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VERTICAL MARKETS
Update on Vertical Markets
BY MINDA MORGANFORM, April 1991
They say it's part dream come true, part smart selling strategy, part luck, part WORK. But whatever it is, more and more distributors are pursuing vertical markets.
Last year, FORM brought you the first vertical market report. We've updated the report to let you know what's going on this year in the top vertical markets—health care, insurance, financial, government and education.
Health Care
David Santangelo, president of Fleet Data Forms Inc., a Deerfield Beach, Fla., distributorship, sells almost exclusively to medical and dental offices. He entered the market more than four years ago when a software company, owned by his now-partner, Gary Kurstin, began selling software to the health care market. Santangelo began designing software-compatible forms and has pursued the market successfully since.
But Fleet does not rely on its software connection alone to penetrate the market. Since physicians' and dentists' offices tend to be scattered, Santangelo uses direct mail and telemarketing with personal sales calls only to offices in nearby counties.
Gary Frank, president of Accounting Systems Inc., a Hialeah, Fla., distributorship, also specializes in selling to medical and dental offices. He says it's important to understand the needs and problems of each specialty. "To sell to the healing arts you must understand that each specialty is like a separate business," he says. "Systems must be tailored to suit the needs and problems of individual specialties."
Ray McCabe, vice president of Med-Forms Inc., a Peoria, Ill.,-based distributorship, also entered the health care market through a connection with a software company. Now hospitals make up 85-95 percent of his firm's business.
The Market:
The demand for health care is expected to grow steadily for the next 20-30 years as baby boomers age. However, the health care system is plagued with soaring costs, financial troubles and changing insurance requirements. Many health care providers struggle to pay their bills, making price an important issue in nearly every purchase.
Sales Tips: 
Learn about the hospital's forms needs. Stress service, availability, on-time delivery and quick turnaround. Be persistent. It sometimes takes time for hospitals to become disenchanted with their buying groups. Treat each practice like a business. Get to know the needs and variations of each. To get lower prices, many hospitals join buying groups, which promise lower prices and may offer refunds at the end of a year. They may be based locally, in regional associations or chapters of the Volunteer Hospital Association, and usually charge a membership fee. Non-independents often have contracts with these groups.
Although buying groups sometimes provide lower prices, prices usually are based on volume orders, forcing hospitals in the group to order forms at the same time or risk running out while waiting for the next reorder opportunity. Hospitals may not be able to buy forms when needed or may need to warehouse their own forms to avoid running out. This erratic service leads many hospitals to seek independent sources that provide service, quality, quick delivery, forms management and warehousing.
Service is extremely important to hospitals and necessary to beat buying groups, says McCabe. Many hospitals want forms delivered straight to nurses' stations and others desire pick and pack or forms management with regular weekly or biweekly deliveries.
The biggest changes in the hospital industry come from new legislation and changes in insurance requirements. Because these revisions may necessitate frequent changes to forms, hospitals may prefer to order small quantities, which may be impossible to do with buying groups.
Service also is extremely important in offices and smaller facilities. "We can get an order for a form one day and ship it the next," says Santangelo, emphasizing his company's services. Fleet designed a customized Medicare form and envelope for doctors' offices when Medicare changed form requirements. "(Physicians' offices) were addressing envelopes by hand, since the new, longer form no longer fit in a #10 envelope," he says. "So we designed the form to run through their computer printer and custom designed window envelopes large enough to hold it."
Knowledge about changes in the insurance industry and new technology is important for distributors serving the health care market. Buyers at some small medical and dental offices depend on Santangelo to keep them up to date and to adjust their forms to comply with changing regulations. McCabe says hospitals are switching to laser printers and cut sheet forms, bar codes and value-added items such as label/form combinations.
Despite constant changes, the health care industry has one big advantage: it is fairly recession-proof. People need medical services regardless of the economy, says Santangelo.
