Eyes Wide Open
The big wheel of business has turned a million times over since Johannes Gutenberg spearheaded the printing movement. Many recognized opportunity and seized it. Demand increased, profits soared and companies expanded. Then, a crippling recession happened, leaving behind a paper trail of red ink, closures and bankruptcies.
So, what happens next? It's a complicated question with no simple answer. "We continue to struggle with a painfully slow, maddening[ly] inconsistent recovery from our worst recession on record," observed Andrew D. Paparozzi, chief economist of the National Association for Printing Leadership (NAPL), East Rutherford, N.J. "Business picks up, only to slow right back down. Even companies that are growing aren't sure what to expect next."
He used last year's numbers as an example. According to Paparozzi, sales from all sources (not just print) rose 0.6 percent—the first increase in nearly five years. "Sales firmed as the year progressed, growing by 1.3 percent during the fourth quarter," he noted. "And confidence is gradually returning: 27.3 percent of NAPL State of the Industry participants now expect business to improve during the six months ahead, up from 24.0 percent last fall and 19.1 percent last summer."
Still, Paparozzi noted, with total industry sales down more than 20 percent from pre-recession (i.e., 2007) levels, recovery isn't going to happen overnight. As for the economy, current Blue Chip Economic Indicators estimate that Gross Domestic Product (GDP) will grow just 1.9 percent in 2013, a slight improvement over 2011's 1.8 percent growth, though short of the 2.2 percent growth in 2012. (The Blue Chip consensus is hopeful for 2014, forecasting the GDP to grow by nearly 3.0 percent.)
Dr. Ronnie H. Davis, senior vice president and chief economist at Printing Industries of America (PIA) in Sewickley, Pa., maintained a cautiously optimistic attitude. "In general, the industry is doing OK—certainly not great, but it could be much worse," he said.
Davis continued, "The future of print is one of great opportunity, but also significant challenge. Our long-run projections indicate that the total print market space will likely remain fairly stable or decline slightly over the next 10 years. However, this space will remain large with an economic footprint encapsulating around $150 billion in annual shipments and some 40,000 or so establishments."
Both men pointed to several bright spots. "Print logistics (packaging and labels/wrappers) continue to hold up well and are not threatened by digital communication. I also believe that direct marketing will continue to be a viable force given its record of delivering results," Davis remarked. "Greeting cards also appear to be doing OK, perhaps as consumers want to send a tangible message rather than a digital one."
Paparozzi agreed, expanding on the effectiveness of highly personalized, targeted direct-mail campaigns. "These include advanced variable-data digital, PURLs, QR codes, etc., that make the campaign very relevant and compelling to the target audience—it's not 'junk mail' anymore–and responding to the campaign very easy," he explained.
In addition, Paparozzi referenced a recent NAPL State of the Industry Report where participants cited their top three areas of anticipated growth: digital color, variable data digital color and wide-format color. Paparozzi also was encouraged by the diversity of responses that included web-to-print, signage, fulfillment, 1:1/cross-media marketing, database management, Web page creation/hosting and video for the Web.
In a constantly evolving industry, it is nearly impossible to identify long-term trends with confidence. But one thing is certain: With economists foreseeing protracted recovery, it's no longer enough to simply reinvent traditional printing methods. Those best positioned to succeed in the future are spending their creative energy in different ways.
"We are in the communications business, not the ink- or toner-on-paper business. So anything that affects how people communicate affects us," Paparozzi commented.
Distributors and suppliers across the board now face the same reality: Are they understanding and meeting clients' communication goals? Read on to see how specific market niches can create timely, relevant and engaging ways to boost ROI.
ON PRINTED FORMS
Celebrating its 100th anniversary as a family-owned business, The Flesh Company, headquartered in St. Louis, is all too familiar with change. "Over [that 100-year span], we've seen printing change from letterpress to offset and flexographic. We've seen prepress change from hot type to cold type to digital. We've seen business forms such as travel itineraries and checks decline or go away completely," said Roger D. Buck, marketing director/new product development.
It's no secret that the forms market has taken some punches over the years. According to Buck, several variables are at work. First, there's the economy. When sales are down, clients use less work orders, bills of lading, labels, statements and invoices for billing.
Technology is another cause for reduction. Take checks, for instance. Direct deposit replaced payroll checks, and shortly after, the printed direct deposit form disappeared. "Once a company moves to electronic cash management, then other documents such as printed invoices, statements and AP checks are eliminated," Buck said. "Manufacturing operations looking for lean manufacturing methods are looking at production tracking systems that rely on bar code scanning and electronic movement of the production order. This can eliminate printed piece tickets, work orders and quality defect documentation."
Furthermore, large cities have migrated toward electronic traffic citations. Hotel chains email check-out statements to guests. And some companies prefer to email PDFs of business printed collaterals. While change is unavoidable, it can be managed. "Some business forms are doomed to become extinct. The key is to understand the impact drivers and the projected life span," Buck stressed.
