketplace, just the same as publishers and broadcasters do. Harte-Hanks has worked with printers for years, and indeed, through its newspaper properties, is a printer itself. This might be a sign that data base companies are looking to add value to their offering, and increase the attractiveness of working with them by adding the implementation of print campaigns. There are pressures on marketers to do more with less, and part of that process is to reduce their own overheads and use the services of others to meet their goals. In other words, to outsource more.

Outsourcing is still a very strong business trend despite corporate profits taking a strong upturn. In fact, the first quarter of 2006 was 24% higher than the first quarter of 2005. In a year of energy price paranoia, concerns about world political stability, threats of offshore competition in all industries, and worries about interest rates, the spending restraint of corporations has been combined with a stronger-than- expected economy, resulting in buildups of cash. It's not likely that corporations are going to start spending lavishly and begin adding staff. Those business concerns are still there, and the desire to further outsource to all kinds of small businesses to retain budgeting flexibility remains as well. The more connected businesses are by broadband, the greater their capability to outsource and do so productively.

The greatest beneficiary of outsourcing has been small business. The economy is adding on average more than 70,000 new small businesses a month. Yes, a month, and that's after deducting the businesses that close. This is why companies like Staples and Vistaprint have been doing well; there's nothing better than riding a strong, secular demographic trend that lasts for years. The rise of in the number of small businesses and the concurrent lack of employment growth in large businesses has been well-documented. Small business is where the action is in this economy for the past two years or so, and it's been an under-reported story in the business press.

A primary application of data bases is to manage the high costs of the sales prospecting process. There is nothing more costly in sales than a sales person who has no idea whom to call. The next highest cost is a sales person who knows what kinds of businesses to call on, but who has to do further investigation to uncover the right contact person and their requirements. Data base providers offer a means to deal with these problems. Sales prospecting has often involved printed materials, especially brochures and other hard copy product information. The use of data bases actually reduces the aggregate amount of printed materials needed. Good data bases allow companies to narrowly focus their sales prospecting efforts to their most likely new customers. Therefore, printed materials are not wasted on unlikely prospects. This also means that office-printed materials are more likely to be sent, avoiding use of commercial print providers for much of the content. But data bases do stimulate the use of other kinds of printed materials.

Data base providers can reduce the costs of sales and marketing management by coordinating the implementation of prospecting and promotional campaigns. They know how people use data bases, of course, and know that direct mail is a primary outlet for data bases. They also know that time-strapped sales and marketing executives no longer have the staff, and perhaps the expertise, to work out the details of direct mail and other media in an era of corporate penny-pinching.

This brings out the most important and unrenewable management resource: time. Time cannot be replaced. Outsourcing implementation tasks creates time for corporate management because they can apply their managerial time elsewhere, and access expertise in implementation that they could not acquire personally or would have to hire at great cost.

Printing companies have significant opportunities to lift burdens and create time for their clients. Knowing how their clients use print, or would use print if they could, and what other information distribution methods they need to tie into, has been hard for many printers to understand. It's essential to focus not on getting ink onto paper, but on translating client ideas into actions. It will be quite interesting to see how (or if) Harte-Hanks expands their services in this way. It will be also interesting to see how many printers also view this as a core strategy for their own businesses. There are hurdles: clients typically do not think of their printers in this way.

The Harte-Hanks article http://members.whattheythink.com/news/newslink.cfm?id=23239

E-commerce Jumps, Print Shipments Fall

2006-05-25T05:00:00.000-07:00

In a previous edition we discussed the very strong statistical link between e-commerce as a percentage and U.S. commercial printing shipments. At that time, the available e-commerce data that went up to the third quarter of 2005. As we know, fourth quarter printing shipments were quite disappointing. Last week, we updated the analysis with e-commerce data for Q4-2005, and it goes a long way to explaining that sharp decline. New data shows that e-commerce jumped from 2.2% of retail sales to 2.7% at that time. That doesn't sound like a lot, but remember, this data series can be used as a surrogate for the general effects of new media. Through the first quarter of 2006, this level remained unchanged at 2.7%.

We also updated our data series and ran the statistical analysis again. Every 0.1 percentage point change in e-commerce as a percentage of retail sales is equivalent to $1.6 billion in annual printing shipments. The strength of the statistical relationship is shown by the r-squared (coefficient of determination), which was 90.2%. This is excellent as sales forecasting models that are in the 75% range are considered to be very good.

Why did e-commerce jump so much (from $21B in goods in 4Q-04 to $27B in 4Q-05)? Aside from the trend for more e-commerce as broadband penetrates more and more Internet households and businesses, it may have gotten a boost from consumers trying to bypass rising energy prices. Shoppers avoiding trips to malls and shopping centers may have been more inclined to buy online. Retailers have been encouraging consumers to shop online as their sites, e-mail promotions, and data bases continue to improve every year.

Wonder why rising energy prices haven't slowed the economy? One of the reasons is that e-commerce provides a way of sidestepping higher personal energy costs for transportation. Of course, goods have to be shipped, but FedEx and UPS are far more efficient in their use of energy than individual consumers. Let's also remember that the online FedEx and UPS package tracking systems have increased the confidence that consumers have in buying products online. When consumers are certain about the delivery status of their orders, suspicions about e-commerce recede, and its use increases.

P.S.: A printing business that embraces e-commerce can experience the opposite of the industry trend. Vistaprint's third quarter sales were $41.6 million, up 66% compared to the same quarter of last year. The rule: invest in the technologies that can put you out of business. Then, let your competitors worry about coping with them while you use them to leapfrog ahead.

Surprise! Print is NOT a Commodity

2006-05-11T05:13:00.000-07:00

There is much handwringing and lamenting (dare I say "whining"?) about print being a commodity. This is usually heard in discussions about the fierce price competition within the industry. Printers are always told of the way out of "commodity pricing" is to offer marketing solutions and become their clients communications service. We will review these concepts in future issues.

