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The first challenge to adapting to this new environment is choosing the appropriate sales channels for these new applications. The second challenge is, regardless of the channel(s) selected, how to implement the very dramatic changes in strategy necessary to sell them. We discuss the second challenge here.

In this report, we will provide 11 practical steps and strategies from a panel of experts for making a successful transition.

1. Decide whether you will expand horizontally or vertically.

The first step is to decide on one of two competing strategies:

•  Expanding horizontally (creating an even broader product mix)

•  Expanding vertically (specializing and going after volume sales in those markets)

Both of these approaches work, and both are needed. However, Barb Pellow of Pellow & Partners, an industry consulting firm in Rushville, NY, points out that manufacturers need to decide which model they want to follow because the strategies will be very different, especially when it comes to commercial applications like 1:1 personalization and Web-to-print. While these applications can be profitable, they require enormous upfront investments in customer acquisition and program development, so successful implementation requires the creation of repetitive applications, with customers making long-term commitments and providing recurring revenue streams.

Not only must these applications be sold very differently, using different strategies and different sales compensation structures, but your business structure must be different, too.

In the commercial printing industry, where the transition from long-run offset to short-run digital and personalized communications has been occurring over the last decade, printers have found that, in order to be successful, they must set up their digital and 1:1 personalization operations as separate businesses or as separate, independent divisions, with their own management and sales forces. Forms manufacturers making this transition successfully are taking the same approach.

2. Commit to a long-term ramp-up.

Whatever strategy you choose to implement—expanding horizontally or vertically—the transition will take time. It requires the development of sales collateral, training of distributors or other resellers (or manufacturers' own sales forces, if they decide to go direct), and, in many cases, training of customers, as well.

While manufacturers and distributors expect that they will need training, the need to train end users often takes them by surprise. But if customers don't know how much it costs them to inventory, destroy, update, and print documents, they won't immediately recognize the value that Internet-based print management programs bring. Likewise, in order for 1:1 personalization to be successful, end user companies have to know something about their customers in order to make the communications, not only personalized, but relevant —and many don't.

This has been a frustration for manufacturers that have found distributors that “get” these applications, but when those distributors go out to sell them, they find that customers are completely clueless. Consequently, distributors that were once fired up about selling personalization and Web-to-print discover that the road is often longer and more difficult than they anticipated. Managing expectations then becomes a big part of making a successful transition. It can take months, even years, to develop and implement successfully.

3. Implement new compensation strategies for resellers and direct sales teams.

With long ramp-ups and potentially even longer sales cycles, new compensation models are required to motivate your sales force. Who is going to spend months developing a client relationship to sell a one-time, 500-piece 1:1 personalization program? Manufacturers must come up with new compensation models to reward distributors and other resellers, not just for setting up accounts, but for implementing programs that grow that relationship over time.

This goes beyond annuities. According to Paul Reilly, partner in Compass Capital Partners, Ltd., a consulting firm based in Exton, PA, it means weighting the compensation structure to reward resellers for what is important to the future of the business. If you decide it's new products, then resellers should get bonuses for selling new products. If it's annuity programs, then compensation needs to be boosted for those.

If you are going to implement Web-to-print strategies through the distributor channel, make sure that you don't cut your distributors out once the deal is done. Rather, make sure that your distributors continue to get a cut of the action.

4. Learn from commercial printers.

You and your resellers will have to ramp up as quickly as possible, so don't try to reinvent the wheel. Many of these lessons have already been learned by others. This includes the commercial printing industry, where there is a long track record of successful applications, templated programs, off-the-shelf solutions, optimized software, manufacturer training, and seminars—even entire conferences—designed to help printers ramp up quickly.

While many forms manufacturers and distributors think of commercial printers as focusing primarily on output from long-run iron, this is far from being the case. More than half of commercial printers have adopted digital printing of some kind, whether color or black-and-white, and many have been refining their digital printing strategies for more than a decade.

“Many of these ‘printers' are invisible to the forms industry because they no longer look or act like printers,” says Heidi Tolliver-Nigro, a commercial printing industry analyst specializing in digital and variable data printing applications. “Applications have been developed, training programs honed, and detailed case study histories written so that, for many applications, it is all but plug and play. If forms manufacturers and distributors want to copy this success, they would be wise to learn from them.”

In addition to forms industry resources like the Document Management Industries Association, manufacturers and distributors need to take advantage of the resources like Printing Industries Association/Graphic Arts Technical Foundation (especially GATF's annual Variable Data Printing Conference), National Association of Printing Leadership, and digital printing specialty organizations like the PIA Digital Printing Council and the Print On Demand Initiative (PODi), which maintains a detailed database of case histories of the industry's “best practices” digital printing case studies. WhatTheyThink.com, a commercial printing industry information portal, regularly runs Webinars on key applications, and its sister portal, OnDemandJournal.com, is a treasure trove of articles and case studies on digital print. Those in the forms industry should also take full advantage of OEM and press manufacturer training and users groups, where they can network and learn from those who have already blazed the trail.

