In the last month’s article, I spoke about the opportunities in the A4 space and how many dealers have thrown in the towel on MPS. In this article, I will address the common MPS mistakes and how to avoid them.
The first mistake companies make when selling MPS is selling a blanket cost savings. If your goal is going to be to put printers under contract and do it for less than the prospect is currently spending, there is a high probability that you will fit into the “can’t make money in MPS” camp I referenced in the first half of this article. With the correct approach and environment you can save a company money but it isn’t by taking the 12 printers they buy toner and service for on a transactional basis and putting those devices under a contract.
The Customer Segments
When you look at A4 placements you ‘ll find single function printers (SFP) and multifunction printers (MFP) in single placement dental offices through thousands of the devices in a large enterprise account. Although the actual device may be the same, the sales approach is not. The sales approach is the first mistake that has been and continues to be made by companies with a copier heritage.
Small customers, those with fewer than 25 devices, do not experience a lot of pain with their printers. Let’s face it, printers are highly reliable so a company with 10 or 12 printers simply goes about their daily printing without any involvement with the printer other than picking up their prints and changing the occasional cartridge. This is usually not the optimal print environment to put under a managed program due to the fact that there isn’t a lot of motivation for the customer to change their current approach. Your sales department can go in and “save them 30%,” but given the long-term competitiveness of the office supply industry (the type of company they are probably buying their cartridges from) and cartridges in general, you may actually be selling below cost when you cut their price by 30%. Moreover, the customer will see very little value in the arrangement and when the contract expires you may find yourself losing your account to a competitor that is willing to sell the same arrangement for less than you.
With these small environments you can save the customer money but that savings should be driven by a balanced deployment. Let’s stick with the 12-printer example and assume they have three copiers as well. Let’s further assume that through a thorough discovery you were able to identify two legacy paper processes that the company moved to digital in the last two years, cutting 20% of their paper usage. After highlighting the reduction in paper to the CFO of this company you suggest an assessment to determine if the current print infrastructure matches the current use of paper. At the end of that assessment you determine that the customer actually needs one copier, two A4 MFPs in areas where they need scanning but don’t use finishing or print in A3, and six A4 SFPs, reducing their devices from 15 to nine. They have two fairly new high volume SFPs in their fleet so you keep those in place and sell them seven new devices, putting the entire solution on a five-year lease. Since you reduced their fleet by 40% they’d certainly expect to pay less and given the fleet reduction you should have no issue making very high gross margin while reducing their cost.
Note that the solution was sold on a five-year lease so there is no need for quarterly business reviews; it’s just like today’s “copier sale.” In fact, every single account with fewer than 25 devices should be approached this way. No sales specialist needed; simply go sell. The key is the discovery meeting—identifying changes in the processes that would logically suggest to the decision maker that they probably have too many devices—and the assessment. The decision maker for this sales is always the business owner or CFO; it is a financial sale. Keep the assessment simple—there is no reason why you can’t complete this assessment in 90 minutes without ever having to install software or return for second readings.
The second customer segment is those companies with 75 – 500 printers, major accounts. These companies are where your MPS efforts should be focused. The IT department handles the printers in these larger organizations and they do not relish that responsibility.
With 200 printers a company has approximately 150 service incidents a year, or 12+ per month. The devices are a nuisance for IT support and they would rather not deal with them. The great aspect about this is that IT is also very accustomed to outsourcing so MPS is a very comfortable approach for this group. Although everybody likes saving money—you always ask in some form or another if you can get a discount when you buy something, don’t you—this outsourced decision isn’t made on saving money (In your own experience if what you are buying is a benefit or a desire you still buy it even though there is no discount, correct). IT wants to ensure you will provide at least the same level of service the users currently get from their team without it costing them any more than they are currently spending. They want those 12+ hours per month back so that they can use them on more important projects but they don’t want to hear any complaints from the print users about the new vendor.
The third segment is enterprise accounts, those with 500+ printers. Although you use the same approach as you do in major accounts, the complexity with these accounts are usually multiple locations so service becomes more difficult. Although the major players in the MPS space routinely work with this segment, I’d suggest you get comfortable with major accounts before tackling enterprise accounts.
Other Common Mistakes
The second mistake made with MPS is the wrong contact level. In small to midsize companies the decision maker is the owner or CFO. In major accounts the decision maker is the director of IT, VP of IT, or CIO. It is a mistake to target IT in small companies and a mistake in large companies to go below the director of IT—to a manager or help desk employee, the purchasing team, or in most cases finance. If you think back to the customer segments, the small to medium sized business makes a financial and cultural decision based on business process change, hence the owner or CFO, and in large companies the decision is made to outsource based on quality of deliverables, hence the department currently providing the support, IT, and at a level that understands budgets as well as workload, hence at least the director level.
The third mistake made is in the assessment. For small accounts you want to make the assessment as quick and painless as possible. You don’t need software for this assessment nor do you need to get print volumes over any period. Simply print out a configuration sheet and calculate out the average monthly volume over the life of the SFP or MFP. The copier volume should be easily attainable from their invoices. With larger companies you do need to install software and conduct a walk through to get volumes from printers not identified with the software. Finally, as part of the assessment you need to understand what the company is currently spending per SKU for the cartridges. Do not take shortcuts with pricing.
Once you have the major account customer under contract the biggest profit leak is the quantity of cartridges you ship. Service only represents 35% of the revenue and cost; the risk is in the cartridges and you need a program in place that ensures, and validates, that you are not over shipping cartridges.
Finally, you need to conduct quarterly business reviews with a focus on refreshing the older devices throughout the agreement.
If you call on the correct person given the customer segment, use the correct value proposition for that segment, ensure you capture the correct cost to justify your solution, and manage the cartridges, MPS will provide you with excellent revenue and profit opportunities.