But for now, I can't think of a better place to be than in commodities. Surprised? ExxonMobil, a commodity company, posted profits that were so high that it created screaming lynch mobs of journalists and politicians. DeBeers is a world monopoly that mines diamonds, a valuable commodity, of course. Gold prices have gone up significantly, creating fear of inflation and worldwide financial turmoil. I can't ever remember print ever having these kinds of commodity pricing "problems." If we were in these commodity businesses we could unwring our hands and start dancing in the streets.

The American Heritage Dictionary states that a "commodity" is "an article of trade or commerce, especially an agricultural or mining product that can be processed and resold."

And there's the issues: "article" and "can be processed and resold."

While the print business uses materials and chemicals like paper and ink that originate from pure commodities like wood pulp and oil at some point in their manufacture, printing cannot be a commodity itself. Print is not an "article of trade or commerce," it is a process that is applied to materials for a single buyer. Print does not change those materials and create something totally different. The paper is still paper. The ink sits on the paper. It's not like we've taken a tree and turned it into a grand piano, or took a barrel of oil and created carpeting or polyester pants. We're also not about to start reselling print, because there is only one buyer for a particular print job. If printers could, someone would have figured out how already, and there would probably be an association seminar about it.

What is print then? Clearly, the commodity aspect of print, though the selection of the word is poor, is that so many people have the equipment to do it. A consultant friend of mine, Bob Rosen, often peppers his presentations with the line "God must love printers because he made so many of them."

Printing technology has advanced to a point where craft skill is encased in software, and the variation of print quality between shops has narrowed greatly. The mystery of print has disappeared. Our secrets have been revealed, and now you click "file" and then "print." Well, almost.

When we talk to print buyers they claim that they see all printers as offering about the same quality. Yes, technology has raised mediocrity to a higher, predictable, less variable level. That means the best quality at premium prices is a harder sell than ever.

So print is not a commodity in the strict sense of the word. If it was a commodity, we could stockpile it and wait for better prices. We could sell printing futures in a marketplace. We could trade it at the Chicago Mercantile Exchange among people wearing funny- colored jackets who spend the day screaming at each other as they fight for each cent advantage among other buyers and sellers. The ability to print is more like a commodity, not print itself.

If sales people in our industry act like print is an undifferentiated commodity, then that's the way buyers will understand it, and respond accordingly. Is there a meaningful difference between printers? Some printers will point to their equipment. But using technology as a way to differentiate a printing company ended not long after desktop publishing took hold. Digital printing limits marketing differentiation on the basis of equipment as well. The fact that your company owns a certain type of technology when others don't creates a saleable marketing window that lasts only a short period of time before a competitor buys the same thing or the next technological wave comes.

What really matters? Knowing a client's communications objectives and finding ways to facilitate the implementation of them is the winning business strategy. While this strategy does little to change the nature of pricing in our industry, it does affect a company's ability to attract, retain, and broaden their business with their customers. Getting jobs consistently requires a relationship well beyond the "here's a copy of our equipment list; can we bid on your next job?" approach which creates an unpredictable, haphazard flow of business where every incoming job is a surprise. Insights, solutions, and new ideas are hot commodities clients seek. Let everyone else sell their ability to apply thin coatings of liquids to substrates.

There are more media seeking their share of media communications budgets than ever. Having the capability to print well is not the big deal it used to be. Helping clients get superior results out of those limited budget dollars gets the print business out of its self-imposed commodity game. That is, only if printers decide that's the nature of their business.

The Hidden Industry?

2006-04-27T05:00:00.000-07:00

I've been at more than one industry event where the audience is filled with people who nod in agreement that the printing industry has “a bad image” or is not known to the public at large. This assumes of course, that people know other industries quite well. They don't. Public knowledge of economics and news in general is disappointingly low, so how can one expect the public to know much about any industry and its companies, including ours?

When a person buys a car, for example, they see brochures, signage, postage, and they eventually sign forms, and see an owner's manual (I say “see” because I wonder how many people actually read owners manuals, but that's another matter). Is there any reason for them to say to themselves “those were made by a commercial printer, one of our country's leading industries, the 500-year old industry that changed the world and helped make Ben Franklin a wealthy man?”

All printing is assumed to be produced by the entity who hands it to the customer. Packaging? General Mills, Post, or Kellogg's makes that, in their minds. Printing is part of the product, isn't it? Yet we know that consumer packaging is created by a complex of specialists, from the trees cut down using heavy capital equipment, milled and processed in factories, transported though a logistics chain, and eventually printed, filled, and ending up on a store shelf. The images are envisioned and created by a different set of people from marketing executives, researchers, designers, printing companies, and others. This is the world of branding and image creation, and it's not a single task of individual effort. Each function of this web of creativity and implementation could lay claim to being "hidden" or underappreciated.

In the end, printers are just one component of a grand economic process, and claiming that our industry is not known is much like a New Year's Eve partier in Times Square demanding that everyone look at him instead of the ball of lights in its midnight descent. One voice can't be heard over the others at that moment; there are just too many people in the streets for it to be reasonably expected. As far as being a well-known industry, consider of the public perceptions of oil, pharmaceutical, telephone, utility, and other industries that have far greater visibility accompanied by significant and vocal consumer distrust. Being well-known is not necessarily a good thing.

What attracts workers and others to an industry? Good wages, good rates of return, and a sense of dynamism. The fact that most printing businesses are small means that they are not in position to hire workers with the same techniques that other industries do. Individual banks, retailers, and manufacturers will always be at the top of college recruiter lists. Our business has always been comprised of entrepreneurs and small business owners. We could benefit more from a booster shot of entrepreneurship right now than the recognition and awe of others.

What we say about ourselves and what others say about us is of minor importance. It's how we perform that matters more. Individual companies are responsible for that; it's not an industry thing at all. It's important that those who seek information about our industry have a convenient and reliable place to find it. There are already good organizations that assist the industry in the creation and sharing of information about itself and its markets. These tasks are necessary and good in and of themselves. In the long run, however, it is essential that we go about our business in a creative and innovative manner that helps clients improve the performance of their own businesses. This will earn us a more valuable form of recognition, that of being an indispensible value- creating partner, known to loyal and delighted clients, even if hidden to others.

