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


:mad:

[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]

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.

[ZeusGT]

smart move...

[Jonesy-5150]

If you can find a dealer that sells the 6500 and actually makes the money that they anticipated, let me know who they are, and I'll pay them for their secrets.
The dealership I work for has tried this approach a few times over the years.
I think sales folks like these deals because it's big dollars up front and big dollars all in one deal.
The mistake happens when dealerships decide to discount service costs to show higher gross profit on the sale. THEN what happens, is the dealership loses their rear ends over the term of the contract. In the end.... it's a loss because these accounts AND machines are sooo damn epensive to maintain.
Print for Pay businesses buy these products to do their work at lower cost. The manufacturer loves to sell the "theory" to dealerships.
Tread lightly or let me know what I'm missing.

[technuthardway]

Xerox is the name that comes up the most for "I just switched to"......

under .02 black....

under .06 color......

again and again...

Is that what everyone else is coming across?

[mjunkaged]

How about using all generic supplies for the accounts that are putting the screws to you on cost per page? Would only take a carefully worded contract. Of course it's a horrible thing to do to any machine and its tech.!!

[Tech2002]

How about using all generic supplies for the accounts that are putting the screws to you on cost per page? Would only take a carefully worded contract. Of course it's a horrible thing to do to any machine and its tech.!!

I think you're onto something here.

I think we all want to do the right thing - honesty is the best policy, right?

But when someone wants something for nothing, and if you want the deal,
do the deed as they are doing the deed to you.

I usually don't bother with people who start to nickle and dime me. All they
do is take up your time when you could be off with a real customer making
a good profit. I just fold my cards and look for a better hand.

With these types of clients they will take, take, and take - but they can only
take, take, take if you allow them to.

Just move on..........................................

[kingpd@businessprints.net]

These are all good points and really good posts on this topic. My two cents on it and to some of the other comments...

1. Xerox seems to be the evil leader on the low click charges. I've heard of .0375 for an 11x17 click charge full color. It was also a $400,000 machine too.
2. I have serious doubts about manufacturers playing fair with THEIR direct sales offices and independent dealers. If you make the goods then of course you can sell them cheaper directly...but "we charge our in house dealers the same cost as independent dealers..." First, wft does that even mean and second, how do you theoretically pay yourself the same amount of money as an external dealer that gives you real cash and the money actually changes hands.
3. Print shops and commercial printers are the worst customer (usually) for a dealer. Quality must be 110% perfect and the cost the absolute lowest. Now on their defense, their customers nickel and dime them to death as well. But then again, have you ever seen how much some of these shops charge for a page? Some can charge 7 cents b/w and 39 cents color...HUGE profit!
4. Dealers need to push back and nickel and dime the manufacturers. Despite their usually being a written contract with the costs in writing, your sales rep. should have the power to make exceptions. Maybe you can entice ordering a min. amount of supplies for an extra 5%-10% off or free shipping...just be creative and push the idea that you could lose sales if you can't be competitive.
5. Definately put contract clauses about overcharges for large paper sizes and extra toner coverage, customer stupidity, etc. A smart print shop/commercial printer will charge their customers for a lot of ink coverage...you the dealer should do the same.
6. Try this new contract clause. The customer leases with a $1.00 buyout but you pay the leasing company the $1.00 buyout fee (some don't even charge the buck) then you resell the machine to the customer for 100% profit and continue a new maintenance agreement. Leasing companies I have worked with WANT your sales people to do the fair market buy out option because then the leasing company makes interest on the loan and the customer has essentially bought the leasing company a machine at the end of the contract. Said leasing company will then resell or export the machine for 100% profit. Yes even the leasing companies are trying to screw the dealers just as the manufacturers do too.
7. Increase add on sales. If you buy a truckload of paper (about $20k-$30k) you can get a case for about $20. Sell them paper for $30-$40, or up the click charges to include paper so they don't have to buy it. If you do this though, make sure you bill for the paper you've delivered b/c many offices will use the included paper in non-related equipment.
8. Try to start a movement within your organization and competitors to have a somewhat of a "fixed price." Oh but wait that's price fixing, wfc...the customers have done it.
10. Try to encourage techs to be involved in the sales process. Techs are way more knowledgable on the equipment anyway and the techs are the ones that see the clients more. Techs when visiting try to socialize and get to know the decision makers. If they can see you as a real human with a spouse, kids, car and mortgage payment...they might just be more considerate to you and your company when it comes time for pricing and contract renewals. Do occassional follow up and hey how you doing calls BEFORE contracts expire. It's best to have something to say that can help them when you talk to them or see if there's anything you can do to help them.