5. Join marketing associations.

Not only should forms manufacturers tap into the resources of the commercial printing industry, but they should tap into the resources of the end user base, as well. You won't be selling to purchasing agents anymore. You'll be selling to marketers—marketing managers, business developers, ad agencies, and other professionals whose job it is to market and sell their company's services. So learn to think like they do.

To do this, you need to read marketing publications and join marketing associations like the Direct Marketing Association. Be prepared to shift your focus from speeds and feeds to program effectiveness. Your new end user base wants to know, not how you produce the document, but how they can use these applications to make more money. Notes one manufacturer, “One of the reasons we moved into commercial printing is that we saw the results of a market research study that asked 500 businesses about their primary objectives for the following year. For the last few years, the number one answer has been ‘new customer acquisitions.'”

Thus, if you want to motivate end users to buy from you, you have to help them achieve their goals. This means the ability to talk about applications using language that resonates with them—return on investment and response rates.

While this can seem intimidating, industry insiders say that it doesn't have to be as intimidating as many think. “Right now, distributors are dealing primarily with workflow documents like integrated cards that help their customers transfer information effectively,” says one manufacturer. “They take forms and labels, combine them, and help the customer's business run better. Now, even though you are selling revenue documents, you are still dealing with the transfer of information. It's just that, instead of internal information going from the front office to the workshop, it's external information going to the end user.”

While distributors are often timid when moving in on the territory of an ad agency, afraid that they will appear unknowledgeable, agencies are on the learning curve, too, and while some leading-edge agencies understand and embrace these applications, the average agency is still on the same plane with most distributors. All distributors have to do is take the knowledge they already have—such as analyzing customer needs, putting together solutions, and handling customer databases—and apply it to marketing documents.

6. Sell programs, not print.

One of the dangers in this new environment is the temptation to avoid making these transitions entirely, thinking you can make up the volume on shorter, digitally printed runs of existing applications. But as The PERF Print Report discussed last quarter, order processing costs run into the hundreds of dollars per job (for our panel, the cost of processing an order for a unit-set form was over $500). This means that the shorter your runs, the higher the percentage of your costs order processing becomes and the less profitable the jobs become. Unless your workflow is optimized for these applications (which, in most cases, requires customers to work from templates, so that preflighting, proofing, and processing can be 100% automated), this is not a sustainable model.

Start with an analysis of your current job mix. What percentage of your jobs is currently short-run, one-off? When one manufacturer looked at all of its quotes for distributors one month, for example, it found that more than half of its digital printing orders were under $300. “I realized that we needed to sit down with the distributors and say, ‘Why are we quoting on orders this small? It's not good for us, it's not good for you, and it's not good for the end user,'” he said.

The good news is, repeat one-off jobs present a wide open opportunity to sell program applications that are profitable. There is an initial set-up cost to develop the Web interface and templates, but if done right, those costs can be quickly amortized over time. The cost savings in time, inventory reduction, and reduced or eliminated obsolescence can be huge.

7. Learn to sell on ROI, not on price.

A key aspect of this transition is learning to sell on ROI and program effectiveness, not on price. This means focusing, not on services, but on results. Bazzirk, for example, a marketing intelligence company in Austin, TX, opens the corporate section on its website by touting response rates—just under 40% (with a high of 86%) and ROI averaging over 150:1 (high of 686:1).

This is where manufacturers and distributors need to start thinking like marketers, not salesmen. For example, one distributor showed a major customer how it could save several hundred thousands per year, even if had to pay 25% more for digital print. How is this possible? Look at the end user's costs. How much do they spend each year on warehousing? Print inventory? How much of that print inventory is thrown out at the end of the year? How much time do its employees spend looking for forms or documentation they need? Reworking and redesigning forms as they change?

These are real costs. Start adding them up and the results can be stunning. Even if the customer pays more per piece, setting up a just-in-time manufacturing program can still save them big money when all of the other costs are taken into consideration.

Take the example of a small, niche publisher that used to inventory its own titles. One of its best-selling titles cost $4.25 each to print (short-run digital, warehoused) and sold for $17.00. The publisher's primary sales outlet is online retailers, which take 50% discount, which means the publisher earned $8.50 per book. After printing costs, it was earning $4.25. Each of these books required packaging $1.00, plus shipping ($1.50), plus transportation and administrative costs for handling and delivering the book to the Post Office ($.75). In the end, the publisher was earning $1.00 per book, with a lot of time and energy expended that could have been better spent on other things.

Struggling to make a profit, the publisher changed to a program print-on-demand model. The costs per book jumped to $6.50, but the printer produces each book at the time it is ordered and gangs them into longer print runs from multiple publishers. This allowed the printer to pack and ship the books just in time, at no charge to each publisher.

The result? Even though this publisher is now paying more than 50% more per book, it doubled its profit per book, with no inventory, no overhead, and no administrative expenses, and now spends its time generating other revenue.

