1 in 3 Customers Leaving MPS – Potentially Costing Industry $1.6B in North America
While office page volumes have declined, the managed print services market has seen steady growth. But a recent study reveals one out in three current MPS users intend to either switch providers, or exit their managed print services altogether, posing substantial widespread negative impact on the market, in the form of customer dissatisfaction.
Photizo Group’s 2015 Decision Maker Tracking Study, which tracks the attitudes and behaviors of decision makers for more than 3,000 MPS customer programs, showed a startlingly high rate of negative end-user experience, depicting growing discontent within the North American market.
“With such a rosy outlook, just a few years ago, this may come to a surprise to those invested in the industry” says Ken Stewart, Vice President of Market Intelligence at Photizo Group, “but clear indications have been cited, directly from customers, spanning multiple industries and organization sizes, depicting a significant, measurable rise in delivery dissatisfaction.”
A surprising 34 percent of decision makers indicated they were ready to leave their MPS contract all together (21 percent) or at least switch a new provider (13 percent).
It is concerning for major players in the MPS market to see that one out of every three customers is dissatisfied with their service, to the point of seeking alternative solutions. However, it is arguably more concerning for the imaging industry as a whole that one in five customers are actively seeking to leave outsourced management altogether. With recent market trends showing decreasing printed pages that were being offset by increased managed pages, a substantial exit of customers could severely impact the industry, stemming one of its major positive revenue opportunities. Specifically, given these numbers, if 21% of the customers leave MPS, that would equal $1.6B in the 7.6B North American MPS market.
Why are customers dissatisfied, and what does that mean for the future? Simply put, their expectations aren’t being met. A number of indicators point toward a gap in perception and service delivery, threatening the positive industry outlook.
First time buyers are five times more likely to switch partners, and six times more likely to exit MPS altogether. Why? Because buyers are becoming smarter about what to expect and less patient as the market matures. This trend presents a major threat to key players in the industry because most profitability is secured in subsequent contracts, following the first year of service, due to high startup costs absorbed by the vendor. The financial impact is compounded, beyond the loss of potential revenue with loss of investment costs.
Of end-users interested in leaving their program, the majority (79 percent) were engaged in all-inclusive (per page or per seat) programs. As the contract becomes more inclusive, customer expectations increase, requiring a higher level of service excellence.
“A toxic mix is brewing in the industry,” says Stewart, “customers expect more out of all-inclusive contracts, and tolerate less, while providers continually shift focus to more inclusive packages – often overpromising to close the sale.”
All-inclusive contracts are attractive to vendors, presenting an opportunity to penetrate deeper into customer organizations, and expand with extended service offerings from the inside out. These high-value service expansions, such as business process optimization solutions, deliver the opportunity to radically improve financial performance with high-yield engagements. In underserving the customers with the highest profit potential, key vendors are losing opportunity to drive increased financial performance from services, reducing dependence on traditional manufacturing and box sales, which is identified as a critical component to long-term success in the industry.
Negative trends in customer satisfaction, leading to loss of first-year contracts, and inability to expand services poses major financial concern in the imaging industry that should be addressed immediately. Implications are already seen in major organizations, such as Lexmark and Xerox, with negative financial performance, particularly in core imaging business. . Lexmark saw an 11 percent decline in Laser Hardware revenue, and 26 percent decline in Small Workgroup devices, leading to an overall hardware revenue reduction of 16 percent in the third quarter. Likewise, Xerox saw a 12 percent decrease, year-to-year (YTY) in Document Technology revenue. Similarly, Equipment revenue sunk 13 percent YTY. Major players are incurring millions of dollars in revenue decline, leading to real cause for concern amongst those invested in the industry.
Without an aligned service strategy, and strong emphasis on tactical delivery based on sales communications, the financial outlook of the industry becomes bleak. If providers fail to provide extremely clear, realistic expectations, and deliver as promised, they are likely to face a hard reality of increasing customer retention deficiencies, ultimately leading to an unsustainable business model, negative brand reputation, and unstable marketplace. Negative effects will resonate throughout the industry, decreasing financial performance, stock prices, investor interest, and imaging success, leading to vendor failure and consolidation.
The remedy lies in vendors taking an honest look at advertised services, establishing clear communications around realistic capabilities, with a focus on delivering true customer value. Only then will the imaging industry regain the momentum needed to re-establish high profit margins and stability, for customers, investors and members within the organization.
About Photizo Group
Photizo Group is a leading market intelligence and consulting firm, with dedicated focus on the imaging industry. It is our sole mission to deliver the most deep-rooted and comprehensive imaging insight. We partner with clients, delivering unparalleled market intelligence and consulting services to help drive success in your organization and capitalize on emerging opportunity.
