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1 Analysis November 2012 Exclusively Prepared for:

2 Table of Contents Introduction... 3 The Evolution Has Begun... 3 Evolution: It s a Phased Approach... 4 Mid Atlantic Printers Limited: the Adoption of Marketing Services... 4 BPI Media Group: Repositioning for Organic Growth in Marketing Services... 5 The Kennickell Group: a Transformation through High-value Solutions... 6 InfoTrends Opinion... 9 About the Author InfoTrends

3 Introduction Service providers have long recognized that growing and retaining businesses requires a strategic review of current and future needs of customers, and then putting a plan in place to address those needs. Traditionally, customer needs have centered on finding better, faster, and cheaper printed products. In meeting those needs, service providers turned to hardware and technology that allowed them to improve their color, increase capacity, reduce turn times, and reduce costs. Nevertheless, in today s competitive market, companies that pursue only a better/faster/cheaper market strategy are finding their profit margins eroding, their customer base becoming more unstable, and increased competition from low-cost providers. In addition, the rise in mobile, social, and online media channels is resulting in a redistribution of marketing dollars. Print is now only one of many media channels marketers can choose to invest in. Success in the printing industry requires firms to transform from print service providers into cross-media and marketing service providers. Making this transformation requires business repositioning, innovation, and redefinition of the overall value proposition. Companies that are making this transition or that have successfully made this transition have done so through a natural evolution that matches the needs of the company with the needs of customers and prospects. This white paper presents three case studies of companies that are at different phases of the transformation from offering traditional print manufacturing services to marketing-focused services. The Evolution Has Begun The transition from offering only traditional print services to offering an expanded set of marketing and cross-media services is well underway. The Evolution of the Cross-Media Marketing Services Provider study found that close to 60% of service providers surveyed (over 250) are currently offering marketing-focused services. In addition, over 25% of companies that do not currently offer marketing-focused services plan to start offering them. Print service providers who have begun transitioning towards marketing services recognize that while print is still an important tool in the box, its role in the marketing mix is being blended with higher value integrated services that combine marketing automation, fulfillment, data, and cross-media. The integration of these services is done through a phased approach that balances the resources of the company with the needs of customers and prospects. The following case studies present three companies, each at various stages in their transformation, and outline the steps taken towards making the transition as well as the results those steps have had on their business. InfoTrends

4 Evolution: It s a Phased Approach Mid Atlantic Printers Limited: the Adoption of Marketing Services Mid Atlantic Printers Limited, a full service commercial printer headquartered in Altavista, VA, has been delivering world-class quality and service to their customers for 102 years. With close to 80 employees and sales offices throughout Washington, DC; North Carolina; and Virginia, Mid Atlantic has established a strong reputation in their market. A reputation that, for a long time, had been built around delivering high-quality offset print services at a price that was competitive in the market. In addition to a full range of offset printing equipment, Mid Atlantic also offers over 12,000 square feet devoted to fulfillment and kitting services. The shift from traditional print services to marketing-focused solutions began for Mid Atlantic prior to the installation of their first digital press. Charles Edwards, president of Mid Atlantic, says Our clients were looking for ways to optimize their supply chain and reduce costs. We took a consultative approach and began educating our clients on the positive impact that storefront solutions could have in meeting their goals. Mid Atlantic s first storefronts allowed clients to print and inventory marketing collateral in quantities that reduced the overall per unit price. The storefronts were followed quickly by the installation of their first digital press. With the addition of the digital press, Mid Atlantic was able to offer customers a hybrid inventory solution. The hybrid solution combined a blend of traditional offset printed materials that could be inventoried, along with on demand, web-to-print driven, and digital printing. Mid Atlantic was also quick to leverage the digital press to support variable data printing and direct mailings. The digital press when combined with the storefront and web-to-print technology created a new range of products and services Mid Atlantic was capable offering clients. It also presented Mid Atlantic with new challenges. One of the primary challenges Mid Atlantic faced was getting the company to embrace digital technologies and shift the company culture, one that had been rooted in heavy iron and offset printing, to one that was focused on communications and marketing services. This challenge still remains, however, as revenues from digital solutions continue to increase, the stigmatisms surrounding digital printing are beginning to break down and employees are recognizing the role and value the technology plays in keeping the company profitable. Edwards has continued to move forward in laying the foundation for growth through digital focused marketing solutions. He says, For a long time, I wanted to hear nothing about becoming a communications provider. A little over a year ago, I was introduced to the power of data driven analytics, and I ve become a true believer. The ability to marry the variable printing capabilities of the digital press with the targeted marketing InfoTrends

