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McIlroy--Digital Printing - Are You Making Money?

June 1998

XYAN is a little-discussed, but very successful player in the digital printing market. The company has 1,100 employees and operates 74 production centers in 28 states. XYAN has grown rapidly through acquisitions. It offers a wide range of services, from offset printing to facilities management, fulfillment and digital printing. But, as Kelty pointed out, "Digital printing is our future and it is our hallmark."

"Very simply put," she explained, "we looked at the printing industry and saw that it was growing at the rate of 2 to 4 percent annually. We didn't think that that was good enough for us. Digital printing is growing anywhere in excess of 20 percent annually. That is where we wanted to be."

Why the growth in digital printing? "Companies are facing very stiff competition," Kelty attested. "There are a lot of issues around—consolidation, globalization, downsizing, rightsizing, business process re-engineering, you name it. Digital printing addresses those needs by allowing companies to cut costs, reduce their time to market, improve customer satisfaction and gain a competitive edge."

Like Rosen, Kelty feels that demand creation is the major challenge facing the industry. "Digital printing really solves a problem that people may not recognize they have," she said. Kelty used an analogy of ATM banking machines to illustrate her point. Automatic teller machines were not introduced in response to a market demand. People were accustomed to banking between 10 a.m. and 3 p.m. It took the banks several years to get their customers trained to use ATMs. And now no one can imagine living without 24-hour, worldwide access to their bank accounts.

Keys to Profitability
XYAN is carving success in the digital print market one small step at a time. It has developed a consultative sales strategy, and accepts that the sales cycle is much longer than for traditional printing. The company's 100 sales reps receive extensive training and support, as do customers. XYAN focuses on niche markets, such as legal and financial printing, and avoids trying to be all things to all people.

In concluding her presentation, Kelty offered another analogy. "The key to profitability for digital printing is a little bit like embarking on a home-improvement project," she said. "It is going to take you a lot longer than you thought initially, and it is probably going to cost you more than what you had planned."

Susan Kinney, of Castle Press, brought her company into digital printing to address her own needs. While the 60-employee company does nearly $7 million in printing, Kinney also operates a $1.5 million greeting card firm, Painted Hearts and Friends. In 1995, she bought a Xeikon/Barco press to create shorter and faster runs of her greeting cards. Digital printing has since become the fastest-growing segment of her business.

"Digital press sales are growing at 25 percent a year," she said. "Litho is growing at about 3 to 6 percent. Half of our new customers are on the digital press."

Kinney has found other benefits in operating a digital press. "It's easier to get new first-time sales appointments when you have a new technology," she pointed out. Castle Press employs a telemarketer who obtains a first appointment on half of her calls because of the technology.

Of significance, even though the digital press opens the doors, the sales reps still sell (by volume) 75 percent litho against 25 percent digital printing.

Equally important, digital printing brings Castle Press to a new group of buyers. "Instead of dealing with purchasing agents, we're now dealing more with CEOs, marketing officers, brand managers and production managers," Kinney said.

The lesson of digital printing is that it's digital, not printing. And digital is still a new business for most graphic arts firms. The digitization of your prepress departments allowed you to do the same old things more quickly and (eventually) more cheaply, but it wasn't really a new product. Digital printing is a new product, and new products require new markets.

Over the last decade, the graphic arts community has become digitally adept at a technical level. Now we've got to grow as marketers.

—Thad McIlroy

About the Author
Thad McIlroy is a San Francisco-based electronic publishing consultant and author, and associate conference director of Seybold Seminars.


 

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