Do Digital, Do This.

In Brief
If you want to do digital in a marketplace that wants it…then don't wait. Invest in people and the process and you can play and get the payback fast.

Get This Party Started
Dig into this: The digital printing market is estimated to grow to $57.6 billion by 2006, up from $36.6 billion in 2001, for U.S. production copying and digital printing. This according to Cap Ventures, a strategic consulting firm in Norwell, Massachusetts, which also says that despite the poor economy, print on demand (POD) will grow, showing double digit increases in installed base, annual impressions, total annual revenue, and retail value. And this covers the spectrum of services from simple monochrome to full-color digital printing.

Many printers arrived first in this marketplace and found that this is a different type of sale. While these same printers are way ahead of others, they are still trying to figure out the killer app. Consequently, there is still a great margin for profit and opportunity for those that are "second" in a market that is still somewhat unrefined. Think Avis Rent-A-Car. They were second and they tried harder. Opportunity knocking means applications and if you have the experience, or at least desire it and acquire it, you will be rewarded with some of the growth in this industry.

Tell You How
An investment in new equipment or greater utilization of current equipment begins the process of going digital. The most common type of digital production is black-and-white printing on a Xerox Docutech or similar offers from Heidelberg, Canon, Oce, IBM, Nipson, Delphax and others. Moving into color you will be investing in OEMs such as Heidelberg, Hewlett Packard, Kodak, Scitex, Xerox and Xeikon.

To get set up "beyond the box", a manufacturer must acquire or have access to knowledge about most of the common file preparation software packages. "Manufacturers must understand creation, verification, preflighting, proofing and correction of PDF and PostScript files for document printing," says Ivars Sarkans, industry consultant, of Sarkans & Associates in Englewood, Colorado. They must also understand how various versions of these files work with the specified output device.

Distributors and customers equally rely on the manufacturer for counsel on digital print and digital file issues. One of the biggest misperceptions of the digital world is the expectation that files will print "as is" represented on the computer screen. To the contrary. Different fonts and printers change layouts significantly when the file is transferred between computers.

Sarkans advises that a manufacturer should have at least one digital file expert on staff to handle the variety of file types and versions. Looking beyond the prepress department, customer service representatives also should be kept in the loop. CSRs should be cross-trained to understand file preflighting, file acceptance conditions and associated charges for correcting file problems. CSRs also should be familiar with the basics of common page assembly and creative services, including forms design and graphics software, and have a base knowledge of common problems encountered on output devices. "CSRs do not have to be expert users of graphic file preparation and submission software, but they do need enough knowledge to communicate with customers, designers and prepress specialists," Sarkans says.

VDP and Repeat Business
Probably the most valuable byproduct of digital printing is the growing demand for variable data printing (VDP) in both the monochrome and color categories. The F.P. Horak Company, a $20 million print company located in Bay City, Michigan, made its investment in digital printing in 1995 and has seen significant growth in VDP, generating more than eight million mail pieces per year for customers in diverse markets. F.P. Horak, a traditional forms printer in business since 1946 has built a model that other forms printers should take a look at. Many jobs produced at F.P. Horak involve printing the forms (a.k.a. "transactional documents") and filling them in with VDP.

With VDP, there is even greater emphasis on programming since these jobs lend themselves to tens or hundreds of thousands of possible versions, according to Jeremy Morford, Digital Solutions Manager, at F.P. Horak. "Programmers are needed to set up and ‘own’ the job to make sure it is programmed, printed and mailed correctly–with 100% accuracy, every time," says Morford.

F.P. Horak built a high-tech digital imaging center.

Most companies involved in VDP use off-the-shelf programs that work with Quark Xpress or Acrobat files-both favorites in the creative services environment. F.P. Horak has progressed further into the database management side by acquiring a programming language called Delphi (offered by Borland, the manufacturer of dBase and other programs).

Delphi is used to maintain databases and control all logic. Delphi outputs a Postscript file, which has to be written line by line, and describes page layout for text, graphics, paper stocks, and other specifications. "By going so deep into programming, we have extended capabilities into personalized fax, email, dynamic Web sites, and of course personalized print jobs," Morford adds.
Morford says that without Delphi, many high-value jobs would not be possible or would require much more time in development.