Sell To:
Hospitals, psychiatric centers, rehabilitation hospitals, blood banks, dependency treatment centers, dentists' offices, doctors' offices, health maintenance organizations, laboratories, nursing homes and urgent care facilities.Forms Needs:
Forms needs vary greatly based on the size and type of health care provider. A health care facility may use from 10 to 500 different products. Possible forms include: labels for specimens, admitting records, bar coded labels and products (to identify patients, drugs and equipment), bills, payroll checks, in-patient forms, out-patient forms, statements, health brochures, lab test forms, label/form combinations, letterhead, narcotic control forms, one-write systems, patients' charts, superbills given at time of service, tags and 4-color promotional work.Talk To:
Hospitals—Start with the materials manager or purchasing agent before visiting individual departments. Talk to the public relations department about brochures and promotional work.Small medical practices—Talk to office managers, bookkeepers, doctors or dentists.
For More Information:
To keep up to date on health insurance changes, contact major carriers and ask to be put on their mailing list.
Insurance
Ben Tumolo, CFC, of General Business Systems, a Huntingdon Valley, Pa., distributorship, entered the insurance market when a software company began recommending his software-compatible forms.
Though the original software company is not out of the market, computer service and software companies continue to recommend Tumolo. "Insurance companies were looking for a local forms source with good service and delivery," says Tumolo. "We fit the bill."
One computer company even provides forms order kits—one from General Business Systems and one from a non-independent—with every purchase. Although Tumolo says it's difficult to gauge how many clients have selected his company over the non-independent, he receives a lot of business from the promotion.
"(The insurance industry) offers substantial business," says Tumolo. Once his company has the software-compatible forms business, it can penetrate accounts easily to supply continuous and cut sheet letterhead, brochures and other printed products.
The Market:
The insurance industry is volatile and rife with ever-changing regulations and mergers and acquisitions. Keeping up with federal and state regulations challenges distributors who pursue this market. Further, increasing repair, replacement and medical costs are driving some insurance companies out of business, making credit checks more important.
Sales Tips: Know what kind of software and hardware a company uses. Learn state and federal regulations and how they affect forms. Ask for an explanation of every procedure, from application to claim filing to payment to billing. Look for ways to reduce processing time. Insurance companies appreciate telephone or mail re-order services, says Tumolo. Despite potential problems, Tumolo says the insurance industry is a fairly stable one, particularly during a recession. "It is a volatile industry, but we've had few credit problems," says Tumolo. "And although insurance companies tend to grow through mergers and acquisitions, they usually tend to keep the same suppliers."
One of the biggest threats to the insurance market is the emergence of electronic forms, says Tumolo. Many large insurance companies are actively investigating paper reduction with these systems. "Insurance companies have wanted to reduce paperwork for a long time," says Tumolo, "but they will never be able to totally do away with forms."
Sell To:
Insurance agencies of all sizes. Insurance companies may provide many types of coverage or specialize in health, car, home owner's or other types of insurance. Although larger companies may have their own print shops, few design their own forms or produce multicolor work.Forms Needs:
Include applications, promotional brochures, cancellation forms, checks, claim forms, collection notices, commission statements, group claim cards (paper or plastic), input documents for computer systems, invoices, invoice request forms, continuous and cut sheet letterhead, mailers (for premium notices or promotional campaigns), membership cards (paper or plastic), premium notices, reinstatement notices and statements.Talk To:
Large insurance companies: purchasing agents or data processing managers. Smaller companies: office managers or principals.Many software companies offer software exclusively for insurance agencies. Talk to the marketing director or business manager about form specifications for the software and ask them to recommend your company.
For More Information:
Contact major insurance carriers and local insurance associations and ask to be put on their mailing list to get more information on the industry.
Financial
David Gaffey, owner of Gaffey & Associates, a Holt, Mich., distributorship, sold printed and specialty products to banks before he entered the forms industry. His banking contacts and knowledge of bank operations helped him penetrate the market.
Linda Pfeifle, owner of Professional Data Forms & Supplies, an El Paso, Texas, distributorship, previously worked for a credit union for five years. Now, she sells to credit unions. She says credit unions are good, profitable clients. Credit unions' non-profit status and few regulations (compared to banks and savings and loans) make them more popular with consumers today. Also, credit unions cannot make commercial loans, says Pfeifle, protecting them from some of the problems plaguing other financial institutions.