5 capabilities that result from data analytics is a revolutionary tool that all marketers need to be leveraging. To promote the companies competencies in digital driven solutions, Mid Atlantic has started using data analytics in its own marketing campaigns. Variable data print (VDP) direct mailers are sent to prospects, linking them back to a personalized URL (purl). Prospect actions at the purl site trigger the mailing of a customized brochure, which is then followed with a mailing of fact sheets that illustrate how the data in their marketing campaign is being used. By using the same technology in our own campaigns that we re looking to bring to clients, we re able to demonstrate a level of expertise, while also introducing companies to the power of data analytics, Edwards says. Today, digital sales currently make up 15% of Mid Atlantics business. While still in the early stages of transitioning from traditional print services to marketing focused and digitally driven services, Edwards sees these new technologies as the path forward. He says, We have the technology and we re using it. Meantime we re encouraging adoption by our customers. The transition requires patience, a commitment to walking the talk, and a willingness to educate customers and prospects. BPI Media Group: Repositioning for Organic Growth in Marketing Services Over the course of 35 years, BPI Media Group has seen their business change and shift in dramatic ways as technology within the graphic communications industry has evolved. Boaz Printing, as the company was named at the time of its founding, was based in Boaz, Alabama and began as a government contractor providing simple one-over-one print manufacturing for bound documents, such as books and manuals. In the late 1980s and early 90s, through a combination of technology investments and market shifts, the company began manufacturing less single color government work and more full color commercial marketing collateral for local businesses and companies. It was around this time that Alan Davis, president of BPI Media Group, and his brother took over the business from their father. They both recognized that to grow the business, they would have to change the perception of customers and prospects that they were a small town printer. They would also need to introduce a broader range of services and solutions beyond print manufacturing. In 2007, in response to declining offset print runs and increased demand from existing clients for shorter runs, Boaz Printing bought a small digital press. Client response to the digital press was very positive and the company soon found that they were driving significantly more volume through their digital press than it was rated for. Davis says, When we got into digital printing, the response from clients was tremendous. We knew that we had a tool that we could leverage to meet the needs of our current clients. We also knew that we didn t want to stay on the short run static path for very long. We recognized that the long term strategic focus needed to be centered on developing and delivering InfoTrends

6 marketing focused services. In 2008, Boaz Printing changed its name to BPI Media Group and began adding a broad range of cross-media marketing services, web-to-print solutions, and fulfillment solutions to their portfolio of offerings. In rebranding and repositioning the business, BPI Media Group began experiencing growth on two fronts. The first was from existing clients that were transitioning from traditional print services into web-to-print and fulfillment solutions. The second, and largest area of growth, came from new clients. Davis says, While many of our existing customers will always see us as just a printer, we have had success in transitioning a number of our existing traditional print clients over to digital and fulfillment accounts. Currently, one of BPI Media Group s largest clients was one they had been producing basic print work for. They were able to move the client into an inventory and fulfillment print production model, which lead to the transition into a web-to-print storefront that supported the fulfillment of inventoried items as well as print on demand products. The relationship progressed and the client became more comfortable with the marketing services BPI Media Group offered. This ultimately led to BPI Media Group rebuilding the client s website and integrating it into a newly designed storefront that supports e- commerce and an expanded range of products. Davis says, We just signed a new deal with them and have captured 90% of their print work, while streamlining their marketing supply chan. Without the staff and technology we ve brought on, we d still be bidding jobs for them in a competitive market. Currently, 25% of the company s revenue is coming in is through web-to-print storefronts. BPI Media Group has a goal of increasing this to 50% over the next two years. The majority of this new revenue will come through the organic growth of new business. Davis says, We know that we can t convert all of our customers over to these digital technologies, but we now have a broader range of solutions we can use to open the door with. We are optimistic about reaching our goals and we are continuing to push the technology through mobile optimized storefronts and data analytics. The introduction of marketing driven solutions has revitalized me and made the business fun again. The Kennickell Group: a Transformation through High-value Solutions The Kennickell Group, located in Savanna, Georgia, was founded in For 110 years, the family run business developed and built a core base of services that were deeply rooted in traditional print manufacturing. Over the past 12 years, Al Kennickell, president of The Kennickell Group and the grandson of Milton Kennickell (the original founder), has been reshaping the company into a global provider of marketing and fulfillment services. When Al Kennickell took over the family run business in the early 1980s, he recognized that for the company to grow, they would have to expand beyond their regional market. At the time that Kennickell joined the family business, it operated under the name InfoTrends

