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HP loses money on 25% of customers

December 4, 2020

In a 40 minute investors brief, HP Inc’s president of Imaging, Printing and Solutions business, Tuan Tran told the audience that HP loses money on 25% of customers and sets out how the recent launch of the new HP+ end-to-end solution will address the issue.

We lose money [on] about 25% of our customers. This is due to the fact that we invest money upfront in placing hardware, and we don’t make that money back over the life of the product.” Tran told the audience in the Zoom call.

“Some of our customers actually put a tremendous amount with HP supplies. We make lots of money in those customers. Some customers use alternative supplies, and we lose money in those customers.”

HP is going with a two model strategy of HP+ and HP Standard. According to Tran “the HP+ model is really designed to attract and retain our low customers and give them the best value. The standard model is for customers who would like HP hardware but prefer a choice of supplies.”

The HP+ example.”

Is it worth it?

Programme Printer Pages
(over 5 years)
Printer cost Consumables cost Total

Cost

Cost per page.
HP+ LaserJet M234we 90,000 $179.00 $1403.46 $1,582.46 $0.0176
HP Standard LaserJet M234dw 90,000 $229.00 $2,923.00* $3,152.00 $0.0350
Aftermarket LaserJet M234dw 90,000 $229.00 $925.00** $1,154.00 $0.0128

* 37 HP original cartridges at $79 per cartridge
** 37 reuse or compatible cartridges at $25 per cartridge

The whammy is that if you go with HP Standard so you can buy and use non-OEM cartridges, you run the risk of still having your non-OM cartridges locked out because HPs dynamic security is a feature in the HP Standard LaserJet M234dw printer offer. And the HP website cautions “This printer uses dynamic security, which may be updated periodically by firmware updates. The printer is intended to be used solely with cartridges using an original HP chip. Cartridges using a non?HP chip may not function or may cease to function.”

It beggars the question “Why would you buy it?” when there are so many other printer options available. You can buy a warrantied upcycled/ refurbished printer for as little as $75.

HP is pinning the success of the HP+ on “having a compelling end-to-end model that attracts high use and loyal customers. That’s where HP+ comes in.” According to Tran “Our research says that 8 out of 10 customers believe that the end-to-end system, the HP+ system is better value than the standard model. Furthermore, not only is the better value for current HP customers.”

HP said: “The print market, like many other markets, has been reshaped by COVID-19” and it’s “clear that printing is also essential.” “We saw more people buying new printers as they were forced to work and learn from home.”

In Q4, HP gained 5 points of share setting a new record delivering $4.8 billion worth of revenue and over $700 million in operating profit. But the excitement over printer shipments is “was offset by an office printing business that still remains challenged.” Tran added.

There’s a silver lining though, as we see the economies come back. We see small businesses start open, and we see printing resume to pre-COVID levels, and we’re starting to see the overall printing market improve.

HP has continued to outperform our competition. We had an amazing Q4, delivering $4.8 billion worth of revenue, and over $700 million in operating profit.

Editorial Opinion: Will HP+ work? It should appeal to certain market sectors, and I am sure the 25% of customers who don’t buy their consumables will choose a different printer in future.

But it is a bit naughty of HP to promote the HP Standard with the choice to buy non HP consumable and possibly lockout those non HP consumables with their dynamic security feature.

Categories : World Focus

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