Print jobs with the highest value and the highest growth in the digital segment are full-color, individualized one-to-one business documents and marketing and sales support materials, according to Sarkans. The value, however, lies in program sales. "Unlike conventional offset production, much of digital printing is generally not profitable on a job-by-job basis. Digital printing tends to be profitable only when sold on a program basis, with a steady flow of similar orders over a sustained period of time," says Sarkans.

Morford and most manufacturers who are "doing digital" agree. "The nature of digital printing is to increase the number of jobs," says Morford. For example, F.P. Horak produces on a cyclical basis a health benefit book for one large customer, and it is personalized for each employee each print run. Other applications fit nicely into a "repeat" model. Product manuals are the "perfect job" according to Morford, because they are easy to print and represent large volume over time. F.P. Horak’s other niches include personalized tax forms for state and local governments, digitally printed forms for local hospitals, and e-commerce driven printing such as business cards, letterhead and memo pads.

Out-of-the-Box Thinking
The measure of one’s success in digital printing directly relates to a radical shift in thinking from the traditional view. SourceLink is a $140 million company in Andover, Massachusetts, that is entrenched in the direct marketing segment of the digital printing industry. Internally they use a wide variety of variable data (mostly color) equipment and software to offer a comprehensive range of solutions to clients.

Since they consider themselves application specialists, SourceLink’s vice president of business development, Jim Hackett, prefers not to specify in this article their use of certain OEMs. He says they are constantly looking at new equipment. And, he emphasizes, the customer doesn’t care about the product so much as the business problem it can solve. Key point when it comes to new thinking.

Hackett provides a prime example of reinventing a business model to create a new and very different revenue stream for one project: When called to a bidder’s conference to answer an RFP for automobile registration renewals from the state of New Mexico, Hackett wrestled with ways to differentiate SourceLink. "I don’t want to be in the business of competing on a cost-per-thousand basis," he says. He thought there must be a way to give the state of New Mexico what they want and more.

He approached a worthy competitor for this same job and turned them into a partner. Together the two companies gave-yes gave-the state of New Mexico the low, low price of printing the job for nothing. Free. This application was to be printed and mailed weekly and the two companies saw an opportunity for adding advertising as a solution. They "sold" the idea to automotive-related companies such as Ford, Geico, and some local repair and service providers. The job is paid for by these supporters who do targeted marketing-and gain a new revenue stream-from the recipients of the "base" renewals. In this case, the printed thumbnail-sized advertisements appear on the margins of the transactional documents sent to residents.

Replicate and Re-create
Hackett says a project like this was not possible before because of production restrictions and old-line thinking in the traditional print world. This business model change in the digital realm won the partnering relationship more opportunities in other states across the U.S.

Similar applications exist such as the home-moving packages that SourceLink produces for the United States Post Office, and the customer statements that are generated by an airline’s frequent flyer program. In both cases, these print and mail jobs include four-color variable data printed advertising targeted to the preferences, demographics, and region of the recipient. The USPS moving packages might include a coupon from the local Home Depot, for instance, and the frequent flyer program might include relevant advertising from Citicorp, Hertz and MCI. As incentives to these advertisers, SourceLink has changed the chargeback model from a flat fee to a more measurable, per-person touched basis.

Hackett distinguishes SourceLink’s position as delivering on a strategy, versus delivering a tactic or product. Being on the high end of direct marketing, this strategy naturally ties to business generation for both the client and any supporting partners. SourceLink carries its image to the front line of sales, as each individual business card reads "business generation specialist" rather than "account manager."

"This kind of positioning begins the consultative relationship automatically," says Hackett. "We are not just in business for ourselves; we are in business for our clients."

A Different Selling Approach
Of course, "doing digital" requires much more than buying a box and thinking outside of it. Distributors need to take advantage of all the training and partnering opportunities being offered by manufacturers. Digital/VDP print sales are unlike forms and commercial print sales. The customer needs lots of handholding, and that is where the manufacturer’s support is critical. Once the distributor and manufacturer learn how to success at this type of sale, they can make the partnership prosper.

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