7 Kennickell Printing and had established a solid reputation regionally as a print provider committed to manufacturing excellence and customer service. Kennickell also understood that there were two critical requirements for expanding the company beyond the boundaries of their local market. The first requirement was to place an emphasis on developing marketing focused products, services, and solutions that were complementary to their core print manufacturing capabilities. The second requirement was to reposition the company and how it was viewed in the minds of existing clients and future prospects. In addressing these two critical requirements, Kennickell rebranded the company and changed the company name from Kennickell Printing to The Kennickell Group. He says, We knew that we had to get print out of our name if we ever wanted to be seen as being more than the local print shop. Kennickell also expanded the company s portfolio of offerings on two major fronts: fulfillment and direct mail services, as well as data analytics. To further support their clients marketing efforts, Kennickell established Kennickell Direct Mail and Fulfillment. The business, which operates under its own P&L, grew quickly from 15,000 square feet operation to an 83,000 square feet operation. From its start, Kennickell Direct Mail and Fulfillment operated independently and removed from the printing facility. In discussing the logic behind separating the printing and fulfillment businesses, Kennickell says, We wanted to make sure that the direct mail and fulfillment business was profitable. We recognized that if we housed that division of our company within our printing facility, it would be challenging to separate the operation costs from our print division and our direct mail and fulfillment division. In addition to keeping the fulfillment and direct mail divisions physically separated from the printing facility, Kennickell also staffed the new business with employees that had experience in direct mail and fulfillment. The skills and competencies needed to run a successful fulfillment and direct mail company are different than those needed to succeed in traditional print manufacturing. You can easily make a bad impression if you don t manage these services well. Under the strategic guidance of Kennickell, the fulfillment and direct mail division has become an important line of business for The Kennickell Group. Marketing collateral and valuable inventory are now shipped globally for clients, and a network of print partners in over 40 countries has been developed to address challenges associated with customs and tight delivery schedules. In addition, The Kennickell Group co-manages a warehouse in China to support customers who need products delivered in various parts of the world, in a timely manner, and without the delays associated with customs. The introduction of fulfillment and direct mail capabilities allows The Kennickell Group to support client marketing efforts by ensuring that client communications are being delivered to the right customer, at the right time, regardless of the customer s location. Recently, The Kennickell Group has introduced a data analytics program. As Kennickell InfoTrends

8 puts it, Analytics is the biggest thing coming. In the old days, only companies like IBM could manage and process the vast amounts of data needed to gain significant insight into consumer patterns and trends. Today, the costs of computing and managing that volume of data has reached a point where it s affordable, for a company like ours, to develop data analytics solution that we can bring to the market. The development and introduction of a data analytics program complements the fulfillment and direct mail services, and allows The Kennickell Group to help clients make sure that the right message is delivered to the right customer. The expansion of services from traditional print manufacturing into fulfillment and direct mail, as well as data analytic services, has resulted in increased profits and print volume. Prior to the addition of these services, 99% of sales revenue came from commercial print. Today, only 50% of revenue comes from traditional commercial print sales. Kennickell states, We understood that we weren t going to grow simply by increasing commercial print sales. The bigger deals that we ve landed in the last couple years have been driven by software and internal workflows that connect our clients to our broad range of fulfillment focused capabilities. Kennickell goes on to note that, Clients still want to come and look at the printing facility to confirm that the quality is good, but the physical print component is much further down on the list of priorities for our client. While print production is still a key area of revenue, The Kennickell Group has found that if they can master and support higher value services like fulfillment, direct mail, or data analytics they capture the print by default. By expanding beyond traditional commercial print services into marketing focused services, The Kennickell Group has been able to bring more to the table for their clients as well as reduce the volume of commercial work being bid upon in a competitive environment. By developing programs that are built around supporting the marketing needs of their clients, The Kennickell Group has been able to grow their business and weather economic challenges while still receiving a fair price for the work they do. InfoTrends

9 InfoTrends Opinion Market leaders understand that success and continued growth in this industry require the development of high-value services aimed at meeting the unique marketing needs of existing and future clients. Nevertheless, the evolutionary path from print service provider to marketing services provider is not linear. As demonstrated through these case studies, the evolution is natural and organic, and balances the resources of the company with the needs of customers and prospects. These case studies also highlight that the transition is not achieved solely through the introduction of new technology and services; it also requires service providers to strategically rebrand and reposition their company, while pursuing new lines of business and customers outside of their traditional markets. The key to successful transformation is planning. Too often companies are reactive -- not proactive -- and employ short-term solutions that must be reevaluated and displaced before achieving their intended ROI. Instead of investing in technology to support a perceived immediate customer need, technology decisions should involve a long-term vision. With more and more service providers looking to break away from the traditional commodity price driven print market and enter into value added marketing services, the time to refocus and transition is now. 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

10 About the Author Matt Rees Senior Consultant Matt Rees is a Senior Consultant for InfoTrends Business Development Services. In this role, Matt will support service initiatives by assisting customers in growing and developing new market opportunities. Mr. Rees has a broad range of experience within the photo and production printing/software space. InfoTrends

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