One of the most prevalent hardware storylines in recent years has been the increased emphasis placed on A4 MFPs among A3-centric manufacturers and within A3-dominated channels. This A4 MFP revolution has largely come from traditional “copier” players expanding their lineups in an effort to achieve better portfolio balance, capture more page and placement opportunities, and regain share within their multi-line dealers. This trend has also been driven by traditional “printer” players launching BTA-targeted A4s that cater to dealers’ cost/billing structure and channel exclusivity preferences, and allow these manufacturers to expand beyond their traditional open distribution channels.
As a result, the total number of active A4 mono and color MFPs targeting the BTA channel has increased by 50% and 45%, respectively, since the start of 2010. Meanwhile, the BTA channel has seen the overall assortment of active A3 MFPs flatten out and the number of available B&W A3 MFPs has actually declined.
The above A4 MFP portfolio expansions have resulted in impressive A4 unit growth from a number of historically A3-centric vendors. And although part of the reason that this unit growth has been so impressive is because these vendors’ A4 sales were previously very very low, recent manufacturer statements and ongoing A4 MFP lineup expansions suggest that the “copier” guys plan to maintain this A4 momentum into the future (side note: role of “A4 specialist” brand is in peril).
The A4 Channel Challenge
Based on this evidence, the continued sales growth of A4 MFPs from “copier” brands and within “copier” channels seems like a done deal, but there’s a catch. The A4 growth seen so far has either been generated from channels that the manufacturers can control (direct) or from channel partners that have already embraced A4 MFPs, but there is a big portion of the BTA channel that is not nearly as excited about A4s as their OEM suppliers for a number of reasons:
Low Price / Low Gross Margin / Low Commissions – Everyone in our industry is in the page business, until you ask a dealer about A4 MFPs and then there is a good chance that he or she will adopt a hardware-centric philosophy very quickly. After years of selling $10k+ A3 MFPs, many BTA dealers have a hard time wrapping their mind around the idea of chasing $3k deals with minimal hardware gross profit contributions and commissions that they fear are low-enough to make sales reps update their LinkedIn profiles. Combine these issues with the role that leasing and hardware commissions play in the sales process and it’s safe to say that dealers are pretty hung up on A4 MFPs’ low hardware pricing.
Durability Concerns – It’s not just the sales guys that have beef with A4 MFPs, service managers are still feeling the burn from a number of shaky first generation “copier” brand A4s, and are quick to remind their sales team and management of their engine preferences. Or at the very least, they make sure reps are careful not to over-place A4s in higher print/scan volume environments.
eCom / VAR Alternatives – One of the great advantages of A3 MFPs in the eyes of “copier” dealers has always been channel exclusivity, both in terms of product/supplies availability and the overall superior capabilities of A3 MFPs. This remains true, as you could count the number of A3 MFPs on CDW.com that could compete head-to-head with a BTA-exclusive model on one hand. Unfortunately, A4 MFPs do not offer this advantage, as well-equipped A4s are abundant in online channels and many open distribution A4 models can meet or beat just about any copier brand A4 MFP available today.
Feature / Value Conflicts – Even the dealers who have positive views of low-priced A4 MFPs, and see them as a key way to win more deals and grow their fleets, have complaints regarding A4 feature sets, often noting that A4 MFPs’ ADFs are too flimsy, their panels are too small, their solutions support is insufficient, and their finishers are too limited. To quote just about every channel sales manager ever, dealers can be hard to please…
That’s a lot of challenges, but the important thing to note is that everyone is right in their own way. The A3-centric manufacturers are right to accelerate their entrance into the A4 MFP segments, and the dealers that are pushing back are right to recognize that this shift will not fit nicely into their established business models. Good thing gap intelligence is here to help guide everyone in the right direction.
gap’s Message to Dealers
We get it. You built your business on selling high-priced A3 MFPs that generally offered functionality well beyond your customers’ needs. Why mess this up by pushing low-priced and less-equipped A4s at the expense of your business model and at the risk of your prioritized A3 product line?
Because you have to, that’s why… The fact is, office page volumes are falling, jobs lengths are getting shorter, and the idea of paying $10k+ for an MFP with an ROI based on high page volumes is going to be less attractive to your customers as time goes on – no matter how much you’d prefer to sell a $10k MFP rather than a $3K model.