Buck predicts customer demand will be a significant driver for the forms sector. This means distributors need to cut through the clutter to be problem solvers. "Time is money and our customers are no exception. Depending on the situation, they may need on-demand response, timely notification of work in process, shorter development time of test runs to earn new business or relevant, quick-read reminders of new market opportunities," Buck said.
The Flesh Company has taken a few steps to keep up with marketplace demands. It merged its label plant into its forms facility to increase efficiency in form/label and form/card production. The company also invested in more imaging solutions for those and other label or forms products produced there such as chain-of-custody documents.
"Our new product developing team works to add new spins to current products as well as add entirely new products to our offering. Many of these ideas come from customers who have unique opportunities to win a piece of business if a better solution is created," Buck shared. "We have team members attending a wide variety of print industry conventions and expositions looking for new ideas to improve internal efficiency and growth."
The current state of the forms sector may give novice distributors pause. However, certain areas are faring well—particularly unit sets and value-add items like integrated, affixed and variable imaging. Consider business forms the unsung heroes in an industry dominated by promotional products, commercial print and direct mail.
"Business forms are still required to help run [a] company efficiently. [...] Forms have a very strategic function within a company. They move critical information through sales, production, shipping and accounting," Buck explained. "Companies today are all looking for the ROI in a marketing program. Distributors need to show the client the ROI in a well-designed business form."
It's all about perspective. The way Buck sees it? "You miss every shot you don't take," he said.
ON LABELS
Speed and efficiency are set to shape the future of the label market as advances in digital printing continue to overhaul traditional processes. Customers now require smaller label runs to reduce inventory, or they're asking for multiple SKUs of a label, which bodes well for digital press manufacturers.
"You just can't compete in smaller label runs with flexographic printing. I am seeing more equipment coming out with faster speeds and larger web widths," observed Tony Heinl, president of Tipp City, Ohio-based Repacorp Inc. "Digital printing will be competing with high-speed flexo in four to five years. [...] You can't compete if you need to pay for plates [and] tooling, and have the larger waste and setup times with flexo."
Repacorp recently stepped up its efforts to ensure clients receive optimal value. To keep up with the demand for short runs, the company now has five digital presses with laser cutting in three locations (three presses are in Ohio, one press is in Wisconsin and another press is located in Arizona). Heinl mentioned plans to purchase wider web widths this year, moving from the current 8-inch width to 13 inches.
In addition, the company installed the Domino K600i for high-speed variable printing with 600x600 dpi resolution. "The Domino is a true variable data print engine, and when added to our [13", six-color] flexo press, turns into a variable machine that will make our distributors more competitive in high-speed variable print label runs," Heinl noted. "The variable print does not only have to be just barcodes or text; it supports a range of linear barcodes, 2D barcodes, QR codes, numbers, graphics, logos and personalized data."
Repacorp also paired its digital presses with an instant quote module. Distributors can place the quote module on their website, with their brand and markup, or use it internally. "They are able to provide quotes while on the phone with their customer, thus capturing more business," Heinl said.
Looking ahead, Heinl sees digital presses competing in a tight race against flexo presses. "Digital will be running 200 to 250 feet per minute and will have web widths of 13 inches to 16 inches wide," he commented.
From Heinl's point of view, labels are practically recession-proof. Everyone needs a label on their product, and pushing the boundaries of digital will fuel growth.
"The digital label business is now a one billion dollar industry. Why wouldn't you be a part of it? [...] I suggest that a distributor looking to get into the label market partner with a label company that is keeping up with technology [that] has digital presses and laser cutting, so that the distributor can continue to grow his or her business," Heinl recommended.
ON PROMOTIONAL PRODUCTS
Like its printed counterpart, the promotional products industry faces challenges due to the unsteady global economy. But the economic conditions of clients, the buyers and users of promotional products, particularly influence how the industry will perform. And history shows marketplace realities are constantly changing with no signs of slowing down.
"These pressures and how our marketing clients respond to them will ultimately determine how, why and when they choose to market their businesses and dictate how a product or service will get to market," said Paul Bellantone, CAE, president and CEO of Promotional Products Association International (PPAI), located in Irving, Texas. "Whether it's global economy, price pressures, regulation or product safety, we need to adapt and add value."
Challenges, however, are not limited to growing market share. According to Bellantone, legislative and product safety regulations will need to be a priority for all industry practitioners. He added, "Technology, once limited to a supporting role in our day-to-day business, is now an integral part of the industry and drives changes exponentially. The number and sophistication of global manufacturers continue to challenge the 'buy domestic' preference that has been dominant throughout our history."
