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    October 21, 2009

    What Everybody Ought to Know About Market Segmenting

    In a previous post I talked about the difference between fidelity services and convenience services.  In the AEC reprographics industry this is mostly divided between design (A/E), and construction (C).

    A/E = Fidelity

    C = Convenience

    For the industry to be successful it is important that the services provided to these two different market segments be differentiated.  They should be differentiated by service, quality and price.  Here are a couple of comments I have heard within the industry over the past few years.

    "We don't sell to contractors because they are too cheap."

    "I was forced to lower the price with my largest revenue customer [Architect], because he found the price I was charging to another customer [GC]."

    "My customer would never accept the quality from that brand printer because they have high standards.  I don't understand how the other guy gets away with it."

    "We are losing bids because we just won't lower our price to the ridiculous prices that are being thrown around."

    "I can't service the GC's at the cost structure I have in place."

    "Those guys don't understand the value we provide."

    "I just bought a shop in another city and they were selling the services for too low of a price so we went in and raised the prices to what they should be."

    "I can't believe the other guy won a bid at that price.  How can he do work at that price?"

    When you take a step back and say what are the market requirements of each of these market segments and are you matching our services and price to those markets?  

    Quality - Architects and engineers typically demand high fidelity.  The documents produced represent their work.  They want it to look as professional as possible.  Contractors don't care about the quality.  They just need to be able to read the dimensions and understand what is expected of them.  To satisfy architects you should be producing documents on the highest fidelity 600DPI printers(at least).  To satisfy contractors you could use a lower quality 400DPI printer.

    Service - Most companies who service architects and engineers spend a lot of time going back and forth with their customers making sure that all of the required files are present; making sure the right revisions are in place; and sometimes providing proofs to make sure the quality is acceptable.  Contractors usually require you to simply print the documents that they gave you.  There is very little back and forth and double checking.

    Price - An architect or engineer is willing to pay more to make sure that their work product is represented correctly.  Since it is their name on the documents they do care about the attention to detail and service that is provided.  They are buying fidelity.  They want a "triple shot, extra hot, no foam, caramel macchiato."  The fact that they are often not spending their own money is also a factor.  Contractors are looking for convenience.  They want the drawings printed quickly and cost effectively.  They are generally not willing to pay extra for the attention to detail, at least as it pertains to quality.  There is value in the content management and revision control, but that service needs to be separated from the printing as they see printing as a necessary evil.  They just want a cup of coffee and they can't understand why anyone would pay four bucks for a cup of coffee!

    Those who understand that they are not providing simply printing to the AEC industry, but meeting the unique requirements of specific market segments can find hidden profits.  Those who cannot differentiate between these market segments will be either overpricing their services and loosing business, or underpricing their services and losing money.  Either one means decreased profits.  In some cases you should be lowering your prices and in other cases you should be raising your prices, but you must also describe in detail what the differentiated services are for that price (i.e. resolution/DPI, quality control, turnaround time, etc.).  There are many details to be worked out and expectations to be set or reset with customers.  You also must have the internal process to make sure you can execute.  Sure some say "it won't work in our market".   What's the alternative?

    October 12, 2009

    Napster is to iTunes as FTP Sites are to Digital Services

    Before there was iTunes there was Napster.  Napster was hugely disruptive to traditional music distribution model.  People getting  away music for free!  Even respectable law abiding citizens were downloading illegal music for free.  It wasn't just because the music was free.  It was convenient.  It was easy to search for the music you liked and get the instant gratification of a download.  At the time Napster came about the next best thing was going to the store and buying a CD.  What if I only wanted one song?  What if I wanted it now?  The cost of distribution was too high to get the song.  The old model was out of date and inefficient. 

    Steve Jobs and Apple introduced the iPod and iTunes.  He offered the same convenience for a reasonable price - $0.99 a song.  For that price the law abiding citizens would rather pay $0.99 and be legitimate.  Would Apple have been a successful if they came out with iPod and iTunes before the Napster revolution?  Maybe, but it would have been a lot harder.  Napster created pent up demand.

    Many people in the reprographics industry complain about the hidden enemy "FTP Sites and CD-ROM distribution".  Maybe some of your customers didn't find the cost of the convenience of your service desirable so they decided to invest in their own technology.  Now that they have tried to do it themselves are they more or less interested in digital services.  I would argue that many would not go back to the inconvenience of analog distribution, but are disillusioned with the headaches with performing and maintaining digital content distribution services.  To sell your digital services you can't lead with "why printing is better".  You may overtly or covertly get the door shut in your face.  You should lead with how you can perform the services more efficiently and more cost effectively than they can.  There is one important point.  The pricing will have to appetizing.  It has to fit the same buying mode as iTunes.  For example "for $0.99 a song I'm willing to NOT use Napster".  You customer will have to say "based on that proposal we are willing to NOT create CD-ROM's and hosting an FTP site".

    September 28, 2009

    What Does Starbucks and AEC Reprographics Markets Have in Common?

