Is Print Really a Commodity?Posted by Richard Dannenberg on Dec 4, 2013 in Print Marketing | Comments Off on Is Print Really a Commodity?
I had a conversation about marketing yesterday with the owner of a large, regional printing operation. We covered a lot of territory, including some mutual commiseration regarding difficult market conditions. During the course of the conversation, the owner commented a few times about print’s status as a “commodity.” I’ve been thinking about that term this morning, and decided that the question is worth digging into. So, here goes . . . is print really a commodity?
What’s the definition of commodity?
Let’s consider the definition. Webster’s basic definition is simple:
- Something that is bought and sold
- Something or someone that is useful or valued
Well and good, but it doesn’t shed much light on the question. Webster also provides a more detailed definition:
- A good or service whose wide availability typically leads to smaller profit margins and diminishes the importance of factors (as brand name) other than price.
Yep, that rings true, especially in the last few years. Wikipedia adds another curious word to the explanation, fungibility, stating that the term commodity is applied to goods meeting the following qualification:
It is used to describe a class of goods for which there is demand, but which is supplied without qualitative differentiation across a market. A commodity has full or partial fungibility; that is, the market treats its instances as equivalent or nearly so with no regard to who produced them.
Fungibility denotes that a unit of a particular product can be substituted for any other unit of the same product. If we’re considering individual printed pieces in a run, fungibility could be a good characteristic to have, provided that the quality is satisfactory to the customer. It’s in the case of the broader definition that we run into trouble. If print were truly a commodity, then it could be assumed that the product from any one provider would be exactly like that of any other provider.
Even if you accept the assumption that the overall quality of print has increased as weaker players washed out of the market, there are still variations in quality that are produced by any number of workflow variables from prepress to bindery. Strictly speaking, print isn’t fungible – the same product printed at multiple plants will vary depending on the capabilities of each producer.
The commodity argument also neglects some other important considerations, namely the other attributes that surround the product. Early in my career, I worked with a very good company whose primary product line was treated lumber. We purchased Southern Pine lumber from multiple suppliers by grade. While there were subtle differences in quality, it was very difficult to tell the difference between a #2 grade 2 x 4 from Louisiana Pacific and one from Union Camp. And unless one of the lumber graders was working with a hangover, the consistency of product was very high. My company was essentially a processor . . . we added preservatives to the product and resold it in the commodity market, which dictated the price of each size and length based on supply and demand. When demand was high or supply short, prices went up. Low demand or oversupply sent prices downward.
My company sold our products at a consistent premium to the commodity market price. How could we do this? We differentiated other aspects of the product, the way we handled it, and the way we interacted with our customers. Our package sizes were small, allowing more variety on a truck, we added incremental improvements to the processing system to keep the lumber clean and bright, and we used predictive inventory modeling to assure consistent supply for key customers during times of peak demand. Finally, we helped our customers market decks, not pieces of lumber, and showed them how to increase their margins by selling the finished product.
Can printing companies differentiate?
Let’s talk in plain language. It’s in the customer’s advantage to seek to “commoditize” print. It helps to drive the prices down. Conversely, it’s to the printer’s advantage if he can differentiate his product or the attributes that surround it.
If differentiation works for a lumber company, it can certainly work for a printing company where operations and products should be the polar opposite of a fungible commodity. After all, each print project is a custom work for a specific customer and targeted to a particular application or market. Print is specialized by nature. Sure, decreasing demand has produced price pressure and increased competition, but the economic consequences of the supply and demand curves really don’t make the product a commodity.
What does it take?
Some effort. First, it’s necessary to take a good look at your customers and prospects. In the lumber business, it was easy to sell to 84 Lumber. They bought purely on price – if you could offer the lowest price, they’d be your customer and if you were the low cost provider, you might come out with a very small profit after the transaction. The same class of customer exists in the markets for print. If your company isn’t a low-cost producer, these potential customers should be ignored. Even if you are cost-efficient, other customers may provide more profitable opportunities.
Next, discover the hot buttons. What is it that you are able to provide to solve a problem for a customer or for several? Where are your customers’ points of pain? Can you help with salve and a bandaid? Don’t assume that you know what your prospects and customers want and need. Ask them. If you’re able to provide a simple solution to a problem that they think is complex, you’ve just differentiated your company.
Get into the details and provide information. This doesn’t mean sending in an overly talkative salesperson to “educate” the client. Customers today are appreciative of information that they can find on their own and use. This may take the shape of a print newsletter, a blog, case studies or “how-to” pages on your website. Does this mean that you’ll get the next order? Not necessarily, but a concentrated effort to provide helpful information may get you an opportunity.
Finally, focus on niches that may be more difficult to commoditize. Whether it’s a vertical market segment or a specific product, if you are seen as a provider of both specialized product and expertise, you’re more likely to get and keep customers based on attributes that are perceived to be valuable.
What about the relationship?
What about it? If anything can be learned from the economic changes of the past five years, it’s that relationships were the real commodities, substituted according to convenience. For the most part, pragmatism superseded loyalty after the recession. Today’s buyer doesn’t depend on a salesperson for information. While the statement may be upsetting to some, it’s evident that conventional sales relationships are fading fast. Trust for the company and the brand continues to be important and guidance through the transaction will continue to be a valued attribute that a salesperson can provide, but the weekly golf match is a thing of the past.
Today’s customers look for value, but purchases are not always purely price driven. By emphasizing the value of attributes that surround the products they sell, printers can differentiate their operations and move away from commoditized competition.
The Last Part
DP Marketing Services provides marketing services and support for printing companies. Part of our mission is to help our customers plan their marketing program and execute it with consistency. We hope you’ll take a look at our website while you’re here. If you’d like to talk about your business, we’d be most happy to get in touch. The first consultation is absolutely free and there’s no pressure. You can contact Richard Dannenberg by phone at 478-719-4029, by email at firstname.lastname@example.org, or you can click the button to fill out a contact form here on the website.
Photo attribution: Jeff Haynes, Chicago Mercantile Exchange photo