Bellantone remains encouraged—and his optimism is far from wishful thinking. In fact, 2012 marked the industry's third year of consecutive distributor sales-volume growth. PPAI research, along with independent, third-party studies, indicates that promotional products are proving to be a dominant advertising medium. Bellantone went on to discuss PPAI's most recent study, The Influence of Promotional Products on Consumer Behavior. The study offers many examples of how promotional products impact consumer perception and influence purchasing behaviors.
"There is compelling evidence that promotional products are among the most cost-effective means of marketing products and services—both as standalone vehicles and as part of integrated media campaigns," he said. "At a time when most other advertising media are experiencing flat or negative growth year-over-year, we should be pleased."
Still, Bellantone cautioned against becoming complacent. All players are under pressure to add value to stay relevant. It's no longer enough to compete on price alone. "Price will always be important, but price should be the driving factor only when risk and creativity are equal to zero," he insisted. "The elimination of risk and the delivery of creativity and solutions-based selling are areas where our members have been elevating the conversation. They are responding to marketplace demands by valuing their time, talents, creativity and the resources and services they provide to their customers."
Corporate social responsibility is another area where industry practitioners can deliver. This refers to product safety, corporate conscience and environmental stewardship. PPAI has concentrated many of its efforts on supplying members with the necessary tools to comply with mandatory regulations impacting the distributor channel.
"We have developed robust product responsibility education including the Product Safety Summit, a two-day event that attracts promotional products professionals and CSR thought-leaders to share best practices," Bellantone explained. "We also have created the PPAI Code of Conduct, a tangible presentation of what members are doing to meet the expectations of the end-buyer for product safety, social and environmental assurances. To date, nearly 800 member companies have adopted this code."
What happens next is anyone's guess. But the promotional products industry is nothing if not a collection of creative people always contemplating the best ways to adapt, thrive and serve.
ON DIRECT MAIL
The controversy surrounding the USPS and its financial troubles has done little to instill confidence in clients. The organization recorded a nearly $16 billion loss during its last fiscal year, and will end Saturday delivery in August in an effort to stay solvent.
U.S. Postmaster General Patrick Donahoe didn't mince words during his recent testimony to the Senate Homeland Security and Government Affairs Committee. "Time is not on our side. To preserve our mission to provide secure, reliable and affordable, universal delivery service—and do so without burdening the American taxpayer—the Postal Service needs urgent reform to its business model," he declared.
Chris Giles, vice president, solutions and competitive marketing, Pitney Bowes North America, Stamford, Conn., weighed in on the current model. "The need for automation is critical for the USPS to maintain the right cost balance, and this also leads to incentives and programs that help the mailer, such as QR code promotions run by USPS that directly link the mail piece to an e-commerce transaction," he said. "Other programs, such as sample mailings, may also help to encourage highly targeted, impactful direct mail campaigns."
Giles dismissed the notion that mail is going away. Instead, mailers are reevaluating direct mail as part of their overall communication strategy. "They are constantly reevaluating where and when to use it, where it makes sense," Giles noted.
He believes sophisticated marketers have an advantage. They are using intelligent data to target their prospects to maximize results. Mailing habits are changing and, when done correctly, direct mail plays a big part in a multichannel approach. "It provides credibility and impact that the web and email simply can't deliver, but it needs to be targeted (and personalized, when possible) to get the most out of it," Giles remarked.
Marketers have to think "multi-channel" and "multi-touch." It also helps to think through how and when the prospect will be engaged or when the prospect wants to be engaged. Relevance and timing are key, and this is where direct mailers can excel. "If you receive an offer that matters to you, at the right time, the rest is easy. Understanding customer preference and buying triggers directly impacts results," Giles said. "Direct mailers have to get inside this data and leverage the information that is hidden inside."
It's also important to test and measure results. "If you just stop for a moment and listen to your customers, they are probably already telling you what they want and need to see in order to act," Giles suggested.
Always stop and ask, "Is this the best way?" Giles mentioned the ways the economy has caused businesses to rethink strategies, dig deep for lower-cost alternatives and use different approaches, especially in regard to technology.
"The growth of smart phones and tablets has changed our world and it means we have to consider direct mail as an integral part of a communication ecosystem: an ecosystem that relies on many channels to operate at its most efficient.
"Think of the impact augmented reality can have, for example, when used effectively in a campaign. The selection of the right channel at the right time with the right message, and then reinforcing that message through other channels is the key to success providing you align with customer preferences," he concluded.
FINAL THOUGHTS
Recovery doesn't happen on its own. Understand that the printing industry is not just changing, it is being redefined. Perhaps Paparozzi summed it up best. "It is becoming something fundamentally different from what it was, creating historic opportunity for the prepared and profound threats for the unprepared," he said. "So what's the state of the industry? It's what we make it."
Elise Hacking Carr is senior production editor for Print & Promo Marketing magazine, and managing editor for PRINTING United Journal.