Required reading

We're not the only hidden industry. “I, Pencil” is a famous essay about the complexity of economic interrelationships and many anonymous workers and businesses behind the production of a mere pencil. This link also has commentary about the essay by Nobel Prize economist Milton Friedman.

A Weakness of New Media We Need To Exploit

2006-04-20T05:00:00.000-07:00

No, this isn't a column about the problems of delivering email marketing messages which are already well documented. This is something more basic. It's about search and the rise of Google, and how businesses may be kidding themselves by thinking they can discontinue all use of printed sales and information materials and assuming that prospects will easily find them on the Internet. It's a multichannel world, and we're one of those channels.

It is now common practice for purchasing department and other workers to search for information about anything they want to purchase from expensive capital goods to daily supplies on the Internet, often through a search engine. In the past, they would have pulled a directory like the Thomas Register off the shelf and then made some phone calls.

What's the difference? Searching on the Internet is anonymous to the company they are researching. The old phone call would have led to the capture of the inquiree's contact information, at least the mailing of literature, and potentially a visit by a dealer or sales rep.

This means that people are making decisions about whether or not to engage in a transaction without the company ever knowing about it. Sales prospects have access to a great deal of information yet the company has no contact with them at all.

This is a real problem for marketers because all they end up with are statistics about their web traffic but no sales leads. That's the fallacy of the “measurability” of new media. What good are statistics unless they lead to real transactions?

Is there has to be a way for our industry to tap into this phenomenon? Of course there is! Printers first need to help their customers understand that they are losing leads by allowing only anonymous delivery of information. They may think they are saving money by not printing brochures, may be undermining the sales lead development process. They may, in fact, be losing money in the long term by not capturing information about site visitors that they can use to follow up later. Printers need to communicate the value of that loss, or at least raise the spectre of that loss, to their customers.

There's more to that than just telling them to use more print. Helping them create a good lead capturing process and provide them with solutions to help them achieve it is a good strategy. Printers must follow up by calling out “here’s your problem” and offering a solution, “here’s what we can help you do about it.” Remember, most printers customers are small and medium businesses who feel overburdened with anything beyond their daily core and urgent activities.

Here are some thoughts as to what printers can offer. First, they can bring the problem to the attention of their clients and propose a good Internet prospect capture system. This includes recruitment for newsletters (which the printers can propose the creation and management of, even if they are e-newsletters), events, and promotions. Second, they can make sure their clients have well-made PDFs of their brochures on site. It's amazing how many PDFs are not optimized of desktop printers, viewing on screen, or even quick downloading. Yes, good reproduction matters in all media.

Finally, printers can ensure that sales prospect information collected on the Internet goes directly to their shop. One reason companies were more than happy to get out of the printing of brochures were that they were always short-staffed and never seemed to be able to send things out promptly in addition to the challenge of outdated materials. Last year's Phoenix Convention Bureau story was a good example of this. But requests for information could be diverted to the printer’s server or could be automatically sent to the printer’s shop, queued up and printed out on the latest digital printers, or grabbed from the shelf inventory and mailed to the prospect by the printer. That's one of the “value added” tasks we so often hear about in adding fulfillment as a valuable revenue generating service that printers can add to their operations.

Just because new media offer great opportunities for cost reduction and new ways of reaching customers it does not mean that good time-tested sales process management goes out the window. Helping clients ensure that customers get the right information at the right time never goes out of style.

Capacity Utilization Up, Profits Down: Huh?

2006-04-13T05:00:00.000-07:00

Economics is full of paradoxes, and this is just another one. It explains that there's more to being successful in the printing industry than just keeping presses busy. It sounds simple, but the kinds of goods that you produce and the market prices those products command are more important than how busy your plant is.

The recently released commercial printing profits data for the fourth quarter were expected to be down, because industry shipments were so disappointing for that period. Earnings reports from some large printers confirmed the situation. What was surprising is that industry capacity utilization had been increasing steadily for more than a year. How can that be?

Capacity utilization is computed as a fraction: capacity used divided by capacity available. It is often assumed that when capacity utilization is high, profits will be high. When printers get busy, and the capacity used increases, and it is claimed that profits will rise. Decrease the capacity available while keeping sales at the same level, and capacity utilization will rise. All you did was decrease the denominator. It's just simple arithmetic. Everyone knows 1/2 is more that 1/4, even though the 1 in the numerator is the same.

What's happened recently just doesn't make sense: even though capacity has been coming out of the marketplace as plants have gone out of business, profits have headed down. Profits are supposed to be rising. It actually does make sense, and here's how.

In the mid- and late-1990s, capacity utilization was declining, yet total industry profits were more than three times where they are today. In fact, many new presses were being added to the marketplace, increasing the industry's total available capacity. For the last six years, the statistical relationship between capacity and profits has had less forecasting validity than one could get by just flipping a coin.

Keeping presses busy in an expanding market hides a variety of business sins. Riding an industry-wide wave of growth masks managerial and operational inefficiencies and poor pricing strategies. When the tide goes out, the debris left behind becomes plain to see.

The long-held common wisdom of the relationship of capacity utilization and profits is seriously lacking. First, it ignores what the market prices for use of that capacity are. Producing the right things efficiently is essential to creating profits. Being efficient in the manufacture of unprofitable things is deadly.

Second, it ignores the nature of productivity and efficiency. Not all capacity is created equal. During the 1980s, capacity utilization was declining, but the industry was selling printing that had greater value than it did before: it had good quality process color rather than black & white images. It's often hard to remember that prior to the early 1980s having anything printed in color was incredibly expensive. Digital prepress changed the printing landscape forever. Process color exploded in the 1980s, and print buyers shifted to those kinds of higher value printed materials because they were more effective in meeting their communications objectives. While capacity utilization was steadily decreasing, higher selling prices more than made up for it, even when process color demanded investments in new prepress and press equipment, expanding the industry's capacity.

