INCREASE YOUR SUPPLY MARGINS Service, supply and hard-ware margins have been consistently falling for years. The emergence of managed print services has offered short-term improvement for dealers but these margins will be difficult to sustain indefinitely. A method traditional copier dealers have used to improve supply margins is to use non-OEM supplies in order to support their machines in the field (MIF). Our research indicates that 49% of dealers are using non-OEM supplies (2009 Dealer Strategies Report, Industry Analysts, Inc.) at least to some degree and as more dealers are exposed to non-OEM manufacturers through their vendor MPS programs and their own relationships, that number will rise. For years, vendors have tried to curtail the use of non-OEM supplies and parts through third party product comparisons, which often provide more questions than answers. Consider the Xerox-sponsored toner reliability test from SpencerLab, a credible third party testing organization. It’s not surprising that the report showed toner cartridges from the three non-OEM brands tested (Media Sciences, Rhinotek and Cartridge World) didn’t mea-sure up to the quality provided with the genuine Xerox cart-ridges. After all, this was a vendor-sponsored test and if the results were not in Xerox’s favor, it’s not likely that it would have ever been published. The report, which can be found at www.spencerlab.com, specifically mentioned toner leakage as a reliability issue with each of the three non-OEM brands. While this is certainly a major negative with the non-OEM products, one has to wonder why Xerox chose this model or these non-OEM brands to compare. According to Mark Solvanson of Rhinotek, their brand offers a reliability rate of 97.2% (2.8% failure rate) for Xerox-compatible products and an excellent replacement pro-gram for any product failures. In extreme cases where the toner leaks and damages the printer, an occurrence that Solvanson says is extremely rare, Rhinotek will send tech support to the customer site the next day and fix the printer at no charge. It is not likely Rhinotek would be in business for over 30 years if all of their non-genuine supplies were as bad as those documented in the Xerox-sponsored report. The toner included in that study targeted consumers in an attempt to justify why they should pay considerably more for genuine products. The results of the test may create feelings that all non-OEM products are inferior, when in fact, they’re not. Just as there are reports showing non-OEM supplies are inferior, there are also reports showing that they’re as good as genuine ones and in some cases, even better. Reports like the Xerox-funded study seem to prove that customers must be irrational to use non-OEM supplies. We find it interesting that Xerox sells their own brand of non-OEM supplies for pro-ducts from HP, Brother, etc. You can find plenty of information on Xerox branded non-OEM products at www.xerox.com. The message that customers should only use genuine supplies for my printer but it’s OK to use them for other brands doesn’t fly. In essence, you can’t have it both ways. Many dealers have under-stood this for years and as MPS continues to gain traction more dealers are finding non-OEM brands are worth using. Two key brands not included in the report we’ve discussed are LMI and Katun – two of the largest suppliers of non-OEM products to the copier dealer community. Would about 50% of dealers be using non-genuine products for all of these years if those pro-ducts were ruining the machines they’re now servicing under MPS contracts? We doubt it. The point is – there are good non-genuine products and bad ones. The only way a dealer would consider not using non-OEM supplies is if a customer specifically asks them for genuine and often they charge a premium for meeting that requirement. In many cases, the customer may not even realize that their MPS contract is being fulfilled with non-OEM supplies. As far as they’re concerned, if the printer works to their level of expectation, they’re happy. By now you get it. Even your vendors are providing you with non-OEM supplies in one respect or another in order to support competitive products in the field. They obviously work (some better than others) and their use substantially improves dealer profitability. Another way to increase supply margins is available and you may not be aware of its existence. Software that can reside on the customer’s PC cuts back on the amount of toner and ink used with each print job. Obviously, you only want to use this technology for cost per page and MPS contracts, where lower page coverage and the use of less ink/toner directly impact the profitability of the account. Understand that this is not the typical “toner-save” mode that comes standard in many print drivers. I’m talking about very sophisticated software that allows you to tweak the toner usage levels. Recently, we evaluated software that allows customers to reduce the amount of toner/ink used for printing text and graphics. Our testing showed there was “no visible difference in print quality” from the default print driver settings as compared to documents printed using this software at a setting of 35% reduction in toner. In fact, our analysis showed that the document was still nearly perfect at a savings level of 70% for text and 50% for graphics. Here are some hard numbers to think about. Five hundred pages printed on a 40-PPM laser printer using the manufacturer’s default printer driver settings used an average of 35+ grams of toner. The same print job using the toner saving software at 35% text and 35% graphics used about 26 grams, nearly one-third less toner. The same job using 70% reduction for text and 50% for graphics, which we still found to be visually acceptable, used an average of less than 12 grams of toner! Of course, some of your customers may not accept toner savings at these levels but even if it’s in the range of 15% - 20%, it doesn’t take long to realize how much your margins will increase. This software can be installed on each desktop and while it isn’t free, the payback is extremely fast. Think what reducing your CPP/MPS customer’s toner usage by 35% will do to your margins. Consider the competitive advantage you gain if you can offer genuine products at the same price as your competitors offer non-OEM supplies and what will happen when you tell your customer the difference in what you are offering compared to what they are offering. Or, if you use this software to keep your margins where they currently are, yet you drop your supply cost by 20% - 30%. No matter how you use this software, you win. Who would have thought a copier dealer can make more money by selling less toner? Feel free to contact us for the full version of this report and to find out how and where you can obtain more information about this impressive software by e-mailing us at info@industryanalysts.com. Andy Slawetsky is President of Industry Analysts, Inc., a marketing and management consulting firm for the office automation industry. Much of the company’s research and testing results can be viewed on their website www.industryanalysts.com.