Both Gaffey and Pfeifle's past experience helped them win confidence—and accounts—in the "good, steady" financial market.
The Market:
The recent savings and loan scandals, increasing numbers of commercial loan defaults, layoffs, decreases in loan activity and economic uncertainty have tarnished the image of the financial industry. Yet distributors say the market, traditionally competitive and demanding, is still a safe, steady one to enter in most regions.
Sales Tips: Use a bank directory, available in most libraries, to find prospects and names of key personnel. Learn about new technologies; changing technology may make current systems inefficient. Keep up with changing regulations and the effects on forms design or usage. Sell to the strong, independently owned financial institutions and offer them lower prices if they order together. Gaffey has formed a coalition of independently owned banks, which receive lower prices from gang orders. Work with lawyers on loan applications. Banks may refer you to their legal department. Watch for tax changes; they may affect how people bank. Contact software companies serving the financial industry for software-compatible form specifications. "Banks are now tighter and perhaps more paranoid about their operations," says Gaffey. "But the business is steady and credit is generally not a problem." Banks traditionally pay quickly and tend to be loyal, high-volume users of forms, says distributors.
However, as in other industries, technology is having a major impact. Technologies like electronic funds transfer and electronic loan machines are reducing the need for multipart forms. Forms are moving to 1-part continuous and cut sheets, says Gaffey. Also, more financial institutions than ever control buying activities from a central, corporate structure. As a result, they need forms management systems, says Gaffey.
Sell To:
Banks, savings and loans, credit unions, brokerage firms, title companies and service bureaus.Forms Needs:
Forms needs vary depending on the size and type of financial institution. It is not unusual to supply 300-400 separate items, say distributors. Printed products may include: ATM products, advertising specialties, batch headers for grouping MICR documents, cash in/cash out slips for tellers, certificates of deposit, checks, continuous paper membership cards (for credit unions), credit card applications, credit card statements, demand deposit account (DDA, commonly called a checking account) slips, deposit slips, envelopes of all types, internal processing forms (batch header tickets, coin wrappers, bill straps, loan applications, money bags), notices of adverse action (which are used to explain why loans were not granted), payment books, payment coupons, payment due notices, promissory notes, promotional brochures describing services, signature cards and withdrawal slips.Talk to:
Small financial institutions: vice presidents in charge of marketing or operations, head cashiers or proof department managers.Large financial institutions: may have centralized purchasing departments, which distributors should contact first. Distributors also may need to talk to marketing managers, ATM coordinators, data processing managers, operations officers and loan officers.
For More Information:
Contact the Federal Reserve Board nearest you, state banking organizations, national credit union publications or a local Credit Union National Association (CUNA) chapter for information on the industry and changing regulations. Check the phone book under government, banking or finance for the numbers in your area.
Education
In the past, the education market has been unpredictable. While some school districts and universities user the newest, most efficient printed products, many lag behind with hand-written report cards and mimeographed mailings. However, all that could change, now that the nation's attention has turned toward education.
President Bush has proclaimed himself the "education president" and announced, with the governors of all 50 states, that education will be a priority. This—if it takes hold—could lead to opportunities for distributors.
The Market:
The education market can be divided into two major categories: colleges and universities and elementary and secondary schools. Both categories are generally considered cost-conscious but stable, even in an uncertain economy. Budget crunches in some states mean budget cuts for education, making buyers in some areas cost-sensitive.
Sales Tips: Emphasize service, service, service. Make sure you understand the processing equipment—from typewriters to computer systems. Tone down the sales pitch for smaller schools. Buyers there are educators first and may not be comfortable with a high-powered pitch. Colleges and universities are notoriously price conscious. However, increasing competition for both students and financial contributions encourages spending for glossy, promotional materials. Larger schools often have in-house print shops and may produce forms. Few, however, have the capability to produce promotional materials.
Public elementary and secondary schools tend to have centralized purchasing and distribution of forms, although the system may vary form district to district. Private schools may order in smaller quantities and use simpler forms that often are processed on a personal computer printer.