Third, obsession over capacity utilization assumes that only the "cost of goods sold" portion of the income statement is important. Everything is important. How foolish it is to run an efficient pressroom and squander it all on poorly designed administration, distribution, marketing, sales, and finance. Entire companies make profits, not just pressrooms.

Fourth, market access is ignored. The turnaround time and logistics of creating, printing, and delivering work is missing. There is a value to turnaround and other "value added" activities, which is why they're called "value added" in the first place.

Finally, competition is ignored. Industry capacity measurement has always been geographically based. That is, it was always U.S. capacity or North American capacity. Today, the world is connected as never before. All costs and selling prices in one world region are often affected by the characteristics in another. Commodities have had “world prices” for many years. Now, there are world “goods prices” and world “services prices.” Multinational companies have always shifted work between plants of different geographies to achieve their best costs. Today, all industrial buyers are gaining more power over the prices they pay.

So what does it all mean? Having the correct capacity for an individual print business is still essential. But producing profitable things is essential, too. Presstime is not necessarily generic capacity. That capacity must be able to produce the correct sizes, formats, and quantities that the market demands at a particular point in time. When there is a mismatch between the kinds of printed materials needed today and the equipment purchased years ago when the characteristics of those printed products were different, today's prices naturally fall and costs tend to remain the same. Hence, profits are squeezed. Knowing your customers, anticipating what they will need in the future, and knowing what kinds of new customers are likely to emerge in the future are critical elements of all capital investment decisions. Buying equipment requires a depth and breadth of market knowledge greater than just a few years ago. Today's dynamic media marketplace ruthlessly teaches this lesson.

To Differentiate Your Business, Find Something Your Competitors Can'tor Won't Change

2006-03-30T05:00:00.000-08:00

Last week, our discussion about the EFI/Staples web- to-print sale and the Donnelley acquisition of OfficeTiger led to a letter from famed printing industry consultant Dick Gorelick. I first saw Dick speak at an event in 1983, about the time he had been selected as the first profile in a major print magazine's “New Marketing Managers” series when he was at Braceland Brothers. Since then, he has guided many printers to profitability through common-sense marketing. Dick writes:

"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.

A World of Change

2006-03-23T05:00:00.000-08:00

There were two announcements this week that received much less news coverage than I thought they should. They both illustrate how the industry is changing, how competition is coming from new directions with greater intensity, and how communications technologies offer new opportunities for companies whose primary focus has been to put ink on paper.

The purchase of OfficeTiger by R.R.Donnelley combines with its prior Astron purchase to provide transaction services on an outsourced basis around the world. While the OfficeTiger purchase is more in the spirit of transitioning the old Moore-Wallace line of business from creating forms to capture data to actually collecting and managing the data on behalf of clients, there is a more important aspect to this deal. Both purchases put them in closer contact with all kinds of content creation, especially of the kinds that already and can use digital printing technologies more for a wide range of applications. By being in such close contact with the original data, they can offer more proactive and programmed implementation of communications initiatives, and can do so globally.

EFI made a major sale to office superstore Staples, designed to build their printing presence online, and to allow them to expand their offerings. While sending files to a printer is nothing new, for many of Staples new customers, all printing is a novelty, and they are shaping the perceptions and purchase habits of new print customers who think that printing is something you buy from an office supplies store.

Where are the franchise printers? A visit to the corporate web sites showed little capability to send files or tie in with the work habits of small businesses. FedExKinkos has aggressively pursued this on a corporate basis. Franchises still seem to be operating under the strategy that individual shops are where the action is, and focus on “find a location near you” as a means of directing sales to franchisees. In the process, the office superstores and FedEx, both outsiders to our industry, as many feel, are taking advantage of the most important trend that the Internet has brought us. First, that time is a scarce asset, and convenience is of great benefit to consumers. Consumers don't want to know the technical stuff, they just want their work. VistaPrint seems to be keenly aware of this in their offerings.

Second, geography and proximity are declining in importance. The idea of “a store near you” is good in many cases, but the Donnelley deals show that production and processing can be anywhere. The standardization offered by Staples and FedEx have a predictability that many small print users want. Too often “store near you” among printers means dealing with a different sets of personnel, different pricing, and different workflow preferences.

Ink on paper? Toner on paper? Sure, that has to be done well, but the business processes that get the jobs to that point are changing more dramatically than commonly realized, and often divert work away from commercial printers without them ever realizing it.

Growth & Change: Ready or Not, They Happen Anyway

2006-03-16T05:00:00.000-08:00

The 2004 edition of the Annual Survey of Manufactures was recently released by the Commerce Department, and our analysis revealed some thought-provoking trends. The PrintForecast elves adjusted the data for inflation and calculated the annualized rate of change for the commercial printing business sectors. The way the Commerce Department classifies businesses is very important. More precisely, businesses are asked to choose the best description of their primary business, and the Commerce Department does little except to record the choice in their data base.

The way to read the chart above is to say to yourself "businesses whose primary business is commercial screen printing reported that..."

The star of this data compilation is the “digital printing” category. Those businesses' volume increased in the 1997-2004 period by an average +28.3% per year. Commercial digital printing businesses went from a miniscule 0.6% share of the commercial printing shipments pie in 1997 and moved up to a 4.1% share by 2004, with more room to grow. The pace of growth has slowed, and was a robust +6.8% for 2004 compared to 2003. Remember, businesses may have reclassified themselves from offset to digital, so it's not likely that the increase is solely from digitally printed jobs. It must also be noted that “digital” can mean almost anything.

Ultimately, these data should serve as a catalyst for change within individual companies and eventually ripple through the industry as more companies implement new strategies. It's time for printers to redefine their businesses, rationalize their equipment bases, clean up their balance sheets, invest in capacity that will be marketable three and five years from now, and finally come to grips with the industry's decades-old paradox of printing everyone's marketing materials but often averse to using marketing strategies itself. (How can we say printers should be in the "marketing services" or "communications" businesses when so few use those strategies in their own businesses?) Proactive organizations stay ahead of their clients and worry little about their competitors.

