Erosions in selling prices have solution providers looking beyond hardware in 2007

Sales of color printers and multifunction products (MFPs) were bright spots for solution providers in 2006. Analysts predict that healthy sales will continue into 2007 and beyond. For example, technology research Gartner projects that color printer sales will see a compound annual growth rate of 20 percent for the next two years.

But optimistic sales predictions don't tell the whole story. Color-printer prices continued their decline in 2006, a trend that solution providers expect will continue in 2007. Some estimates put the total price drop at about 20 percent over the past three years.

After a series of new printer and MFP introductions in 2006 virtually all of the major hardware vendors are now selling color devices below $1,000. High-end color, including high-speed and large-format laser printers, also offer relatively low baseline prices of about $5,000. "The price point for color is much lower today, so the barrier to entry for customers has gone down dramatically," says Philip Fontana, president, Lewis & Lewis Computer Store, an Anchorage, Alaska, solution provider.

While-lower cost hardware will keep demand humming, the downward trend diminishes the favorable profit margins that have helped offset slim profits for monochrome printers.

As a result, a growing number of solution providers may try to wring new profits out of color supply and service contracts in the coming year, according to the 2006 VARBusiness Annual Report Card. The channel trade magazine reports that color printing costs have increased 15 percent since early 2005, as consumable costs rise. Service and supplies contracts consequently offer the best hope for healthy color profits in the months ahead.

What selling points will resonate with customers in 2007? Hardware manufacturers and partners highlight the following:

• Color Creates Impact: Readership studies demonstrate heightened interest when marketing materials use color effectively. This means that audiences are 55 percent more likely to read color direct-mail ads than monochrome alternatives. Color boosts brand recognition by 80 percent. Studies have also shown that invoices are paid 30 percent faster when they're printed in color. "People pay attention longer and retain information better with color. It really helps cut through a lot of the clutter," says Anneliese Olson, Hewlett-Packard's director of Laser Jet category management, imaging and printing in the Americas.

• In-House Marketing Saves Money: Small and mid-sized companies see a faster ROI when they invest in color printers and MFPs to create marketing materials versus using commercial print shops, according to a survey by Internal Communications Research. "Small and medium business customers are spending about $26 billion in the U.S. in [printing] outsourcing," adds Olson. "If those companies bring that work in house, they will save a significant amount of money."

  One estimate puts the average cost of 7.2 cents per page, or approximately $3.59 for a print run of 50 pages using a representative color laser printer. By contrast, the job would cost $47.50 when done by a quick-print shop or $263 at offset printer. The printer ROI would be achieved after 20 offset-printing jobs.

• Color Use Can Be Controlled: Companies that install color printers and MFPs don't have to cope with the expensive of inappropriately used resources thanks to access monitoring tools. Management technology is available from vendors such as Ricoh, Xerox, and Hewlett-Packard, or from partners, such as MegaTrack, Pharos, and Equitrac.