    When I first entered this industry I was curious when I would hear two companies in the same market claim that they didn't see the other as true competition and rarely ran into each other.  They would claim that the reason the other company wasn't competition was because of their superior service.  What I came to realize is that these companies didn't run into each other because they were servicing different market segments.  They often didn't realize they were servicing different segments because over time Mr. Market did the segmenting.  The segmentation was mostly down the lines of design market versus construction market.

    The economic downturn has caused business owners to look much more closely at their business and the market in general.  They are understanding what markets they are currently servicing and looking to expand into the other segments.  What is important to understand is that these different segments have very different requirements especially price requirements.  If your pricing and service differentiation are not carefully thought through it will erode your margins instead of growing your business.  In this environment nobody needs more margin erosion.  An article in CNN Money talks about Starbucks struggle between the competing value propositions of fidelity and convenience.  This is very similar to differences in the AEC community.  Design professionals want fidelity and construction professionals want convenience.  Your pricing and service differentiation should match these market requirements otherwise you will loose business by charging too much, or erode margins by charging too little and having to provide more services.

    May 18, 2009

    Chinese Wisdom

    Chinese Crisis The Chinese word for crisis is written in two characters.  The first stands for danger, and the second for opportunity.

    May 14, 2009

    Entrepreneurs Can Change the World

    Smart marketing and inspirational.  This is a purple cow.

    May 08, 2009

    R&D and Amazon's Digital Services Strategy

    Anyone who has seen presentation of mine recently has seen me talk about "R&D".  It is not
    research and development" as you may initially think.  It is "rip-off and duplicate".  I actually ripped this off from Cameron Herold, the former COO of 1-800-GOT-JUNK, and the founder of BackPocket COO.   The concept is when you are struggling with a strategic decision in a changing market it is easy to feel alone.  That is because you are sitting in your conference room thinking that the challenges your company or your industry are facing are unique and novel.  The concept of "R&D" is to look at other industries and how they dealt with the same or similar challenges.  Try to figure out what worked and what didn't.  What is different and what is similar about your business or your industry?  How can you learn from their mistakes and replicate their success?

    Along these lines I believe it a company to watch is  They started in the business of distributing hardcopy content - books.  They are now seeing the business of distributing digital content grow.  A couple days ago they launched the Amazon Kindle DX.  A larger version of their eBook reader.  I have a kindle and it is great.  I read most of my content on line, on my iPhone, or I listen to eBooks (via Amazon's service on my iPhone.  I am buying more content now, and I am not buying many books.  Because it is digital and more portible I am finding better and more convenient ways of experiencing the content.  I suspect my children will buy even fewer books, if any at all.  I read an article recently that said the next market that Amazon is going after with their Kindle product line is education.  Instead of buying paper books every year you can buy them or rent them for use on your Kindle.  Pretty smart!  


    As the Kindle gets bigger could you view construction plans on it?  How will your business fit into this model?  Have you embraced digital services enough to make a profit in this model?  Do your customers see you as the company to go to for this type of service?

    May 06, 2009

    Why Not You?

    This truck was parked in front of our office.  In cash you can't read the text on the photo taken from my iPhone.  They advertise Document Management Solutions, Secure Destruction Services, and Data Protection Services.  Sounds pretty good...maybe even strategic.  Could you offer document retention and document destruction services to your existing customers?Why Not You?

    April 27, 2009

    Amazon's "Digital Services"

    An interesting tidbit from a Washington DC periodical Daily Biznow.  Amazon's first quarter sales are up 18% over last year (close to $5 billion).  Here's what's really interesting.  Now 42% of their revenue comes from electronics such as the Kindle rather than books. 

    posted about an HBR article about Amazon in October of 2007.  Jeff Bezos and his management team's emphasis was on helping customers find the right content at the right price in the format they prefer.  It seems that more people are preferring the digital content.  There are a lot of simularities with the AEC reprographics market.  If you are in the business of only printing there is a limited and declining market.  If you are in the business of giving people choices as to how they get content there is a growing market.  Printing still is the preferred option, but having the choice is important.  

    February 13, 2009

    Google is Charging for Downloads

    Google is brilliant at finding ways to monetize the distribution of digital content.  Today they are allowing "partners" on YouTube to charge for downloads.  They are not yet getting a cut from the fees as it is an experiment.  Watch and learn from Google.  There are many parallels to what is happening with the distribution of AEC content and the distribution of music and video content.

    February 02, 2009

    A Reprographer Leading Change

    Jared Willis, Director of Sales for Barker Blue, is walking the walk.  It is easy to attend an industry event and walk away with good ideas.  We all know that implementing them is the hard part.  On the plane ride home you are filled with inspiration and are thinking about how these new nuggets of knowledge or wisdom are going to change your business.  On Monday morning the reality of managing your business hits you.  It is a struggle to move from working in your business to working on your business.  Barker Blue is doing a great job of acting on much of the learning they have done.  Jared has a great blog where you can follow the wisdom and experience they have gained.

    A recent post of his describes his experience with a PR firm and how they created the perception of value.  Too often reprographers are willing to say we will do anything to satisfy the customer, but they don't communicate to the customer what they are doing and it is not valued.

    Some other industry blogs in case you aren't aware.

    ReproTrends - Curtis Thornton, Thomas Reprographics
    The Rockpile - Tanner Bechtel, ReproMAX