Integration is the Key to Overcoming the Threat of Substitute Products

According to the 2010 State of the Industry (SOI) report if you’re waiting for clients to rediscover the power of print, for competitors to fail, or for the economy to make everything right you will be disappointed. Simply put we are undergoing a fundamental structural change and if you continue with business as usual you will likely struggle. To thrive you need to reinvent your business.

What is structural change? According to the Harvard Business School a company’s health depends in part on the structure of the industry in which it competes. An industries structure depends on five forces of competition:

• the intensity of rivalry among existing competitors;

• the threat of new entrants;

• the threat of substitute products or services;

• the bargaining power of suppliers; and

• the bargaining power of buyers.

Most of these forces are not new but one has become more of an issue over the last few years. For years we have witnessed the competition become more cut throat and ruthless, new emerging sources of new competition, and the simple fact that larger printers and customer with more purchasing power command better pricing.

But the one force that continues to grow and become a much more disruptive influence is the threat of substitute products and services. These substitute products are so ubiquitous that we often don’t realize that email, the internet, cell phones, laser printers and color copiers are changing the demand for print and mailed products.

Occasionally something will happen that may bring this to our attention such as the release of the iPad and recent discounts of e-readers such as the Amazon Kindle. These products impact the consumption of printed books, magazines and newspapers. But after a short period of time, the threat becomes less obvious when something timelier occurs.

How can you overcome this threat? One strategy we have used successfully for years is to surround the printing process with more value-added services such as design, mail and fulfillment. Since many have already done this, many companies are wondering “what’s next.” A newer option is to create new solutions that do not have threats of substitution.

These solutions include variable data printing, email marketing, Purls, social media marketing and QR codes. While each of these can be offered as stand alone services, we believe “to add is bad.” In other words, simply adding new services may provide a temporary bump in sales and/or profits but may not result in sustainable change, because your competition will see what you’re doing and make a similar investment and offer it for less.

We have long emphasized that investments must be integrated into a compelling value proposition that locks additional value by helping your customers become more successful. That could mean that you have already developed the internal expertise for mailing, databases or variable data printing. If you confirm the need exists but listen to the voice of your customers, then you could also integrate Purls and email marketing to create a more unique, compelling and valuable solution.

Summary

The take home story is that our industry is in the midst of a fundamental structural change due at least in part to the substitute products and services. While there are many ways to compensate, one solution is to grab more “wallet share” or more work from existing clients and within existing markets by grafting new products and services into your portfolio and offering them as part of an integrated service.

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