One successful 1:1 print provider, Custom Data Imaging Corporation, has been very successful using a similar approach to sell personalized marketing documents. By encouraging its clients to market smarter—even if in smaller volumes—their revenues soar. In a Canadian direct marketing publication, it summarized this process as follows:

Say a marketer mails out 10,000 pieces to an account base, and it costs them 45 cents to produce each printed piece, plus 38 cents postage, for a total cost of $8,300.00. Being generous, we can estimate that, using this traditional approach, they might get a 2% response rate, or 200 responses. If each response generates a $400 order, the total sales from the mailing would be $80,000.

If, on the other hand, the company decides to do a more targeted mailing to the top 20% of its customer base, the equation changes. The number of printed mailers now shrinks to 2,000 at $2.35 per printed piece. Plus postage of 38 cents, this results in an overall program cost of $5,460 — nearly $3,000 less than the traditional mailing. The response rate changes, too. By targeting the mailing, we can estimate that the response rate jumps to 12% and that the increased relevance (conservatively) boosts the average sale to $600. This brings the total sales for the VDP campaign to $144,000.

8. Change who you sell to.

In addition to a change in sales technique, selling programs requires selling at a different level within the organization. Instead of dealing with the print buyer, you need to deal with the marketing or business development executive. Remember—you need to start thinking like a marketer.

9. Make a significant investment in sales collateral.

In this process, you need to make a significant investment in samples and collateral materials that will help you sell. Instead of going in with a price sheet, you need to go in with case studies, white papers, and sample programs. Because many of these buyers will also be Internet-savvy, you also need to make a significant investment in Web copy detailing your services, successes, and expertise. This often means hiring marketing or business development staffers or an outside consultant.

Pat Veverica of What's Your Plan consulting, based in Chicago, IL, for example, spends much of her time these days developing such resources, especially for manufacturers under $10 million. “Sticking with the traditional distributor channel can be a tough road, but you can do it with the correct sales tools,” she says. “What this industry hasn't done well in the past is produce marketing materials that support that support the sales force. Now, by producing these materials, this allows manufacturers to give their customers tools, so even if they don't have to fully understand what their manufacturers do, at least they are able to get these materials in the hands of their customers. This gives these distributors strong value propositions, case studies, and white papers that explain problems and solutions.”

10. Be strategic.

In this new and rapidly changing environment, the temptation can be to try to be everything to everyone. This, industry experts say, is a sure ticket to disaster. “Distributors, for example, often have such big product lines that they chase anything,” says Paul Reilly. “But to be profitable, you need to track your revenues and costs. Be strategic about your next move, not just chasing whatever seems easiest or to have the quickest payback.”

This, Reilly says, includes one of the most difficult steps many companies may have to make—turning down unprofitable business. In order to be truly marketing-oriented, he says, you need to be very focused about who you want to do business with and who you don't. If you haven't said “no” to business in the last six months, you aren't truly a marketing company.

11. Be ready to bring in new blood.

Not necessarily to replace, but to augment. Bring in some younger executives with marketing and business development backgrounds who are fluent in technology and electronic applications. Your company needs to think differently, and sometimes that requires a fresh perspective.

Making the Hard Decisions

The changes that need to take place in the manufacturing and distribution channels are not going to be easy ones. In some cases, manufacturers will be able to make the transition while using distributors primarily, if not exclusively. But in others, manufacturers will be required to add additional reseller channels, if not start selling direct (or, if they are already selling direct, allow those sales efforts to become more transparent).

These types of changes make everyone uncomfortable, and yet, the volume of “quote and sell” jobs is shrinking. Manufacturers must broaden their product mixes if they want to stay in business. Some manufacturers have already put several millions into new buildings and facilities, people, and equipment. They must recoup that investment. If distributors aren't able to help them generate the necessary revenue, they must accept that manufacturers are going to add new resellers and direct sales channels.

At the same time, distributors have to feed their families, too. It takes a long time to ramp up to this new way of selling. In the meantime, they have to continue to sell a diverse product mix, including products that have nothing to do with forms or even commercial printing. This is why a change in sales compensation models is so critical. Manufacturers must understand that distributors can't just drop everything and spend weeks developing new client relationships without sufficient compensation.

There will be a difficult time of transition, and sacrifices are going to have to be made on both sides in order to make it successful.

The Peril of Status Quo

Whether you are a distributor or manufacturer, these are transitions that will occur with or without you. Corporate and business customers are rapidly embracing this model. If manufacturers and distributors don't sell these applications, they'll lose the work to someone who does. Or the customer will simply bring these applications in-house.

This trend will only accelerate, particularly as older purchasing agents get replaced with younger, more tech-savvy people who live and die by the Internet. These individuals are used to communicating, ordering, and managing business from desktop computers, laptops, PDAs, and even cell phones. It won't take them long to figure out that they don't need or want a sales person. If distributors want to keep this business, they need to be the ones creating the value and setting up those Web interfaces. Otherwise, they will lose the business over a cup of coffee and an Internet connection.

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