Make the most of the tough times

WORDS Simon Creasey - Printing World - Friday 1st February

When economic uncertainty hits, many businesses slash their print budgets, but for PM firms, there may be opportunities to pick up lucrative work provided they're flexible with their services.

While most business sectors might be ruing the current economic climate, for others the turbulent financial conditions spell opportunities. With more and more corporates slashing their operational budgets amidst a flurry of profit warnings, the print buying department is often the first one to go, which creates numerous new avenues of business for print management (PM) firms.

Huge growth
Over the past few years, the growth of this business sector has been phenomenal. When Print Buyer's sister title Print Week launched its inaugural "Top 20 Print Management Company League Table" back in 2004, the combined turnover of the firms amounted to just shy of £920m. In today's equivalent table, the combined turnover of the top three firms trumps this total and the potential for future growth is phenomenal.

But doesn't it follow that if companies start to cut back costs over the coming months that they will in turn also scale back their marketing activities? "Quite the opposite," claims TPF's group business development director Dean Smith. "Below-the-line print still represents a relatively inexpensive and marginal fraction of a corporate's promotional and operational spend. It is also a lower cost per acquisition than above-the-line media such as TV and press advertising. The key challenge for organisations will be proving to the board that what they spend is achieving results and the very nature of print campaigns means that companies can more easily track the effectiveness and ROI than with other mediums."

And the financial markets' current woes won't just lead to more opportunities in print. Due to the testing climate, corporates will inevitably start to look at the way their current business model works and introduce business improvents - an area in which PM firms come into their own, according to AccessPlus's chief executive Jason Cromack. "Economic turmoil forces change and we are change managers," says Cromack. "The economic environment enhances our proposition and it should provide opportunities for businesses like ourselves because many companies look to outsource when times are tough."

He adds that one of the biggest opportunities - and indeed challenges - facing PM firms lies not only in offering corporates cost savings, but also in being upfront with their customers and questioning whether or not they are communicating as effectively as they could be - and, if not, suggesting ways in which they might communicate better. The outcome of these discussions might not necessarily end up as ink on paper.

"Gird your loins and bite the bullet," advises Webmart managing director Simon Bitcliffe. "Go to them [your customers] with the solutions to achieve cost reduction proactively rather than waiting for them to invite in alternative suppliers to do it for them by putting it out to pitch. You gain long-term loyalty this way."

Most PM firms of a certain size now offer a wide menu of communications solutions for corporates to choose from - from data handling and job creation, through to call centre management, SMS messaging and last but by no means least, print.

New opportunities
While some view e-marketing and web-based marketing output as a threat, other more progressive thinking companies believe that development of this side of the business could see the creation of new revenue streams.

"There is undeniable evidence that both media if used intelligently as part of a cohesive and marketing plan deliver stunning results," claims Matt Bird, etrinsic managing director. "The lower costs of acquisition associated with web-base marketing are complemented by the tangibility and length of visibility associated with personalised print. I firmly believe that good PM at its most basic level will be about substantially reducing the print output of clients whilst increasing the effectiveness of their reduced volume by the use of technology and a media-neutral perspective."

Some firms have already extended their traditional PM service offer through acquisitions (a number of which took place in the early part of the decade). Although the sector has seen little M&A activity over the past couple of years, industry pundits predict that we could see a frenzy of companies picking up rival operators over the coming months, as they eschew organic growth in favour of rapid growth through acquisition.

Adding value
"It would not surprise me as the growth plans and profit commitments made by many PM organisations are simply not going to be organically achievable in an environment where client best interest dictates lower volumes of print. PM turnover and profits have been forecast based on 'more and more', rather than 'better', says etrinsic's Bird. "For that reason, I think some businesses will attempt to increase size though acquisition in the year ahead."

Polestar Applied Solutions' category director Tim Smith agrees, though he thinks that deals will be done at the lower end of the market. "There will be some activity, but not significant, as lower leaguers consolidate, but often these are difficult to value as they're more lifestyle businesses with few assets."

The biggest problem for those looking to grow though acquisitions might be finding a suitable target. Whereas five years or so ago there were plenty of firms of a decent size that were ripe for the picking, now there are only a handful of firms that fit the bill. After that, there are lots of small but very well run companies fighting over the scraps, but as these firms grow, they may appear on the radar of their larger rivals.

Acquisitions unlikely
"There are an ever-growing number of very small PM companies evolving and winning some creditable business and in time these may be the subject of M&A activity, but probably not for a while," says Gary Petts, print management sales director at Iceberg Marketing. "However, at present, there don't appear to be any significant players in the PM market under-or over-performing to suggest the possibility of an acquisition".

Indeed, it may well be that unlike in previous years, PM companies will not look to acquire competitors (and their turnover). Instead, they will look for businesses outside of the sector that offer skills that fall neatly under the PM umbrella and expand their business offer.

"Where we will see the real activity is in PM organisations bolstering their data and digital activities," believes TPF's Smith. "This includes non-print media solutions such as SMS, email and media buying."

AccessPlus's Cromack subscribes to this viewpoint. "We see ourselves as managers of a much broader supply chain than just print and therefore we can see M&A activity happening more around the added-value services that can be brought into the PM model such as cross-media marketingtools."

Some corporates have already started to request delivery of items electronically that historically would have been dealt with by the printer - report and accounts being an obvious recent example, with the high cost of printing such documents being cited reason for the switch - and with businesses set to drive further costs out of their supply chain, this will inevitably lead to opportunities for the more canny operators.

* Estimated ** includes direct business
Source: all figures are taken from information provided by the companies themselves, the PrintWeek Top 500, and accounts filed at Companies House

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