Print Buyer's Market

Direct marketers are taking advantage of printing services that target customers ever more precisely as the economy struggles to recover from the recession.

But printers are trying to cope with persistent excess capacity despite ongoing consolidation of their industry. This can translate into savings for DMers that might choose printers merely on price, argues industry consultant Steven Frye of Hailey, ID.

Another factor may affect printing costs: Paper prices are expected to rise later this year. Nevertheless, many printers remain bullish.

At the same time, technological advances, falling prices and gradual acceptance are bringing digital printing to a broader group of companies.

For example, York International, a manufacturer and marketer of heating and air conditioning systems, has just implemented a Web-based system for its dealers that saves them both time and money compared with the direct mail it used previously, says Andy Fracica, marketing manager for the York brand in Norman, OK.

“The customizable post cards cost them only 60 cents per piece vs. the more than $1 per piece it costs for direct mail, including postage, lists and creative,” says Fracica.

York dealers use this system to send post cards to surrounding neighborhoods to let residents know about jobs they've just completed. JG Sullivan Interactive Inc. of South Bend, IN developed the system. As part of the arrangement, Quantum Mail helps York select the ZIP code areas where the post cards are mailed, says Brett Knobloch, executive vice president at JG Sullivan.

Depending on their sales volumes, the system costs York dealers no more than $150 a year.

Since only about 2,500 of York's 6,000 dealers have recently begun putting this system to use, it's too early to tell if any sales have come directly as a result of this program, concedes Fracica.

Sullivan's system uses variable data imaging and digital asset management, technologies that have been in use for several years. These processes let companies store all their images and text on magnetic tapes and create templates that can be easily and inexpensively used and reused for different purposes.

At the same time, digital color technology is improving, giving an added boost to digital printing, says Michael Limbach, president of Proven Direct, Milwaukee.

“We used to just evangelize about digital printing, but now people are coming up to us and saying they've heard about it and want to try it,” says Limbach.

What's more, “the quality is generally better than it was four or five years ago,” says Knobloch. “It has gotten to the point that advertising agencies — often the most severe critics of printing quality — are less able to tell the difference between the two.”

Despite the growth of digital printing, industry executives point out that there's still a huge price difference: Four pages of digital printing can cost about the same as 100 pages of offset, even though prices are falling. Just the same, the digital mailings are said to be much more precise than offset and the recipients presumably much more willing to buy soon.

Some larger printers are increasing their offerings in this area.

In late May, Vertis introduced Vertis Online, a service that enables marketers ranging from franchisees to companies with sales forces to put together their own sales collateral materials using Vertis' Web site, says senior vice president of sales and marketing Ted Gaillard.

The Charlotte, NC printer's service allows companies to create high-end production. High-quality ads, post cards, newsletters, sales letters and direct mail packages reportedly can be customized for local communications.

Gaillard points out that over the last several years digital technology “was ahead of the marketplace but is now finding greater acceptance.” As a result, the firm, which also offers offset printing, is working on integrating all its services.

In the same vein, Banta has been moving toward offering a one-stop shop for printing, says James Cyze, president of Banta Direct Marketing Group in Chicago.

He points to Target Corp., the Minneapolis-based direct marketer and retailer for which Banta does freestanding inserts, digital printing and even Web pop-up ads.

Other printers are practicing this integration as well.

“Catalogers are merging catalog, store and Web operations into one unit, whereas in the past they always used to be separate entities,” says Eric Blohm, director of direct marketing at Quad Graphics, West Allis, WI. “This has been going on for about the last year to year and a half.”

In another trend, catalogs are becoming more personalized. Digital asset management technology enables printers to place wraps around individual books tailored for specific recipients. While not new, its use has been growing in the past year or two. “Demand is up by as much as 20%,” says Blohm.

While Cyze is generally bullish because Banta had a good first half, he's concerned that paper prices will be the wild card for the rest of the year.

“Already the mills have announced they're going to raise prices,” he says, noting that in the second half of the year there will be a greater demand for paper with more catalogs mailing and Christmas season coming on. Cyze pointed out that there hasn't been a serious increase in paper prices since 1994 or 1995.

Some printers are bullish on the rest of this year.

“Over the last five months things have been picking up,” says Steven Spenlinhauer, president of Spencer Press, a Wells, ME catalog printer. He sees an average 5% to 10% gain this year. He notes the case of one cataloger that's set to launch a book now mailing to house files.

Other printers are similarly optimistic.

“I just met with a client that wanted to increase its print runs substantially,” says Quad Graphics' Blohm. And R.R. Donnelley reports a pickup in DM — type business, though he conceded magazine publishing is still in a bit of a slump.

But Blohm admits that some catalogers are not mailing quite the way they used to and are pursuing cheaper alternatives.

“Let's say a cataloger used to send out about 60 million copies of its book. Now it might send 50 million catalogs and around 10 million self-mailers,” he says.

Consolidation of the printing industry still continues apace.

A case in point: Last year Donnelley acquired Moore Wallace for more than $2.8 billion, which enabled the printing giant to close its two plants and replace them with existing Moore Wallace facilities, says Gordon Grote, president, of Response Marketing Services, a Donnelley unit acquired from Moore last year.

While printers are confident about this year, some caution may be in order.

“The economic recovery is happening but it's really just in its infancy,” says Frye. Asserting that print quality is at an all-time high, he believes clients are buying print strictly on price.

On top of that, “there's still a lot of excess capacity out there,” he says.

Frye cites the case of Webco Printing Co., a Bellevue, NE firm that closed its doors in May, putting about 70 people out of work, according to news reports. Webco handled midsize and high-volume printing orders, including mailing and distribution, in the Midwest.

Webco president L. Bernie Egenberger says the printing business has become highly competitive in recent years and the economy has not recovered as much as he had hoped. The cost of the new press strained the company's finances, he adds, and its installation cut into sales efforts. Further details were not available at press time.

In any case, “There was absolutely no problem in absorbing their work,” says Frye.