The new media marketplace is real, with significant opportunities. There are many notable roles open for print and printing companies to successfully play in it. That is, if we really want to. These industry times certainly separate the elite companies from the average ones, the best managers from the mediocre ones. Everyone looks like a business genius in a growing market. But today, it helps to actually be one, and open to new ways of doing business, with strong skills of implementation.

Interestingly, the relative share of other commercial print categories had only minor changes. Commercial offset businesses were 56.6% of the shipments in 2004; they were 56.8% in 1997. Gravure was 4.2% in 2004, and 4.7% in 1997. These don't seem like consequential changes, but the change in dollars is dramatic (or do I mean “traumatic”?). The report shows commercial offset as losing -$10.2 billion in annual shipments comparing the two years of 1997 and 2004. The size of that decline is more than 3.5x the total amount of shipments reported by commercial digital printers so it's not just a simple transfer of volume from offset to digital. Business went elsewhere, to non-print media.

Comparing 1997 and 2004 book printing shipments, there has been a decrease of -$2.1 billion in annual volume. We know that some shifted over to digital printers, though the bulk of the “loss” has moved largely to non-U.S. print providers.S

eparately, and not in the chart above, trade binding and finishing is growing at the rate of about 1% per year. Prepress services, a victim of desktop publishing well before there was an Internet bubble, has lost $2.4 billion in annual shipments, a -6.8% per year decline. Many of those businesses redefined themselves as digital printers, or moved into services such as graphic design.

What's all this mean? The industry continues to change. None of the segments noted are keeping up with GDP growth except for digital printing businesses. As the commercial printing industry headed into 2005, there was some reason for optimism, as the intensity of the downturn seemed to subside and looked to be bottoming. As we know, the downturn restarted in late Spring 2005 and culminated in a December that was down -9% to 2004. None of this matters to growing companies who anticipated these changes and moved accordingly.

I worry that there are still executives who look at data such as these and deny that they exist or claim that they must be wrong and otherwise dismiss them. (Data are always more “acceptable” and unquestioned when they show positive growth; cognitive dissonance has no place in the board room, but we know it's there). Anecdotal support for the trends above are all around us, and need not be documented now. In the end, data are just data, the residue of past business decisions, often by long- departed managers. Those past actions have played out in a marketplace in unanticipated ways.

It's essential to look ahead with an understanding of how one's company can thrive in a variety of future scenarios, not just minor yearly incremental changes. The question is not how to survive, but truly thrive. Managers need solid market information that reflects the marketplace as it is. It's their job to change the marketplace. Without good data, how can one know what needs to be changed and whether or not their attempts to create change have been successful?

Annual Survey of Manufactures

Every 0.1% Increase in E-Commerce Causes -$1.8B in Commercial Printing Sales

2006-03-02T05:00:00.000-08:00

There's a lot of "rules of thumb" about the relationship of GDP and print. Like many rules of thumb, they go out of date, and we've shown that for quite a while there has been no statistical relationship between GDP and printing. We even have a special "Data-to-Go" report about it.

What is valid, with an r-squared of 90% (for the statistics geeks in the audience who know that's quite good from a statistical business forecasting perspective; for everyone else, it's called the coefficient of determination, and a brief explanation can be found by clicking here), is the relationship of the percentage of retail sales that are conducted by e-commerce and inflation adjusted printing shipments.

E-commerce retail sales is now a mere 2.2% ($20.8B for Q3-05), but the equation generated by using that in a linear regression model is rather incredible, showing a $1.84 billion drop in commercial printing shipments for every 0.1% change in the share of e-commerce as a part of total retail.

Does this mean that e- commerce is the sole cause of prints decline? No, it doesn't. What it means is that this data series has a pattern that explains 90% of the direction of the printing shipments pattern. We do know that e- marketing has shifted ad dollars and business information dollars away from print.

So should we be surprised? The economy grows independent of e- commerce (it obviously grew for hundreds of years before it existed), but we know that sales information in all of its forms has been a mainstay of printing, and e-commerce strikes at its very heart.

Is e- commerce, then, sure death for printing? Not if you're a company like Vistaprint, or Printing for Less, or UDesignWePri nt, all of whom are counting on e-commerce to bring them into new markets and new audiences. We always say that you should strongly consider investing in what can put you out of business, and we also say to stay ahead of your clients and not your competitors. These companies may be doing just that.

Dr Joe's Take: The Benefits of Print

2006-02-16T05:00:00.000-08:00

The Boston Globe recently had an article about the changing media mix, and how traditional media are being nudged out by electronic media. The story was based on research by a company called Outsell, Inc., and a presentation that summarizes their media mix outlook. The study highlights are available at no charge from their website after filling out a short form. Once you get past their results showing significant increases in non-print media, you find data about how print and other media compare in achieving two important marketing objectives.

Respondents were asked to rank media by how effective they were for “lead generation effectiveness” and “branding effectiveness.” Print fared very well:

Print trade magazines ranked #1 in branding effectiveness.
Direct mail ranked #2 in lead generation effectiveness and #3 in branding effectiveness.
The highest ranked new media? E-mail marketing, ranked 4th in branding and lead generation.

Sure, the study is not optimistic about print's growth in comparative volume, but it does show that print will remain an important part of the media mix. The effectiveness of print in these two areas that should be constantly hammered home by anyone whose job it is to promote print. Make sure sales people and all those who need to have high-level discussions with clients about their promotional plans have a copy of this presentation. There are things that print continues to do better than electronic media. In today's media intense environment, media diversity is more important than ever. Are we standing up for ourselves when and where it counts? Do we even know how to use new media to promote ourselves to the e-media savvy? Are we going to let them shove us in the corner by calling us "legacy media" or "offline media"? Is anyone listening?

Boston Globe article: "Virtual Ads Pose Real Threat to Traditional Media"

Reader Questions & Comments (Here's a good one!)

