(Editor’s note: This is the second installment of an article I wrote that originally appeared last summer in Independent Dealer magazine www.idealercentral.com. It offers some perspectives that all dealers should pay attention to within the competitive MPS landscape.)
After signing on to SP Richards’ PrintSmart program a year ago, COS Business Products and Interiors in Chattanooga, Tennessee has found they can successfully compete against traditional office technology companies in the MPS arena. Owner Skip Ireland’s inspiration to get into managed print came about two and a half years ago after realizing his business needed a jump start and by talking to customers about some of the challenges they face in their day-to-day business.
“One of the common denominators was the headaches they had servicing printers,” recalls Ireland. “Most people disdain the whole idea of messing with printers.”
Ireland did his due diligence, reading the industry trades and attending conferences and seminars related to MPS where he was the only office products dealer in attendance. He understood this was a trend that was not going away and that it offered value to the customer. He worried about what might happen to his toner and ink business, which makes up one third of his revenues, if he ignored the warning signs and didn’t make the transition to MPS.
“I thought I need to do this so those guys don’t come and take my business,” says Ireland. “I’m a firm believer that you just can’t stick your head in the sand and say that’s not going to happen to me because it will happen to you.”
Since he began offering customers an MPS program, COS is taking away other dealer’s toner and ink business. SP Richards’ PrintSmart program was perfect for Ireland because he was looking for a partner that would provide him with a turnkey solution and the economy of scale such as the software solution along with priority pricing on the toner while also helping with the marketing, proposals and other components of MPS that might be cost prohibitive if he attempted to do it on his own.
“That’s what PrintSmart brings to the table, but I still get to run my own show and keep my own profits,” notes Ireland.
COS has a separate division, launched in May 2010, devoted to MPS. To create that division Ireland acquired a small company that had been servicing his customer’s printers. The previous owner is now COS’s MPS champion and not only services printers, but is responsible for selling the MPS program as well.
“You have to have a champion,” states Ireland. “And you need the total buy in of the owner and you have to have somebody whose sole responsibility is to move the program along. If those two things don’t happen, I don’t think it’s going to happen.”
One of the ironies of become an MPS dealer is that COS wasn’t selling printers before PrintSmart.
“I didn’t realize how critical having these printers would be and in the first year alone I sold over 500 HP remanufactured printers,” boasts Ireland.
Ireland has no qualms about competing against office technology dealers for MPS business. In fact he feels being an OP dealer is an advantage.
“We have a much deeper and more emotional relationship with our customer,” states Ireland. “We have so many transactions with them that we’re in that business all the time. The guys who are selling machines, through no fault of their own, put in a big box or MFP once every three years. Their sales manager never really manages or touches that account like we do.”
COS now services 2,000 devices with 1,700 of those devices under a MPS contract. Ireland’s goal is to raise that 1,700 to 3,000.
Ireland has found the best customers for an MPS program are those with multiple locations.
“I like targeting those customers with locations that are not easily accessible to the IT group,” says Ireland. “The sweet spot is 15-150 printers. Those people don’t normally have an IT staff and in almost every case they’re looking to have an outsider to handle the service.”
United Stationers’ HQueue managed print services program was exactly what Dave Cohen, vice president, sales & marketing for Specialty Enterprises in Westminster, Colorado was looking for when he took the leap into managed print services three years ago. Customers pay a flat monthly rate based on cost-per-page, per printer that includes service, toner, parts, maintenance kits, and monitoring for select HP printers. An annual warranty covers his customer’s printers and includes parts and labor as well as next-day service delivery.
“We’ve done well with it and I think I’m one of the leaders out there,” says Cohen.
What Cohen likes about HQueue is the online software and Web portal.
“It’s better than most and can tell me page counts, and provide reporting, and exporting, etc.,” explains Cohen. “It’s got all the tools I need.”
Even though the program provides Cohen with everything he needs to sell managed print, he cautions others that it’s still not an easy sell.
“Managed print is not a quick transactional sale,” says Cohen. “You have to do a Webinar, do a discovery, see if it’s a fit for the customer, and if you’ve got somebody who has a dozen to hundreds of devices and they want to manage them through outsourcing, then it’s a fit.”
Cohen says one of the advantages of HQueue it includes HP OEM toner.
