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CIG argues the “case for OEM conversion”

July 28, 2016

CIGOEMconversionClover Imaging Group (CIG) pointed out that aiming to convert customers from OEMs is “performing the ultimate balancing act”.

In an article on its website, the remanufacturing group began by noting examples of customers who might state “just give me the specific product I want; I’ll pay any price”, or “I want the cheapest possible product, and I don’t care at all about the quality of my prints”, and in turn a reseller that notes “profit margins don’t matter; I just want to get my customers the products they need”.

It points out that “you get the idea”, as “in the imaging industry, we have always lived in the middle of the cost/value equation”, and have tried to give end users “the best of both worlds while also creating the ideal selling situation for dealers”. However, “the truth is, it has never been easy, even when print was in its prime”, because customers “want products that are inexpensive and reliable, and resellers want to be able to make a good profit”.

This has become “even more difficult over the years as we moved from obstacle to obstacle”, with these including “aftermarket bias, decreasing margins, IP-infringing clones, and changes in authorised dealer models”. CIG states that “overcoming these obstacles would go a long way toward creating a winning proposition for dealers and customers”, as “over the last couple of years, OEMs deauthorised more than 20,000 resellers”.

Remaining resellers in turn are “subject to stringent operating guidelines that affect both dealer choice and margins”, while dealers carrying multiple lines “may find themselves skewing in other directions where possible”, creating a “prime opportunity for aftermarket conversion”. Overcoming aftermarket bias “is the first step”, CIG said, with a “key to this” a partner “that can provide both high-quality product and the sales tools to back it up”.

Products including “customised marketing materials, presentations, videos, and event join sales calls that educate the customer about third-party supplies” can “go a long way toward educating, and eventually converting, customers”. Cost savings were then focused on, with the HP Inc 540A colour cartridge series used an example – these are used in the CM3525 and 3530 machines, a “hot segment that has grown more than 785 percent annually”, costing $762 (€685) for a full OEM set.

However, they sell for $892 (€802), a gross profit of $131 (€117), and with aftermarket pricing, the numbers “change significantly”, with quality remanufactured alternatives costing $306 (€275) and selling for $623 (€560), for a gross profit of $317 (€285), and saving the customer almost $300 (€270). To add to this, if there were “additional incentives for the dealer” selling the products of around 10 percent, it “becomes hard to argue with that kind of logic”.

CIG highlights that “selling on price alone […] has never been a good idea, but it is always going to be a factor” in businesses trying to survive, but such trends are affecting companies and “altering the way office printing equipment is used”, so dealers and MPS providers must “focus on the cost of print”. Focusing on customer needs and then the dealers needs second are said to be the “key to the equation, even though some “may continue” with OEM products.

However, for others “the time might be right for conversion”, and there are also future customers “who may be looking for an alternative […] and are ready for a change”. CIG concludes that factors in favour of conversion “have fluctuated through the years”, but “given the recent upheaval” in the market, for dealers and in printing, “now may well be the perfect time to take advantage”, and “see about tilting the balance in your favour”.

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