According to WhatIs.com, The Internet of Things (IoT) is a system of interrelated computing devices, mechanical and digital machines, objects, animals, or people that are provided with unique identifiers and the ability to transfer data over a network without requiring human-to-human or human-to-computer interaction.
For the office products and supplies industry, connecting printing devices and the Internet is facilitated by deploying a "Data Collection Agent" on a customer's network to identify and monitor all the printers and copiers connected to that network. In doing so, the printer hardware becomes part of the Internet of Things.
The copier channel (BTA) has already connected a significant portion of its customer's hardware to the Internet by implementing managed print services (MPS). As a result, many U.S. businesses with 50+ printers have been converted to multi-year managed print contracts.
However, the selling cycle for MPS is significantly longer than that of a transactional sale; the selling skills for negotiating multi-year MPS contracts differ considerably from those typically held by a transactional salesperson. Usually, a successful transactional salesperson does not convert well into a successful service-selling salesperson with offerings such as MPS.
Preparing and closing a contract for MPS takes time - without a multi-year contract, the cost of customer acquisition and the life-time-value of the customer are out of balance - it's a money-losing proposition.
A business with less than 50 printers is often not worth considering for a managed print contract. If that's true, then many small to medium size businesses remain outside contracted commitments and remain an opportunity for a more suitable alternative. That alternative needs to be tailored to the selling skills of the office products transactional salesperson while also providing an improved value proposition for the customer.
Is the market for Managed Print Services saturated and, if so, what's the opportunity for a traditional office supplies reseller in the transactional space?
| Market Segmentation | # of Businesses | Avg. per Site | # of Devices |
| MPS Coverage | 200,000 | 50 | 10,000,000 |
| Non-MPS Coverage | 20,800,000 | 2 | 41,600,000 |
| Total | 21,000,000 | 2.5 | 51,600,000 |
In the profile of U.S. office printer hardware distribution, as presented in the table above, there are estimated to be over 40 million printing devices operating outside managed print service agreements. This is 80% of the total number of office printing devices.
Assuming the same number of average pages printed, regardless of where the device fits in the market segmentation, 80% of the $25 billion annual retail spend on ink and toner cartridges is not contracted to long-term managed print service agreements. Therefore, although managed print contracts may put some attractive accounts out of the reach of traditional office product resellers, around 80% of the market is still to target.
Unequivocally, the overall market is not saturated with managed print contracts, although the need for businesses with over 50 printing devices may be.
The opportunity to reduce customer churn should be a big incentive for transactional resellers to get their customer's hardware connected to the IoT without them having to offer unsuitable, multi-year managed print contracts.
Mapping specific printer devices to specific cartridge styles becomes possible when the printer is connected to the IoT. The CEO wants an OEM brand cartridge but the warehouse printer is OK with an off-brand compatible - no problem!
Let's take a look at our Return on Investment calculator. It represents two Office Supplies Reseller scenarios. Dealer A (With DCA) has deployed the Data Collection Agent, and Dealer B (No DCA) has not. The underlying assumptions are 20 customers, each with an average of 5 printers using four cartridges per device per year, and an average cartridge sell price from the reseller to the customer of $60. Dealer A has a total revenue potential of $24,000 per year. But, for Dealer B, only aware of 60% of the printing hardware devices at the 20 customers, the revenue potential is only $14,400!
Dealer A has a significant advantage over Dealer B as he starts to leverage Big Data to transform his business. Dealer A now has access to information that puts him ahead of the curve. Not only does he know every printing device on the customer's network, but he also knows when every cartridge will run out, while Dealer B has access to none of this business intelligence. By knowing when the cartridges will run out, Dealer A is in a superior position to obtain repeat orders and can reduce customer churn rates from 20% to 2.5%. Dealer A can have 97.5% of the revenue potential from his 20 customers, while Dealer B can only have 48%. Dealer A generates twice the sales revenue ($23,400) of Dealer B ($11,520) and has a vast customer retention advantage.
Reseller A incurs a cost to monitor its customer's printer hardware. Our example of 20 customers and an aggregate total of 100 printing devices costs around $950 per year. However, these monitoring costs are a worthwhile investment as the returns are over 90% within a 12-month.
The benefit to the reseller should be very clear. But, for this service to be a viable proposition to a resellers customers, there has to be a benefit to those customers that motivates them to allow the Data Collection Agent on be installed on their network.
Mutual Reseller & Customer Benefits:
We've only presented the advantages to a reseller in realizing revenue potential and reducing churn with existing customers. Think for a moment about the possibilities for improving customer acquisition rates by using the data gathered by the DCA to populate proposals and leveraging access to big data.
One of the most significant issues facing resellers is the conversion process from OEM to aftermarket brands. Think about that conversion process - perhaps leveraging access to data in the office products industry to access brands with high levels of trust and recognition, such as Xerox, IBM, and Kodak, can be utilized to demonstrate to the 80% of consumers still using OEM products, a trustworthy path to transitioning toward money-saving aftermarket products! In building customer confidence and presenting a variety of value propositions, the reseller can leverage technology to save customers money.
Customer Benefits:
How many customers bother to manage their printing device assets? How many know what they have, how old they are, and what their total cost of ownership is? How often do they ignore the ink or toner "low" messages, suddenly find they've run out, and have to make an emergency trip to their local superstore, paying total retail prices, usually on over-priced OEM brand cartridges? Worse still, how many see the "toner low" warning and immediately install a new cartridge, not knowing there may have been as much as 20% of the original supply remaining?
All these potential issues can be eliminated after installing the DCA on a network, the hardware assets are identified, the usage patterns are established, and the reorder points are determined. Last-minute panics are eliminated. The buyer's time in the process is significantly reduced. Mapping the best value proposition to each printer based on print volumes and print requirements becomes routine, with information technology controlling the flow of cartridges to each device as and when needed. Customer printing costs are reduced, and employees' time can be spent in more productive areas.
Conclusion:
The Internet of Things is here to stay. By 2020, 4 billion connected people, 25+ million apps, 25+ billion embedded and intelligent systems, 50 trillion gigabytes of data, and a $4 trillion revenue opportunity. It's not going away - it's time to get aboard and participate.