PM mixes it up

Either way you look at it, that’s a lot of unknowns. Still, what we do know (or what we know, we know) is that recessions have a profound effect on business and this one will be no different. So, if the last recession, which all things considered was a fairly short, sharp affair, was in many ways responsible for the rise of print management (PM), it is worth asking what effect this one will have.

The typical reaction to recession is to reduce headcount and outsource non-core activity. This led to the early 1990s boom in outsourced print buying. However, given that PM is now a fairly mature market in the UK, it would be reasonable to assume that the next recession might be more challenging for the sector. Existing clients are understandably taking a close look at their marketing budgets with a view to cutting costs. However, there are still plenty of companies that have yet to jump on the outsourcing bandwagon and many print managers are reporting an increase in business over the past six months.

Positive start
“We won another £25m-worth of work during the last quarter of 2008, both of new business and con­tract renewals, and 2009 has already started well,” says Charterhouse account director Sue Tuck.

“We have been seeing customers seeking to outsource more jobs,” says Tony Massey, group sales and marketing director at HH Print Management. “For printers and print managers that prove a commercial improvement, there is work to be won.”

Alistair Cane, executive director of business development and marketing at Adare, says that, while the economic downturn has seen the outsourcing sector grow the demand has varied by sector, with some markets definitely registering a decline.

“We have seen a slowdown in demand from the financial services sector as it decreases the amount of products on offer to customers and looks to cut costs accordingly,” he says. “In contrast, we have seen a sharp rise in demand from the retail sector as clients strive to promote sales.”

The main difference between this recession and the last from a PM point of view, is that some of the biggest contracts are now into at least their second or third generations, meaning double-digit percentage savings are a thing of the past. So, if savings are what’s needed, then there is only one way they can be achieved. It’s the oldest and most sure fire cost-saving method in the book – print less.

TAG print strategy director Mike Newman says he has noticed clients focusing on cost and value much more. “Even some of the high-profile brands who traditionally weren’t cost driven are focusing on what media delivers the best value for their marketing budget,” he says.

So, while there might be more new prospects in the pipeline, existing customers are likely to be asking questions that, for some print managers at least, may prove difficult to answer.

“For some, the biggest challenge will be to prove that their position in the supply chain is of genuine value, providing benefits to the client that are not only tangible and ongoing, but also proportional to the fee charged for the service,” says Etrinsic managing director Matt Bird. “In my view, this was the challenge for print managers prior to the economic downturn, but the current climate serves to clearly highlight where value is being provided.”

Changing times
Newman agrees: “Some of the old models will have to change as clients become more aware of the sharp practices employed by some print managers, many of which have increasingly reduced their margins and sold on cost, rather than value, and tried to recover extra margins from large rebates or overcharging, neither of which is sustainable.”

One fortunate side-effect is that the successful print managers have been forced to seek alternative sources of revenue. This goes beyond the principle of simple economies of scale on which the sector was founded and which, some argue, it has never fully capitalised on. It gives them a second string now that print spend is coming under more scrutiny.

“We have seen a slight reduction in spend on core print management services,” says Bird, “But the pleasing thing for me has been the level of additional business we have converted with our clients in respect of our broader service offering through discussions on optimising the use of available budgets for 2009.”

In particular, Etrinsic has noted an increase in demand from existing print management clients for its data processing, marketing and creative services. This highlights the opportunity to be had from the current recession and ties in with Newman’s theory that diversification will prove crucial over the coming years.

“Diversification to maintain revenue is the main challenge,” he says. “As capacity is removed and clients become smarter, print managers are being forced to find revenue from other areas, such as studios, data management and business process outsourcing. Hopefully, that will lead to a new generation of service businesses that focus on delivering real value and operate sustainable models.”

Adare, like Etrinsic, has worked hard to diversify its service offering and is now reaping the benefits. “Clients are increasingly adopting our MC2 portal-based technology to drive supply chain transparency and procurement integrity,” says Cane. “It is also likely that most major PM companies will look to Europe-wide solutions to increase revenue – there are significant growth opportunities in this area and it is a region that Adare is already successfully reaping the benefits from.”

Bird agrees that investments made over the past five years on areas that are outside the scope of traditional PM, are now starting to bear fruit. “We are now able to offer solutions in marketing and creative services and data management which represent clear benefits to clients in respect of both cost and quality,” he says.

Competitive edge
However, while the recession may well bring new clients to the market, as well as forcing existing clients to explore add-on services they might not otherwise have considered, it may also entice new competition. David Bunker, a director at Close Print Finance, says: “Because the industry is shrinking, there is going to be massive competition from within print management and from printers. There is certainly the potential for large printers to form syndicates and go directly to the clients.”

Competition may also come in the form of companies such as TAG, itself a new entrant to the market. TAG has approached the sector from the opposite direction to most print managers; adding print as a service to complement studio work rather than vice versa.

Newman says: “You will see different entrants to the PM market as businesses such as TAG re-couple print production with artworking and brand management, and a diversification of the services offered by the print managers themselves.”

In fact, TAG could be the ‘one to watch’ for 2009. It has the kind of global presence that most in the sector can only dream of, a client list that would be the envy of almost every traditional print manager around and a compelling argument from a brand and campaign management point of view for ‘re-coupling’ the print production with its core offering.

For all that we know and don’t know, perhaps the only accurate prediction that we can make is that 2009 will be a year of change for the sector. The market will continue to develop and, no doubt, for all the influx of work that print managers are currently benefiting from, there will be casualties. As has always been the case with the evolution of any market, it will be those who are least adaptable that are at greatest risk.

There may be some surprise exits too, sparked perhaps by the unforeseen demise of a major client. Who for instance, this time last year, would have expected MFI, Woolworths and Zavvi to have collapsed by the year’s end? Or predicted the crisis faced by the high-street banks and the ensuing havoc? Those companies that act fastest, that are most responsive to their clients’ needs and that are able to take advantage of the opportunities that will arise, will no doubt look back on 2009 not as the end of a decade of growth, but as the dawn of a new age of opportunity.