I’m not telling you to make a complete shift to A4-size devices right away, but it’s certainly time to start integrating A4 MFPs into your offering at a greater rate, even in scenarios where you could have gotten away with an A3 sale.
That’s right. It’s time to start cannibalizing your A3 sales, at least while you can still work on your A3 cannibalization recipes and control your A3 portion size. For all of the companies that have benefited from avoiding cannibalizing their core products, there is a longer list of companies that have paid a steep price for “successfully” avoiding cannibalization. Apple cannibalized the iPod with the iPhone (huge success!), risked cannibalizing the Mac with the iPad (huge success!), and by the end of the year will probably try to cannibalize all of its devices with its new smartwatch (we’ll see…). On the other hand, Kodak invented the digital camera, but was among the last vendors to move to digital in fear of stepping on its film business, and now gets compared to companies like Apple in blogs like this.
I probably don’t have to say it, but in this case, it’s wise to be more like Apple.
gap’s Message to Manufacturers
Realistically, some dealers are going to embrace A4s and some are not, but there is a lot that you as manufacturers can do to maximize your A4 expansion efforts and drive adoption.
First off, it’s important that you segment the market, or in this case the channel, and understand the needs and opportunities present within what we see as the three general A4 MFP dealer types:
A4 MFP Deniers – The channel’s A4 MFP Deniers are box pushers through and through. They will always look for a reason to propose an A3 MFP, they see almost no financial benefits in A4s, and at best will only sell an A4 as a last resort. You could invest in trying to change their minds, but considering that these dealers are generally also the ones dragging their heels on evolving/diversifying through solutions, MPS, and other services, I wouldn’t suggest spending too much time or money on it. They’ll come around when the market forces them.
A4 MFP Pragmatists –These guys are really starting to understand the benefits of A4s and see them as a great way to win deals and grow current accounts, but will still generally lead with their core A3 lines. In fact, they basically have the same strategy as the copier manufacturers who are now trying to sell A4s to them, so work with them on that level and just make sure you are their portfolio partner – not just their A3 supplier.
A4 MFP Enthusiasts – Also known as VARs, these resellers …. Just kidding!!! There actually are some BTA dealers that will tell you that they truly are enthusiastic about A4 MFPs. They understand the client-centric logic of A4s, they “get” the low-hardware / high-CPC benefits, and they love the competitive advantage of approaching a deal with an A4 MFP or a mixed fleet of A4s and A3s knowing that competing dealers are going to try to push as many A3s as they can. These guys don’t need much convincing, other than that they should be trying to sell your MFPs, rather than another vendor’s.
It’s also important to try to hold off on any mixed messages related to A4s. There are more than a few OEMs out there who are pushing A4s with the caveat that they are intended to protect and create opportunities for A3 MFPs, and should never sell as a replacement or alternative to A3 MFPs. Nearly every dealer already understands that A4 strategy, so even at the risk of sounding too touchy feely, we suggest that you instead focus on the benefits of A4 MFPs to their customers and how A4s can create opportunities to win more fleet deals and expand their current accounts, leaving your own A3 baggage out of it. Understanding that it’s not a coincidence that nearly every manufacturer’s A4 MFP ceiling is just below their lowest-priced A3, we also suggest that vendors start planning for the day when the A4/A3 border moves higher, or even begins to overlap.
gap’s Closing Message
As you can probably tell, we feel strongly that the A4 segments represent a growth opportunity for vendors and dealers that have traditionally focused on copier-based A3 MFPs. In fact, having a balanced fleet is now a competitive requirement regardless if your legacy is in A4s or A3s, and given the direction we’re heading as an industry, we believe everyone needs to think a lot more about how to meet the evolving needs of their customers, and less about what worked back when our industry was a lot more siloed. You don’t have to be Darwin to understand that those in our industry who are the most adaptable will be best positioned to thrive into the future, and it’s pretty much a guarantee that the whole A3 vs. A4 hardware debate is one of the more straightforward adaptation challenges we’ll face, so dealers and manufacturers who have not done so already better get started there.
