Pressing Forward

Suppliers in every marketing channel breathed both a sigh of relief and a groan of uncertainty when the final seconds of 2001 ticked off. They sighed that one of the toughest years in history was over, then groaned over what else may come in 2002.

The specialty printing industry, however, has always been a mixed bag — which would explain why some printers closed last year while others took their sales forces on celebratory trips to Aruba. In a fragmented industry filled with large conglomerates, mom-and-pop operations, and agency/supplier hybrids, a surprising number of specialty printers posted sales growth last year. That came mainly from orders which were signed and paid before the economic climate went from lukewarm to icy cold last spring.

But increased sales figures often came at the expense of profit margins, as sales forces cut prices to meet quotas. “We made money, but we should have made even more,” says Mark Mills, vp-sales and marketing with Travel Tags, Minneapolis. “We had to lower prices or clients would have cut quantities or bought cheaper products.”

“Our profits on big jobs have gotten pretty thin,” agrees Gary Homsey, senior vp with Dallas-based Performance Companies. “Everybody’s in the same boat. It’s a tough situation,” echoes Jody Huemoeller, marketing communications specialist with Minneapolis-based 3M Promotional Markets.

Printers are leery about this year, because they’re already feeling the effects of some promotional printing budgets that were either reduced dramatically or eliminated altogether.

“It really depends on the brand,” says Monika Linderer, manager of marketing materials with St. Louis-based Sara Lee Bakery Group, which frequently runs in-pack coupons and on-pack sweeps (handled by The Graham Group, St. Louis). “We don’t have the budget of a Pepsi or an Anheuser-Busch, but we haven’t dropped spending on printing at all.”

The Printing Industries of America, Alexandria, VA, will release 2001 category spending data in March. (The segment saw revenues fall 1.6 percent to $6.1 billion in 2000 after a 10.2 percent jump in 1999.) Whatever the study uncovers about 2001, makers of gamecards, on-pack enhancements, and other specialty items soldier on, clinging to a business strategy developed with the following five issues in mind.

Research and Development: Printers haven’t slowed their investment in R&D. In fact, companies such as Travel Tags have increased it. “Clients will spend more money on a unique product in a down economy than they would on a normal product,” says Mills.

Cincinnati-based Procter & Gamble, for example, ran a month-long teaser campaign for new Torengos tortilla chips recently by handing out 3-D glasses (made by Bartlett, TN-based American Paper Optics) at thousands of movie theaters. The glasses could be used at torengos.com to enter a sweeps.

R&D energies are split between product development and operations enhancement. On the new-product side, a string of devices will soon come to market.

The Graham Group, known for a Next to Food product line that allows printed pieces to be hygienically sealed and laid directly on food inside packaging, recently came out with a Next to Food phonecard.

Dallas-based Digital Convergence just expanded its service, which allows consumers to use CueCat scanners to link shoppers to brand home pages when they scan a package’s UPC. (Originally free at RadioShack stores, the CueCat is now only available at Cuecat.com for $7.95.) Rival Digimarc Corp., Tualatin, OR, did likewise with its technology, which uses “watermarks” recognized by Webcams; Digimarc’s service is being offered through a deal with New York City-based International Paper’s Shore-wood Packaging unit.

Games printer Pollard Banknote, Winnipeg, Canada, is creating unique “consumer choice” scratch-off games similar to one used recently by Dallas-based Tricon Global Restaurants’ Kentucky Fried Chicken division. KFC’s Canadian restaurants offered $80 million in prizes with gamepieces carrying nine scratch-off boxes; each card was a winner if consumers selected the correct three boxes.

Travel Tags, meanwhile, is introducing textured gift cards with a classier look. Printers are also developing new gamepiece coatings such as laminates, using new inks that let consumers scratch a branded message rather than the traditional silver box, and replacing scratch-off boxes with pop-out windows.

Printers are also mining alternative channels: Gamepiece printers offer phone-cards, coupon printers handle in-pack envelopes. “We’ve tried to stretch into every relevant channel we can,” says Homsey.

The “It” product: The printing industry has always survived on core products, but found its big surges through one or two fads.

The lastest is lenticulars, a fad that may have saved many bottom lines last year, as marketers paid extra for added dimension in graphics. The use of hologram cards (which display action when moved at an angle) exploded in 2001. Everything from baseball cards placed inside Northfield, IL-based Post cereal boxes, to traffic-drivers handed out at the US Open by Irvine, CA-based Lincoln Mercury, to movie teasers from Universal City, CA-based Universal Studios became multi-dimensional.

Logistics: With new products comes interesting operational challenges. How does a lenticular baseball card twice as thick as a regular card fit into Post’s cereal feeder? Is stock the right weight for distribution slides? These are questions for the brand, plant, and printer, and the answers aren’t always easy to agree on.

Printers have dealt with the challenge by increasing their advisory roles. Performance Companies is working on new feeder lenses and other equipment filters to help execution on orders. “If you’re just an order taker these days, you’ll be out of business,” says Homsey.

Security: Printers involved with games, contests, and sweepstakes received a wake-up call last summer after the McDonald’s/Simon Marketing scandal. Clients demanded assurances that gamepiece security was air-tight.

Printers have responded by automating their processes and taking out as much of the human factor as possible. Pollard Banknote, which prints gamepieces for 40 state lotteries and does promotional work for Texaco and Pepsi-Cola, operates one of the industry’s most sophisticated seeding systems, a computerized process that keeps everyone — client, agency, and printer alike — from knowing which gamepiece is the winner. “Clients are gun-shy of hand-feeding methods,” says Pollard sales manager Nancy Tovell. “Expect a huge increase in computerized imaging and random-pattern printing.”

The relationship: Printers are increasing what they do for clients — often at no extra charge — and making themselves more available and more flexible. Marketers are under greater pressure, and therefore demanding the extra help.

“We’re finding clients want us to come in earlier and help with development,” says Graham. “And that’s fine with us.”

“They’re so used to seeing our work that they’ve become editors in addition to being printers,” says Sara Lee’s Linderer of The Graham Group’s work.

Comments like that may help printers breathe a little easier this year.