2006-02-09T05:00:00.000-08:00

Q. (from a printer) In the article from the January 2006 edition of Print Solutions you comment that globalization isn't going away and that companies should find a way to participate in the global market. Sounds great in theory, Joe. But we all know that companies based in China and India compete on one thing and one thing only......price.

How can an American printer or print distributor pursue a market in those countries when their costs are astronomically higher? Are we supposed to sell brochures and documents to businesses located in Beijing and Hong Kong, when they can buy it locally at a fraction of our cost? This is the problem.

You make it sound so elementary when in fact it is a problem which has its roots in unfair trade policies. The Port of Long Beach, CA takes in $36 million worth of imported product from China every day; in return, that same port exports $3 million dollars in raw materials to those same plants in China. Welcome to the new colonialism. Let me know the next time you hear about an American print company successfully selling their product, MADE IN THE USA, to China. Good luck!

A. Good question and it's tough to comment briefly.. There are many issues here and I'll try to do justice in this limited space. I'll also have some links about the nature of trade in the “quick links” section. This is not an easy subject, especially for domestic service providers who seem to be getting the short end of the deal. From a broad economics perspective, what you are seeing is a shift in the differential advantage between nations. That is the genesis of trade: not the exchange of similar goods, but the exchange of very different goods, some of which may go in and out of different ports, if ports are used at all. Very often, trade in services do not require ports; since services have higher value added than many manufactured goods (such as intellectual property) but do not have tangible form, they use communications technologies, and not transportation.

In our study of “offshore printing” last year, it was clear what print buyers told us: geography no longer made a difference, especially when there were U.S.- based sales people or print brokers there to coordinate communications and logistical issues. It was also very clear that the quality barriers for many of these print buyers had disappeared, along with many turnaround issues. FedEx and UPS have seen to that. Some commented that they were able to again afford to get traditional Cromalin and Matchprint proofs, which they had been discouraged from getting in recent years.

The buyers professed that they were quite surprised at how print quality had changed for the better, and feel that they were not just getting “cheap printing” by any measure, but they were getting mainstream quality printing. Remember, for almost a decade, I have been warning that print was too expensive in relation to what it delivers compared to other media alternatives. The marketplace has made it clear: U.S. printers cannot raise prices as they are competing for the same dollars as e-commerce, e-marketing, public relations, events, and other promotions. Print buyers are pressured to squeeze more out of the same budgets, and therefore welcome the alternative that offshore printing can provide.

There are still limitations in the market for offshore printing. There are distinct run length ranges for which transportation costs (plus “hidden” administrative management costs and risk of potential time lost unacceptable print jobs) outweigh potential print savings. The real question is how the relationship with the print buyer of U.S. printers can withstand the encroachment of offshore suppliers. It's printers who have made print a commodity, and the buyers accepted that characterization, for decades.

Sell print from the U.S. to a company in China? Not in our lifetimes. It is doubtful that any U.S. printing company could sell its raw printed product directly to businesses in China. The cost advantage stems principally from significant differences in labor cost, even when balanced by the higher productivity of U.S. print workers. But, publishers who are customers of U.S. printers do, as do companies that sell goods and services to China. There is a growing trade in services with China, from banks, insurance, education, transportation, and other major business service categories. In 2004, almost $34 billion of goods were exported to China.

The top ten goods, representing 47% of the total were: semiconductors, soybeans, industrial machines-other, civilian aircraft, chemicals-organic, cotton-raw, plastic materials, computer accessories, telecommunications equipment, measuring-testing-control instruments

A printer should ask: Do I work with companies that are active in these product areas? Is there an export agency I should work with to identify potential clients who need particular print products necessary for their marketing in China? (The local Small Business Administration office often has export assistance capabilities). Are there expert translators I can work with to create printed materials for companies interested in selling to China and other global markets? How do I find the fastest growing, most innovative companies who may be good exporters? While you may not be able to export your own products, you can often ride the coattails of the companies that do. Having the right customers is a good idea no matter what business you are in. After all, print is not always direct demand, but derived demand from the needs created by other business activities.

Of greater concern to me is that printers, who often claim to be strident entrepreneurs, should be looking for growing print markets, including the potential of creating or investing in overseas printing firms. Sometimes opportunities are not conveniently nearby; in the connected world, they will often be half that world away. There was a time when selling into the next county was a big deal; today, selling abroad is done without a thought.

Investing in “offshore” businesses is an extraordinarily complex area, as some of these countries do not have well-developed banking systems and limitations, legal or cultural, on some kinds of outside investment, which amplify typical business risk. The Index of Economic Freedom is a good start to get background on these countries. This might be a great topic for industry associations and others to start investigating and promoting on behalf of their members. NPES, for example, has been active in this area for many years.

In 20 years, China will be the largest economy in the world, and not long after that, India will be the second. We also need to keep an eye on Thailand as a growing print exporter. Printing imports from India are nominal now, but they are a significant player in publishing and graphic design services for all English- speaking markets. Whatever the case, as these countries grow, their own reliance on exports for their principal growth will diminish as incomes rise and internal consumption of goods grows.

Last year, one survey of China indicated that more than 500 million had never brushed their teeth: I envisioned the Procter & Gamble product managers for Crest, Scope, and Fixodent doing cartwheels in the aisles between their cubicles, as they celebrated the opening of a new market for what are essentially very mature products. Beyond those basics, these countries will become prime consumers of services and intellectual property products over time. Right now, there is often minimal respect for the value of intellectual property in emerging markets, but that will gradually change once native entrepreneurs realize there are good margins for these offerings in their own markets).

As countries went from agricultural to manufacturing economies, service businesses such as transportation, finance, and education began to grow in comparative value to those older industries. Today, when hospitality and travel is excluded, the average service job pays more than the average manufacturing job. These countries are rapidly moving through their manufacturing stage, and there will be a time, when they, too, will look for offshore manufacturing in the countries that are undeveloped at that future time.

