Making a profit with production color machines???

[MinoltaManager]

Hello and thank you for taking the time to read an hopefully respond to this post and my dilemma.

I am the service director for a KonicaMinolta dealership and our sales force is selling production color copiers, the C6500, 65CPM color with all inclusive service contract at 4.5 cents per page. The majority are also charged only one click for 11x17 and 12x18.
These print-for-pay customers then run mostly letter size jobs 2 up on 11x17 and cut them down cutting their per page cost in half. To make matters worse, they also tend to run with heavy fill and use much more toner than other office environment customers and we pay for the toner!
Our competition, Canon, Ricoh, Xerox and others are eager to place such machines in these environments but why? When I look at my cost per copy with single click on all sizes of paper and the above normal toner usage as well as the above normal incidence of service calls, we are actually loosing THOUSANDS of dollars per month EACH on many of these accounts. This is what our competitors are charging so if we want a piece of this market, we have to sell at these prices.
Why are the OEMs and dealers alike selling under conditions where they know they are going to loose big money over the course of the contract? It would be better for us if our sales force had blank checks and gave each customer one for $10,000.00 not to buy from us! We would be better off in the long run.
Please tell me what is wrong with this picture!


Best Regards, John

[Jack Reacher]

I keep saying to my customers to wait a little longer before deciding to purchase a new machine. Things keep getting cheaper and cheaper and it will be very soon we will be paying them for the pleasure of having one of our machines!!!

[cobiray]

I understand what you are saying. I often wonder the same thing at some accounts and know we have lost some to "better" offers. I can only assume that they are giving away the service on the first contract in the hopes that they will re-up at a higher price. So what would stop them from jumping to another company with another "better" offer? Nothing. I think the industry at this point is just a dog chasing it's tail. My other thought is that the sales persons are not concerned with longevity and are just out to make money at the expense of the company as a whole.

But that's just my $.02.

[Jack Reacher]

Copier companies have to offset their lack of income from their primary business with a suplimentary secondary income source.

Most copier businesses are now just a front to legitemise their crack whore operations. Some still use the tried and true "Laundromat" or "Restuarant" fronts but where is the fun in that

[Tech2002]

Contracts should be written based on Mfg Yield - that can be written anywhere into a contract and can be enforceable. You can or not, enforce anything that the customer signed, and they cancel you? Who cares, you would have lost the account anyway if you had not had your bid at rock bottom pricing like your competition. But remember the yield thing - its important.

What's your service like as compared to the competition? Think Value Added Services. Your not in business to subsidise a customer's printing are you? And if you do, what's at stake? Do the Benjamin Franklin Summary - Pros & Cons?

Why does your competition low ball the service contracts and know they are losing money? Sales Numbers! Any monies coming into the cofferes of a business is considered a revenue stream. Profitable deal or not. This is how a company affords to pay your salary every week and the Sales Manager gets to keep his job - for another month. The company may lose money on one deal, but they'll sure pick it up on another one. They're just putting one foot in front of another, moving business forward. Forgive me for saying so, but you're not thinking like a businessman.

Lastly, you need to pick your battles. Which ones do you want to win? Which ones do you want to walk away from and make your competition suffer with regret for winning the "Big Deal"? Your time may very well be spent making money elsewhere. Let the other vendor lose money while they're tied up with that lousy customer they just won from you - your off making a ton more money in another direction, Let that customer bleed that vendor dry and not yours. I have seen this all of my copier career.

Hope this helps your thinking and mindset. Good Luck.

[pepper38_cnd]

John

You are not the only dealer crying in their beer over this. The fact is (in my opinion, and others) KonicaMinolta is pricing their Dealers right out of business. Yours is a story told over and over by other KoninicaMinolta Dealers. The manufactures suggested yields are far fetched and impossible to attain. Yes they always come up with unique way of explaining the situation. But the bottom line is when Dealers take on the big accounts base on what they expect to get in return ( and what everyone else is doing) they get burned. The Konica Minolta products are great, service support is excellent, if the consumable pricing were to just come in line with the competitors, we would all be happy. Keep complaining to your dealer rep and dealer council, sooner or later the message will hit home. Also if you don't have one already consider a second product line and let the manufactures compete for your business.

[fixthecopier]

It is tuff out there. My boss will sell a color machine real cheap just to get the service contract. We do not give away free prints on the 11 x 17. I think in the end people will pay for good service after they have had bad. In my area, I had 4 Minolta 2001 color boxes we had sold, and had the service on, with the same people we have a 300 machine contract with. We then sold a 3102 to a 3 star general's staff. They used it 3 years and could call my cell to get me there in 30 to 60 minute's when they needed me. They then wanted a new machine so I gave them a quote on a C352 at near cost knowing it would be put out for bid. Army contracting did not want them to have a new machine and was pissed that I had started this. The staff won the fight and got the new machine. Then the contracting department pulled my service contract and put it out for bid, I assume to teach me a lesson. A company from a city 2 hours away cut our already low bid in half to get thier foot in our town. My boss tried to tell them that the new company could not pay for the toner with what they had bid but they got it anyway. They cut thier cost by dropping 2 machines from the contract by saying parts could not be found, [ a lie, the machines were 4 years old ]. They would get to the calls sometimes 2 or 3 days after getting called. About 4 weeks ago the 352 blew the "A" board, the contractor showed up said they would order a board, then called the next day and canceled the contract. The head of the staff showed up at the shop and bought a c550 without having to get contracting involved and insisted that I get the service. This was all based on good service.
I had another customer who was going to buy a color printer from me. His boss made him get other quotes. A dealer in town that sells my brand bid the machine at dealer cost when they found out we were the other bidder. The guy was forced to buy from them. He felt so bad he came back to me to stock up on toner, he bought $2500 worth. We made more on the toner than we would have from the printer sale. He wanted to keep the good service. Someone who is trying to make a buck on a machine has to keep it running to make that buck. Time is money to a business. They may be tempted by "a better deal" but if the junk don't run, they will be back.

