PM bad boys get a model makeover

For the best part of a decade, many print managers were guilty of implementing a “lazy” and “greedy” modus operandi. Their blindingly simple sell was to go into large corporates that boasted big procurement budgets and a poor track record of purchasing, and promise to deliver substantial instant savings on the cost of their print.

Future considerations
With further savings pledged over the lifetime of the contract, it came as little surprise that corporates clambered to take up the offer. But what the clients failed to ask when they signed this pact – and what the majority of PM companies failed to consider at the time – was what happens in two, four, six or even 10 years down the line, because you couldn’t go on offering savings forever, especially not when print volumes were already starting to fall.

Five years ago, the fallout from these types of deals began to hit home, with some of the larger players in the market starting to offer a wide range of back-office functions as part of an overall outsourcing package. Print became just a small and, in many cases, insignificant part of the contract (although it allowed them to get that crucial foot in the door). This resulted in the birth of business process outsourcers (BPOs), many of whom have continued to grow at a rapid, and some would argue unsustainable, pace.

However, there remained a select band of companies whose backgrounds lay firmly in print and who had the skills and knowledge to add value to a client’s print purchasing function. Thanks to market forces over the past couple of years, this approach has slowly but surely started to bear fruit due to the new, more flexible print management model they have rolled out.

Basic principles
Under this modern model (on which there are a number of different variations), the core principles of PM still remain in place: the provision of a front-end account-management-focused business that works with marketers to reduce costs and improve ROI. However, key changes have been driven by client demand for greater levels of transparency and reporting. This has resulted in some corporates looking to go back to dealing directly with printers for certain types of work (so that they have more transparency in their supply chain), but then outsourcing other jobs that require more creative input to PM companies. It was a natural progression, according to Etrinsic’s managing director Matt Bird.

“What PM companies haven’t done properly in the past is understand what profile of work or area of print spend would benefit from PM and what wouldn’t,” explains Bird. “We are now seeing clients reviewing their print and direct mail spend, but not as a single entity. Their approach is: can we place a proportion of work directly with a manufacturer and would other areas benefit from using a PM company?”

The answer, quite simply, is yes. Companies like Etrinsic are now taking on more of a consultancy role and advising corporates on the type of work they can outsource themselves and the work for which they need to call in the experts.

Charterhouse’s business development director Matthew Stevens, believes that the Hatfield-based firm has developed a model that fits the bill and delivers “pure PM and a linear approach to direct purchasing”.

Stevens says that part of the reason behind the development of this model, which the company has been rolling out over the past few years, was that it had become obvious there was a large proportion of work that didn’t require a high level of account management. As a result of the change, the firm is now much more efficient in terms of its fee structure.

“With second- and third-generation contracts, we identify certain areas of work that we can commodotise. This will typically be work of a fixed nature,” explains Stevens. “That area of work goes out to our roster of printers. This reduces our account management and the fee saving is passed on to clients. It leaves us free to focus on the highly creative, innovative ad-hoc marketing communications we handle best.”
While he adds that it’s easier to evolve the model after the PM company has been working with a client for some time, Charterhouse has started to take the model into new business contracts, a move Stevens says has been well received.

Another company that claims to be scoring a hit with its hybrid PM offer is Polestar Applied Solutions. The firm’s print services director Matt Spencer explains: “What we’re hearing from clients is that they would like our help to set up a supply source for stuff they could easily get into a matrix, such as letterheads, but once this has been set up they are happy to take it on and handle it themselves. Where they really need our help is when they have complex projects and their marketing teams do not have time or resources to manage them.”

At the heart of Polestar’s model is Httprint: a browser-based print procurement solution, which gives the company’s clients the flexibility to take a number of different approaches to print purchasing.

 “We’ve got customers who have Httprint, but put no work into the Polestar group and we’re not even on their roster of printers. Then we have customers who take it and we are on their roster as a printer. Finally, we have customers who take it and we are on their roster as both a printer and as a PM,” explains Spencer.

He adds that the hybrid model is in place with a number of different customers from a diverse range of industry sectors, all of whom who are starting to see PM companies more as consultants than brokers.

Seeking expert opinion
In the future, it looks like we will see more and more corporates placing commodity work direct to the printer, but they will then seek out expert support for niche and specialist requirements, such as cross-media campaigns. This anticipated move back towards direct sourcing should – in theory at least – be good news for printers (as long as clients understand that they cannot keep pushing prices down when the cost of raw materials is going up). And it should also provide a more sustainable business model for PM companies, or at least for those that can get their head around the need to help their clients serve their customers better.

“It’s going to be a fertile period for PM, but only in reality for those offering a sustained added value to the client,” says Etrinsic’s Bird. “Clients are wiser than they were a decade ago and they are relating print much more back to ROI for their marketing plans.”

Polestar’s Spencer concurs adding: “The ability to drive cost out through harder and better buying is almost in all cases an obsolete option. Therefore, you have got to add value. We’re all finally starting to say the same message again.”

Read the original article at www.printweek.com.

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