One more very interesting article worth reading: “We Think, They Sweat,” a commentary about the nature of trade by Andy Kessler in the December 23, 2004 Wall Street Journal. Kessler discusses the Apple iPod as an example of what is happening from a trade perspective. Please note: this article is available to Wall Street Journal subscribers only, but we can forward a 7-day link to anyone who requests it. Please email us at news@printforecast.com.

WSJ Article: We Think, They Sweat

China Isn't The Only Emerging Print Market

2006-02-02T05:00:00.000-08:00

China's not the only emerging market; emerging Europe is still a place of signif- icant growth. The data in the chart are from 1998 to 2003. In that time, printing employment in the Czech Republic grew 5%, Spain's grew 12%, and Hungary's grew 84%. This was all at a time when the developed economies of Europe's printing employment were either stagnant or declining.

Economic freedom is not turned on like a spigot; it takes time for economies to grow and to benefit from new capital investment. The Eastern European economies have shown steady progress, with some impressive growth rates, while still behind the other mainland economies in terms of incomes and per capita GDP. In practical terms, Spain and Portugal can be considered emerging economies as well.

Growth can be found in many places. Ireland's rise as a notable economy has caused its printing shipments to double in the same time period. Trade agreements account for a great deal of this growth, but modern communications technologies further erode the natural barriers to trade and widen opportunities for buyers and sellers to meet. Constantly improving logistics play a major role as well.

It's essential to realize that just because print may not be growing in North America does not mean it is not growing elsewhere. Business people go where the opportunities lead them. The realization that there is now an interconnected world print economy rather than a collection of discrete print economies is hard for many to get used to... but it's critical that global thinking become second nature to all managers.

Understanding Our Industry

2006-01-26T05:00:00.000-08:00

Tracking changes in magazine pages can help us under- stand what is happen- ing to the overall use of print. Ad pages are an important measure, because you don't need to adjust them for inflation.

For our industry, we're missing a part from the puzzle; circulation. This would give us implied run length. From other industry data, we know that circulation has been flat for 15 years. Recent postal data indicate that the total tons of periodicals mailed has been flat as well. All this has occurred at a time when the number of titles has been increasing.

But now to our data: for the 12 months of 2005, consumer magazine pages were up 1%. For 11 months of 2005, business publication pages were down -0.6%. Both of the organizations that report these data put the best face possible on the data, often reporting the dollar value of the pages. The consumer magazines data are based on "rate card" prices, similar to judging Wal-Mart's sales on retail list prices.

When compared to GDP, ad pages are clearly falling behind, an indication of a constantly changing media mix. While some are forecasting a crash in the magazine business, that doesn't seem quite likely to me. Publishers are still grappling with new formats and the creation of revenue streams from them. In the 1990s it was common to hear that "content is king." Yet you must eventually get to a bottom line: industries that cannot produce profits don't survive. That realization is causing incredible amounts of hand-wringing in the publishing business, and, of course, in ours.

In the long run, more low-circulation magazines seem to be an entrenched trend. This trend creates havoc with high-overhead, high- fixed cost publishing and printing infrastructures. Unraveling that structure is hard; organizations have an urge to protect legacy functions at great expense. Starting from scratch may actually be easier.

WHAT?? Printing Ink Now Linked to Computer & Peripheral Equipment?

2006-01-19T05:00:00.000-08:00

Comparing the price changes in computer technology and printing ink may seem like a bit of a stretch, but it helps put some industry trends in perspective. The increasing use and decreasing costs of electronic media are putting significant pressure on the use of print. We've always maintained (and demonstrated, we hope!) that understanding the demand side of the communications business sheds light on what business conditions will be like for printers. Because of the declining costs of computer equipment, and also communications services (not shown here, but they are down), printing business owners are having trouble passing on their increased costs to print buyers.

The chart shows the producer price index changes for the costs of computers and peripheral equipment and printing ink. No one would have thought that these categories compete with each other, but we know in the "connected world," that they certainly do. The reasons for their price directions are quite different.
Computer equipment costs have continually dropped because the technology has been constantly improved, becoming more efficient, and less expensive.

Printing ink, while it has its own technological improvements, cannot match, nor can any hard goods commodity, the price declines of electronic technology.

As ink prices have remained essentially flat in a long-term perspective, so has paper, and so have the prices for which print is sold. Manufacturers have not been able to pass on their increased costs for raw materials, mainly because printers have no leeway to pass on their own increased costs to the ultimate buyers of printed materials.

Why? The costs of accessing electronic media keep going down because equipment costs keep going down. This has helped create a new media marketplace where consumers find that getting online and buying "gadgets" have great benefits to them, and, it seems, they want more. Other companies have faced this problem, where they can't create profits by selling price-sensitive goods. This is a primary reason why IBM made the strategic shift to services about a decade ago. Services, the selling of expertise that others cannot perform for themselves, has been an enormously profitable marketplace for IBM and others.Is printing a service or a manufacturing business? Changing strategy to become a service business is difficult, but worth it.

While printing can never shed its manufacturing core, what printing owners build around that core in terms of services is often the difference being a mediocre performer and being a great one. This is not the "value added" argument, which so often degenerates into a list of tasks that can be added to invoices or new equipment that should be bought. This is a major change in the strategy of the business. Our favorite strategy is the "communications logistics" business, where printers take their skills of handling complex workflows for print and use them in other media. We'll discuss this, and the other five strategies, in upcoming editions of PrintForecast Perspective.

Are Imports to Blame for the Decline in U.S. Printing Shipments?

2006-01-12T05:00:00.000-08:00

We've been asked this question quite a few times. Trade data are hard to interpret as to their real value because printing imports do not always bear the full cost to the customer. For example, they do not include the cost of delivery to the final customer, and if they were sold by a print broker, they do not have the value of that person's commissions and other factors.