Forms needs for both categories tend to be cyclical, and large, seasonal purchases with few reorders in the same year are not uncommon, says distributors. Also, some schools are slow-payers and may try to force distributors to wait until the next fiscal year—in the fall—to collect payment.
Sell To:
Colleges (2- and 4-year) and universities, public, private and parochial elementary and secondary schools, continuing education programs, often offered through libraries, museums, non-profit organizations or colleges.Forms Needs:
Forms needs will vary from state to state, county to county and sometimes school to school, even in the same town. Forms for the education market include: accident reports, attendance forms, cafeteria forms, computer forms, computer paper, demerit slips, detention slips, financial aid forms, ID cards, labels (for file folders, cubbies, locker combinations, registration forms), mailers (for report cards, statements, overdue library books, donations), newsletters, parking tickets, payroll checks, promotional printing, OCR documents, planning forms, sports guides and registration forms.Talk To:
Colleges and universities: purchasing directors, department heads, registrar's office, admissions office, computer center, library and administration officials. State institutions may have a bid system. If so, contact the purchasing director at the university or the state for purchasing guidelines.Public elementary and secondary schools: purchasing agents, business managers or data processing managers for a school district. At private schools, distributors should talk to the principal or business manager.
For More Information:
Contact your local school board, college or university for purchasing guidelines.
Government
Government agencies are notoriously slow payers. Distributors must cut through layers of red tape and competitive bid processes to get the accounts. But a new federal program, as outlined in President Bush's State of the Union Address, may change all that. In his address, President Bush outlined a plan to turn approximately 50 federal programs over to the states to administrate. The federal government would still fund the programs, which could help speed payment for forms and may give distributors the opportunity to bid on more forms at a state level.
The Market:
From the local to the federal level, governments are famous for forms usage. Virtually every department in local, city and state governments uses many types of forms.Bill Governor, president of P & W Marketing in Youngstown, Ohio, sells forms to local county governments. Although he has heard that the government pays slowly, he hasn't found that to be true. "I just let them know I run a small local business and need the payment," he says.
Sales Tips: Government offices may give preferential treatment to minority-owned or woman-owned businesses. They may require documentation of ownership. Government offices may prefer recycled paper products, even if they cost more. Price preference laws dictate how much more a jurisdiction may pay within a given percentage. Ask for information on regulations and specs on recycled content. Some areas require products be printed in the state. Be prepared to wait. It may take a month or longer to receive notification of an order or payment for completed order. Try to work out payment terms before the order is printed if the agency is a notorious slow-payer. Also, on the local level, government agencies don't necessarily bid out business. They bid only if an order is above a certain dollar limit, says Governor. Larger towns, cities or state governments may, however.
But whether the government is bidding out or just placing orders, it can help to be a small, local business. "Local governments try to favor local businesses," says Governor. Also, many state, city and local governments have preference programs for small companies, local businesses, minority-owned businesses or woman-owned businesses. They also may have preference programs for recycled paper products.
Sell To:
Every office, bureau or department of local, city, county or state government is a potential customer. Police departments, bureaus of motor vehicles, libraries, museums, treasurers' offices, auditors' offices, utilities and departments of taxation are among the most popular.On the state level, individual state senators' and legislators' offices; governors or appointed officials may order their own forms, letterhead and envelopes. Also, local political parties may need forms or promotional printing.
Forms Needs:
Government agencies use almost every conceivable type of form. Some of the most common include: snapout and flat forms, continuous forms, mailers, stock paper, payroll checks, accounts payable checks, mailers for billing, decals, tags, labels, letterhead, envelopes, plastic ID cards, police reports, utility bills, traffic/parking tickets (may be mailers), software compatible forms and commercial/promotional printing including leaflets, pamphlets and direct mail packages.Talk To:
Most orders are awarded by bid. In large cities or state offices, bids must go through the purchasing department. Talk to department heads first to learn needs. In small cities or town halls, call on purchasing agents, town clerks, head of departments or service bureaus that process forms.For More Information:
Call the management, planning or budget office for state, city and county governments to obtain bid procedures and qualifications for preferential status.