Stat: “Toner represents 80% of the profit opportunity in Managed Print Agreements”
Some may say it's labor; some may say it’s something else. I think we can agree that it’s not the hardware driving the profit margins any more. It’s the service you wrap around your product that creates the value in today’s “services led” business model.
In most cases, selling a service (opposed to a product) allows you to mask margins and commit customers to pay you over a longer period of time. Not just recurring revenues for your business, but recurring profit streams as well. This is not a new concept but it sure makes a lot of sense with the amount of commoditization and channel saturation many of our MPS dealers are experiencing with hardware.
So how do you make the big bucks in Managed Print?
Ask some the the top dealers in the Unites States. At LMI, we are fortunate enough to call many of them our customers. If you asked them how they have achieved the margins they have, they would probably all suggest that you “partner wisely” for your core consumable – toner. This is because they realize that the toner component of their cost-per-page models drive up to 80% of their profitability. Yes, 80% of the bottom line profit in most Managed Print agreements.
So since it’s September, and many of us are sending our little ones back to school, maybe it’s time you rethought your toner strategy to make sure you’re on the road to maximum profit per page.
In addition to a fair price per cartridge, here are some important factors when it comes to effective toner management and profitability:
- Ease of ordering – is there automation and integration with your ERP system?
- Online Tracking – can you see your order status?
- Fulfillment Speed – where are distribution facilities located?
- Order Accuracy – can you place a specific name and location on the toner box?
- Packaging and Labelling - can you “brand” the cartridges as your own?
- Blind drop shipping – why warehouse inventory of you can have it shipped direct?
- Recycling Programs – can you differentiate yourself with a better recycling program?
- Return Policies – what is the vendor’s track record of making returns easy?
- Color & monochrome – Can you get both quality products from one toner vendor?
- Yield – this is critical for profitability, when’s the last time you performed a test?
And arguably of course, the most important determining factor in your profitability is the overall performance and print quality of the print cartridge.
With the effort required to secure a new MPS customer these days, the last thing you want to do is disappoint your contact or their end users with toner issues. If you’ve been in the Managed Print business for a while, you know complaints about leakage, inconsistent quality or yield can be extremely time consuming and expensive issues to resolve. Never mind putting your Managed Print Program at risk.
There is an old saying “Success Leaves Clues”, and if you are wondering how the to drive more profitability from your current and future Managed Print contracts, maybe it’s time to go back to school and see if your toner is really working for you or against you.
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