Whatever the situation, it is quite clear that the shipments of imported printing are increasing. The biggest brunt of the increase may actually be Canadian printers, and not U.S. printers. It's interesting how the amount of the increase in printing from China is nearly identical to the decline in imports from Canada. Indeed, where for many years Canada had a printing trade surplus with the U.S., it now has a deficit.

Now's not the time to get into the issue of whether or not trade deficits matter (they really don't in the grander scheme), but it's more an issue of whether or not market shares are changing or whether the nature of the printing is changing. For all we've heard about being in an on-demand world, there are many print buyers willing to wait for weeks for their jobs to arrive from China.

It appears, by the way, that China's printing exports to the U.S. have doubled from the level found in 2004 to the levels indicated by the most recent 2005 data (January through November).

All in all, the U.S. trade deficit in printing is only about $180 million, or 0.2% of U.S. shipments. In effect, the U.S. balance of trade in printing is virtually zero. It's likely that will be changing in 2006.

The SFM Special Report "A Critical Look at Offshore Printing"

Our Industry in Perspective

2006-01-09T05:00:00.000-08:00

Despite the poor level of printing shipments for November (which is the next story), it is important to keep in perspective that ours is still a very large and important industry. I have made a short list of well- known U.S. manufacturing industries that are smaller than ours, yet often have a higher profile. The index calculates printing industry shipments equal to 100. This makes the comparison to others easy. If an industry is 50 in the chart, that means it's half our size.

Sure, there are industries that are bigger than ours, but we've got a long way to go before we disappear, which we're not, for quite a while. Don't mistake retrograde industry economics for a lack of opportunity.

U.S. Commerce Department Manufacturing Data

Where Have All the Profits Gone?

2005-12-16T05:00:00.000-08:00

This past Monday, the Commerce Department released its Quarterly Financial Report, and its printing industry data were disappointing. The four- quarter moving total of inflation-adjusted profits before income taxes moved lower, from $3.89 billion to $3.59 billion annually, the lowest level since Q2- 2002, when it was $3.15 billion. This means fewer dollars for needed investments to reconfigure our industry's plants for greater productivity. It also means the pressures for consolidation are yet more intense (and we thought they were intense already!). Consolidation forces capital that would have been used for new plant equipment to be used for acquisitions instead. On one hand, more productive companies become stronger through the acquistions, but the industry-wide installed base of equipment does not necessarily improve because the dollars were spent elsewhere.

Commerce Department Quarterly Financial Report

Repositioning Print Starts with Ourselves

2005-12-08T05:00:00.000-08:00

Last issue, I discussed our being pushed aside as the “offline media industry.” This time, I’ll review the steps that we must take to remain viable in the communications marketplace.

We have to look at ourselves in the eye and say:

Electronic media have undeniable and pre-emptive advantages in the marketplace, such as timeliness, richer information (motion, sound, etc.), freedom from geography: anytime, anywhere, many devices
Electronic media have undeniable and pre-emptive advantages in the marketplace, such as timeliness, richer information (motion, sound, etc.), freedom from geography: anytime, anywhere, many devices
Print enhances new media, making new media better, ensuring its use, increasing its frequency and its depth
New media is hard to manage and deploy well, just like print.

Our industry has the skills to effectively and efficiently manage the multichannel communications logistics that clients need in order to reach their fragmented target markets and to address the “I want it now” attention span of those marketplaces.

The first step toward solving a problem is to admit that you have one.

So let's take our first steps. Let's say it together: "Electronic media have undeniable and pre- emptive advantages in the marketplace." There, that was good. Now add this: "The recognition of those advantages is growing."

Okay, now add this: "I will do something that adds new media to the marketing arsenal of my printing business, and I will use new media myself as a means of showing that print executives understand the new world of communications."

It's exciting to get into a new business, and internalizing these concepts is the first step. If we don't do this, we will become marginalized as the "offline media" business, and that's not a good thing. After all, "The Offline Media Council" does not have a compelling ring to it.

The next big ad:tech is in April in San Francisco. They also have smaller events around the country and the world. Attend one and learn as much about your new media competitors as you can. After all, they're striving to get the same scarce marketing dollars from clients that we are.

Link to Ad Tech Events

Welcome to the"Offline Media" Business (Oh, by the way... that's printing!)

2005-12-01T05:00:00.000-08:00

For the past few weeks, I've been noticing that print media are being referred to as "offline media." It's not a name we picked for ourselves; it has been assigned to us. "Off" is probably the operative word. Great! Now we're lumped in with events, product placement in movies and TV shows and samples. Most of the discussions that used this term came out of the recent ad:tech show in New York, where were many presentations about multichannel marketing and marketing mix issues.

The ad:tech show is where all executives interested in cutting edge business communications go. But no printer had a booth. No printer was on a panel. I don't know whether any printers attended, but if they did, I imagine the represented a tiny portion of the attendance.

The ad:tech attendees are the kinds of people who are helping organizations like the Phoenix Visitors Bureau switch away from print. That was quite a story, if you haven't heard it. Would-be vacationers were ordering brochures, only to have them arrive after their vacation was over. In about six months, the Bureau saved $60,000 in costs by switching to "e-brochures."

The ad:tech attendees are telling decision makers that print is expensive and ineffective. No one was there to make the case about how our industry offers some of the most innovative applications for increasing response rates for new media marketing as well as for delivering lower long-run total costs for clients.

I have yet to see the industry make a strong and consistent statement that pounces on the documented deliverability problems of e-mail promotions. Strangely enough, there was a presentation at ad:tech about using print and mail to clean up a company's e-mail list. By doing so, their e-mail bounces were reduced to 1%.
Our industry needs to be among the best of the new media practitioners. If we believe that we are in the "communications business" (I say we're in the "communications logistics" business, actually), then we have to act that way.

Our industry is a small business industry, and we serve small businesses regularly. Yet, we have let Staples/OfficeMax/OfficeDepot/FedEx Kinko's take our customers away from us; most of the customers of those services have no idea what a printing business is or what it can do for them. Printing? Oh, I have a Staples coupon for that... It's time to change.

Read about the Phoenix Visitors Bureau