“Pricing wise it’s very competitive and we can put a lot of people on the OEM toner and include service for close to what they’re paying for remanufactured toner,” he reports.
The percentage of Specialty’s revenues attributed to MPS is around 20 percent today and Cohen would like to see that grow to 50-75 percent. What’s it going to take to make that happen?
“More calls and working on it,” says Cohen. “I’m the MPS specialist and you really have to know what you’re doing, especially when you’re dealing with a CFO and an IT manager.”
He’s found more customers are knowledgeable about MPS.
“As the economy has struggled and companies are looking to reduce costs and save jobs, printing costs are on the top of the list so it’s easy to strike up that conversation,” says Cohen.
Not all customers are a good fit for managed print, but what Cohen has found is that the best targets are those with 25-100 devices per location.
Selling MPS also requires patience.
“It takes 30 days to do the discoveries, then there are presentations, reports going back and forth, and by the time decisions are made it’s a 90-day cycle,” states Cohen.
Eakes Office Plus in Grand Island, Nebraska sells office supplies, contract furniture, and equipment. Although the third of their business devoted to office technology gives them an advantage over dealers who just sell office supplies, Eakes has found a way to include their supplies reps in the MPS sales equation. It’s a good thing too since Paul McKinney, operations manager and owner of Eakes, views the transition to MPS as a do-or-die scenario.
“MPS is something that’s not only important to us but vital to our long-term success in supplies and in the copier arena,” affirms McKinney.
Eakes began doing cost-per-copy (CPC) contracts on copiers and printers nine years ago, visiting customers and doing assessments of their equipment fleets, ensuring that the fleet was sized properly and offering customers the option of wrapping all of their equipment, service, and supplies under a CPC agreement.
That’s not all that unusual for an office technology provider, but the difference between how Eakes does it compared to the average office technology dealership, is that Eakes’ supplies reps are involved in the MPS sale. One reason is to ensure the supplies rep’s long-term survival, and two because supplies reps touch more customers on a daily basis than hardware sales reps.
Commission programs incent supplies reps to work with copier salespeople to migrate customers to managed print programs. The biggest challenge is getting the two reps to work effectively together. For a period of time Eakes had two sales forces in the same company competing with each other for toner business.
“That was painful,” concedes McKinney. “I wouldn’t say it’s perfect today, but we chose a strategic direction because the business is shifting from transactional supplies sales to contractual MPS sales.”
Customers who buy a remanufactured or compatible HP toner cartridge from Eakes receive free service labor.
“That’s pretty common and a lot of supplies dealerships have taken that approach and hired a service tech or two,” says McKinney.
Eakes’ supplies reps were told that the company is transitioning into these programs to protect the company.
“At the same time we paid them a variable [rate] to migrate to a per-click agreement,” notes McKinney. “We pay them four years of what they were making on the total gross profit. It’s a win for them as it locks them into a long-term [agreement] and it’s a win for us because we’ve locked that customer into a long-term agreement as well.”
Eakes didn’t just come up with this concept overnight, McKinney spoke with a lot of other dealers about how they were doing it, attended conferences and trade shows where MPS was the hot topic, and has read about MPS in industry publications. Eakes is also an HP OPS Elite dealer, which has helped with pricing and product acquisition.
“We also had a ton of that background being a copier dealer for several decades and to put printers and copiers together is no big deal,” says McKinney. “If you’re doing a copier per click agreement you’ve already got the infrastructure in place to do an MPS agreement.”
Data collection technology is also an essential component of MPS and Eakes uses FMAudit for meter reads, service notifications, and advanced toner shipping, all of which are essential for anyone doing MPS in a per-click environment. Eakes has found this technology to be a useful marketing tool as well.
“One of the first things we do is load FMAudit to see how many copiers and printers the customer has and their volumes,” says McKinney. “It’s critical for us to gather that information.”
Blending his office supplies reps with his hardware sales reps seems to be working and you can’t argue with success. MPS currently represents about 40 percent of Eakes’ total revenues. McKinney expects to see that grow to 45-50 percent while pointing out that he considers MPS anything on a per-click agreement along with all hardware sales associated with those agreements. “We are absolutely winning new business because of MPS,” concludes McKinney.
And so are a growing number of other office products dealers.