[blackcat4866]

"We only lose 5% on every deal, but we make it up in volume..."

I've been hearing this for years. Why are we in business, to move boxes?How about to be profitable? Preferably both. But you're right, these production copy shops suck cash, complain constantly, and probably will not buy from you the next time (if you're lucky).

You can spot these deals a mile away. Fortunately for me, our sales staff will at least consider the possibility that a sale can hurt the company more than it helps.

The first think I'd do is get a couple additional clauses into your service contract:
Double-count for ledger
Surcharge for fill rates exceeding 6% b&w (or 5% color)

Next, I would start charging for those trips referred to as "misuse", when they were trying to feed NCR paper, T-shirt transfers, 140 lb cover, even sheets of plywood ("You can't feed plywood through a copier?"). And yes, they'll hate you, but no more than they would have otherwise. =^..^=

[nmfaxman]

Someone once wrote, and I believe it was here. A salesman will sell his Mother for the right price and lie about how good she is just to make money.
If you want something that works for the right price ask a tech! He has all the right information in black and white not in words or lies.

[fixthecopier]

Salespeople can't make a living trying to sell in my area, so I get to sell if I can. I tell customers that I will not sell crap because I will have to work on it. I have passed on many sales because they wanted cheap crap. In the future when all salespeople have perished, techs will do the task and the world will be a better place.
On the subject of the title of this thread, You can make money on color by keeping the machine up and making money long after it has paid for itself. I have a 3102 with a booklet finisher that is 1 and half years past lease end making us $.09 a page with 4000 page a month min. I have 2 used 3102's waiting to replace it if it goes down. The customer will not say anything about an upgrade as long as I keep it running.

[copymutt]

Color Loss

Savin canceled us for not taking on their color products in this scenario. We made amends and promised to enroll in scholl and buy color. I will not quote below my cost! on service, equipment or supplies. I have lost good clients to 10 cent, even 8 cent agreements w/ competitors. On top of this the color drum moduals are upwards of $1000.00 ea. times three and other dealers tell me they don't go the distance. I feel like a lost dog on this one, but I'm a lost dog that still has a bone. I've not sent tech to school and I've not bought into the bull.

[WaveyDavey]

We see this day in day out, the way I see it is that the manufacturers are shafting the dealers, if they can afford to do OGC pricing for the government then they can do it for all and they are. the consumable prices are higher to dealers and we are having to accept it. so how do we go about changing that?

[ZeusGT]

I have gotten into this mess as well. I'll suck it up to growing pains in my business, but I feel that it's probably one of the best things that has happened to me.

After I sold 2 machines to a production printing shop ( I was green ), It wasn't long till I realized I made a mistake in jumping into this.

YES, they were sucking me dry in supplies and the toner coverage was over 40% in all colors. The meter bill was pretty dang high and the customer wanted me to make ledger adjustments and lower the click charge.

I GLADLY accepted (because new contract agreements had to be drawn up) and I knew that I was going to put excemptions in the clause.

Anything over 15% coverage required a surcharge per color.
They were allowed 3 sets of toner per month and if they went over that then they were responsible for the full cost of the toner after 3 sets.

All that for exchange for the one click Ledger and lower click charge.

I think that IF and I mean IF I go the production color printing route again, I will make it very clear about my excemptions on the front end. My machines are dirt cheap and I'm able to attract many clients that way. I like the service contract sale over the machine sale and usually the machine pays for itself quickly within the first few months of the service agreement

Dealer beware, production shops WILL BLEED YOU DRY!!!!

[unisys12]

In the last year, we have lost one old and dying machine and one bid because we will not give away copies. I mean how freaking stupid is that!!??

Why would we want to keep a customer that forces our company to loose money. And when we do service the machine, how can't we justify performing all necessary maintenance. In the end, our customer will experience more down time, less productivity and nether of us will be allowed to grow our companies like we want to.

In the end... no one wins! So what's so good about that? Sure, your customer makes a quick dime right now, but to what end? A company should be able to make up the difference by selling mid-range MFP's to offices. You should not force your company to loose money on a contract just because it's a production machine.

My two cents...

[tinfox]

Yeah, I just lost a sale on a 3228c. I quoted .02 per impression. They came back with .012 for B&W and .055 for color.

Plus they wanted a free finisher and wanted a network cable run to the copy room "at no additional charge".

I just pulled the machine after a 2 week demo.