Analysis. Print Service Providers Boost Revenues through Value-Added Services. February Service Area. Comments or Questions?
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1 Analysis February 2015 Print Service Providers Boost Revenues through Value-Added Services Service Area Business Development Strategies Service Comments or Questions?
2 Table of Contents Executive Summary... 3 The New Services Offering... 3 The Challenges of Adding Services... 5 Investments in Technology and Promotion are Key... 5 Sales Cycles Linked to Complexity... 6 Compensation for Models... 7 InfoTrends Opinion... 7 About the Author... 8 List of Figures Figure 1: Value-Added Services Attract New Customers... 4 Figure 2: Average Sales Cycles Per Service... 6 InfoTrends
3 Executive Summary Changing customer communication needs and demands have many print service providers pursuing a broader range of services beyond print. By expanding their services, print providers can grow their customer bases, boost revenues, enhance profits, and differentiate themselves from the competition. According to an InfoTrends survey of Printing Impressions readers, print providers that are expanding their services beyond ink/toner on paper are experiencing an 8%-10% boost in annual revenues and winning new customers. This survey is part of an ongoing partnership between NAPCO Media and InfoTrends to monitor emerging market trends among print service providers. The most recent survey, which was conducted in September 2014, garnered responses from 65 print service providers. Respondents were asked a series of questions about the value-added services they offered as well as key strategies, tactics, and business approaches that were yielding results. Overall, respondents reported that the top benefit gained from offering value-added services was access to new revenue streams. A closer look at the benefits by the types of services offered revealed the following findings: Print-related services enabled more cross-selling and up-selling Marketing services offered competitive differentiation and strengthened customer relationships Digital media services (e.g., Website and mobile services) expanded customer bases The New Services Offering According to InfoTrends ongoing research, the firms experiencing the highest growth are focused on competing across the entire communication services value chain from strategy and creative to fulfillment and electronic distribution. Printing Impressions readers reported offering a wide variety of services that enhance the value of print and expand the breadth of communication products. The survey was structured around three core areas: Print-related services, marketing services, and digital publishing. Here is snapshot of key services offered in each area and resulting revenue results: Print-Related Services: The most frequently offered services in this area included finishing (89%), mailing (77%), personalized communications (75%), and fulfillment (74%). Offering these services resulted in an average year-over-year revenue increase of about 10%. Marketing Services: The top marketing services were design services (86%), data preparation (58%), content creating and management (51%), and cross-media marketing (45%). Top services that respondents planned to add included data mobile marketing (30%), social media marketing (25%), data analytics (19%), and marketing InfoTrends
4 strategy (14%). Respondents offering these services reported a year-over-year revenue increase of 8%. Digital Media Services: Leading services offered included Website development (49%), hosting (28%), and digital signage (26%). Key services that respondents plan to add include social media (20%) and mobile application development (15.4%). According to respondents, digital media services resulted in a year-over year revenue increase of 10%. In the past year, print providers reported winning new customers as a result of offering any of these services. Firms offering print-related services (e.g., finishing, mailing, and online ordering) gained an average of 14 new customers, those providing digital media services attracted 11 new customers, and companies offering marketing services added 6 new customers. It is not surprising that print-related offerings generated the highest increase in customers because these services support most providers core product print. What s interesting is that the average number of clients added as a result of digital media services was very close to those added by print. Based on this finding, communication buyers clearly value print providers that offer a broad array of innovative services. Figure 1: Value-Added Services Attract New Customers In the previous calendar year, how many new clients did your company add as a result of offering new services? Print-Related Services 14 Digital Media Services 11 Marketing Services N = Varies Base: 65 Print Service Providers InfoTrends
5 The Challenges of Adding Services Adding any type of service presents a number of hurdles that must be overcome. The biggest challenges print providers reported in offering services across all three areas concerned training sales staff and dealing with resource constraints. Firms that added marketing and digital media services reported greater challenges in having the right internal expertise and educating clients about the new offerings. When asked to pinpoint challenges in pricing value-added services, determining true costs and developing accurate pricing estimates were fundamental challenges for respondents across all three areas. Print providers are accustomed to pricing work based on standardized manufacturing costs. While some elements of pricing value-added services are standard, the amount that service providers charge must be based on the value of the work as opposed to the time and baseline manufacturing costs that are required to complete the work. Determining the right price and communicating the associated value can help service providers migrate from producing print jobs to supporting more complex communication products. Investments in Technology and Promotion are Key Across all areas, investing in technology and developing campaigns to promote services that included social media were key actions taken by respondents who were expanding their services. Promotion is essential, and print providers are using many promotional tools to ensure that prospective purchasers understand their services and capabilities. Trade shows, direct mail, and other forms of traditional marketing are still valid, and they can be particularly powerful when combined with digital marketing. Public relations, establishing an effective Web strategy, networking with prospects, educating customers, and establishing a social media strategy are essential tools for generating awareness and demonstrating a company s ability to deliver new services. Another key strategy was to test services by offering them to a select group of customers before rolling them out on a larger scale. A few respondents hired staff to support new services, and those that did so primarily added sales or IT staff. This reflects the need for a variety of different skill sets. InfoTrends
6 Sales Cycles Linked to Complexity Sales cycles for value-added services varied based on the complexity of the service and customer confidence in the print provider s ability to offer that service. Ancillary services that supported print (e.g., finishing, mailing, data preparation, or design) were reported to have shorter sales cycles, while more complicated services (e.g., Website hosting, development, and marketing services) had longer cycles. Understanding the typical sales cycle of various services is a valuable tool that can guide company managers in sales planning and setting reasonable sales goals for services. Figure 2: Average Sales Cycles Per Service How long (in months) is the average sales cycle for the value-added services you offer? Website hosting Marketing strategy Mobile application development Website development Cross-media marketing Digital signage Print management services Mobile marketing Digital asset management Digital publishing services Video production marketing Social media services Fulfillment Web-to-print services Mobile 2D barcode generation & tracking Data analytics Content creation and management Social media marketing Personalized, 1-to-1 print communications Design Mailing Data preparation Finishing N = Varies Base: 65 Print Service Providers InfoTrends
7 Compensation for Models Nearly three-quarters of respondents made no changes to their sales compensation plans to incent sales staff to sell new services. There was little variation by print-related, marketing, or digital media services. Among those respondents who had made changes, the most common action was to increase bonuses. A small share of firms selling crossmedia (15%) reported offering a separate compensation plan for selling these services. InfoTrends believes that sales compensations plans must be adjusted to offer meaningful incentives that account for a longer sales cycles for more complicated services. InfoTrends Opinion Print service providers have long acknowledged that they need to deliver value-added services to differentiate themselves from competitors, and they are taking actions on many fronts. Expanding and adding innovative services is not without challenges; firms cite resource constrains, pricing, and longer sales cycles as key hurdles. The rewards, however, are big. Businesses that are effectively expanding their services are gaining new customers, building a competitive advantage, and experiencing higher sales. This material is prepared specifically for clients of InfoTrends, Inc. The opinions expressed represent our interpretation and analysis of information generally available to the public or released by responsible individuals in the subject companies. We believe that the sources of information on which our material is based are reliable and we have applied our best professional judgment to the data obtained. InfoTrends
8 About the Author Lisa Cross Associate Director Lisa Cross is the Associate Director for InfoTrends Business Development Strategies service. She is responsible for conducting market research, supporting market forecast estimates, managing custom consulting projects, and reporting on industry events. InfoTrends
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