17. How to add more value

17.

How to add more value

Adding value to your service is the number 1 priority. It’s the most fundamental and basic of all ingredients in every business model.

As a converter/printer, you start out with a request to support your customer. You want to serve them with a service of something, adding value anywhere from design to the finished product. There are costs involved on many levels from labor to media and consumables including the cost of tools (machines) etc. Some part of this cost, as media, is per square meter, ton, or sheet. Other cost is fixed, as the investment in tools. This is then calculated into cost per hour, per machine, sometimes including labor and sometimes with the cost of labor separate. Many of today’s converters/printers add this cost into the key cost per job, sheet, ton or square meter, as they and their parents have done for generations in the family business. Based on that, the old generation tells the new one, it’s about filling the presses using this key cost adding a 15-30% margin. “Then, you will make money”. This way, the price that you invoice your customer is not as dependent on what you deliver in value. It only depends on your costs. Unfortunately, printers/converters of today are often seen investing in digital, but they are using old business models when calculating and planning every job. They will find out that digital alone isn’t profitable in their P&L. Sorry, but that comes as NO surprise. Digital is not by default replacing an analog tool and not while using an analog business model. We’ll go through how we set up a new business model that will work for digital only and, maybe even more interesting, analog and digital in good partnership, complementing each other. Together, this will add more value to you and your customer, win-win.

Let’s go back to the question of adding value and how to add value instead of getting stuck in a cost-structure with merely prices, seen from a customer’s perspective. A good price doesn’t necessarily mean a low price; it’s the value for the customer that counts. Remember: “the combination of cheap and good still hasn’t been invented”. However, a good price is important to the customer. Begin by adding more value for the same cost as before. Then, add more steps and values inside your customers’ supply chain. The more added value you can implement in your service, the fewer suppliers that customer need to have. This will give you control and a healthier business, plus less exposure on price. This excludes the 80-20 law (80% of your business revenue being generated by 20% of your customers) – it’s still necessary to have a good balance between as many of your customers as possible. Plan ahead, so you can afford losing a big customer without destroying/damaging the rest of your business. This means that your support must be more flexible and your delivery time must improve. Go from cost per order to value and price per time it takes to produce. It will increase your profit without increasing the total cost for your customer. For instance, leave the old concept of big quantity orders per 6 or 12 months. Instead produce on demand per SKU and store digital instead of physical in a warehouse. This will save time and money and minimize waste. This way, each product can also be updated every delivery time, providing the opportunity of extra turnover and profit. Knowing that production to stock in the graphic industry has circa 50% waste because of today’s speedier turnaround, this means a growing insurance. It’s possible with an unlimited number of SKUs (editions, language, size, color, etc.), small and medium runs, digital long runs, giving the customer a great flexibility with one and the same supplier. This will create new areas of business that analog can’t do, such as personalization, unique products for targeting, security, anti-counterfeiting, track and trace, etc. To digitally produce all of this is simple. And with no added cost, it will generate higher margins to you and a lot of added value to your customers.

Going from a cost-based business plan to a market-based business plan is more profitable and will deepen your relationship with your customer. It will also increase your value to your customer. Plus, it will be more complicated for the customer to change to another supplier as you are more integrated throughout their supply chain.