Press & Events

Variable Data Printing:
Making Personalization Work On A Daily Basis
By Don Monkerud

Some Printers And Service Bureau Owners Regularly Slam Variable Data Printing (VDP)

March/April, 2003 - Digital Publishing Solutions - Conceived as a technology that would hit the traditional offset printing industry like a tidal wave, VDP, for these critics, is unprofitable, difficult if not impossible to implement, and lacks customer demand. They point to the large investments necessary to become a player and the small inroads made by large corporations as proof that VDP doesn’t work.

They concede that the market will grow, but they choose to sit on the fence and let others tackle the problems, while they continue to sell ink on paper. As the market develops, they are in danger of being left behind.

Technology in Place
Few disagree that the elements are in place for personalized printing, or true one-to-one marketing where each piece is different and incorporates specific information tied to the profile of the recipient. High-speed digital color printers from Xerox, Heidelberg, IBM, Xeikon, Hewlett Packard, and Oce, as well as others from Epson, Hitachi Koki, Canon, Minolta, and Ricoh are capable of handling variable data. RIPs from these manufacturers, as well as those from Creo and Electronics for Imaging, can send data streams to the printers and allow them to print at their optimal speeds. Software suppliers such as PageFlex, Exstream Software, Elixir, GMC Software, Banta, Atlas Software, Datalogics, and PrintSoft offer a full range of products for the creation of personalized, one-to-one communications. Today, technology is capable of producing the simplest or the most complex of VDP projects.

In another era, people were reluctant to buy an expensive automobile when they had a perfectly good horse in the barn. They overlooked the fact they had to buy hay, feed and water the horse, provide a barn and a corral, and exercise the horse daily. In a similar fashion, merging the traditional printing industry with the technology of digital color will take a while to reach its potential. This article will examine what a number of companies are doing on a daily basis and some of the lessons they’ve learned from producing VDP for their customers. Not every job is fully variable one-to-one marketing, but these companies are experimenting, creating new opportunities, and learning how to turn a profit. Although opinions and results differ, each company is making VDP work.

Opportunities for Commercial Printers
Although some commercial printers initially saw an opportunity to produce VDP for direct mail advertising and database-driven customer retention programs, the color print volume didn’t develop as expected. Some companies that invested in presses sold them and went out of business. Others found they could pay their bills and find opportunities in short-run digital color printing. According to Mark Fleming, an industry consultant and president of Strategies on Demand L.L.C. in Naperville, Ill., commercial printers who entered the direct-mail, one-to-one business didn’t find the market they expected. They face significant competition from direct-mail service bureaus that have produced personalized direct marketing for the past 20 years. These firms have expertise in selling, technical service, list processing and presorting, and automated inserting and their mailing capabilities are difficult for commercial printers to match.

“One of the highest value applications is in marketing response management, which is production and fulfillment of marketing communication materials at the consumer’s request in connection with a specific purchase decision,” says Fleming. “Commercial printers who want to profit from personalized, direct-mail marketing should plan to set up a separate operation with staff and equipment dedicated for this purpose.”

In what he terms the "pull model,” Fleming explains, a consumer requests information from a source such as the Web, mail, or phone. This request pulls information for the requester and that information is delivered by a variety of means including print, Web, CD-ROM, videotape, or DVD. This process, or pull model, is print-on-demand and fulfillment in response to an end-user request. Strategies on Demand L.L.C. projects that the value of digital printing in marketing response applications will grow to $4 billion in 2005. 

Greater opportunities exist for commercial printers in the pull model because it is similar to the business commercial printers currently conduct. Because the value proposition for digital printing is higher in the pull model, Fleming believes that it is the greatest volume opportunity for digital color printing. However, printers face challenges in the efficient management of fulfillment operations, which they will need to address before they can be successful in this market.

Creating a Closed-Loop System
The Ramon, Calif.-headquartered K/P Corp. creates a viable business with a different approach. The firm, which has $100 million in yearly sales, 675 employees, and 14 plants, is using VDP to boost its bottom line by focusing on a one-to-many strategy to drive VDP volume.

“Customers can’t justify 24-cents-a-page for one-to-one variable data versus the offset model of two- to four-cents-a-page,” says Steve Thornton, director of technology solutions at K/P Corp.

To solve the problem of the high cost of one-to-one variable data, K/P uses a hybrid system, like many other VDP printers are using, to help customers reach their goals. K/P helps customers select lists and tailor a message to target a narrow audience. By focusing on this narrower audience, rather than an individual, as in one-to-one VDP, K/P can send information to this target audience, measure the response rate, and analyze the results to tailor the next message better.

Database administration and measurement of results become critical elements to help K/P improve ROI for its customers. By lining up the message with the target audience, Thornton explains that K/P creates a “closed-loop system.” Although traditional mail houses are normally better suited for this type of work than commercial printers, K/P Corp. is successful because it allocates its resources to achieve results. K/P’s business becomes manufacturing information delivery, which breaks the company out of the “ink on paper” mold, a market oversaturated with printers willing to erode profits by selling at a lower cost. Today such a closed-loop system can include mailing a business reply card, maintaining an 800 number and a URL, and having a system in place to track response rates. This entails setting up accounts that differ from the response-to-bid business of the typical printer.

To build its VDP business, K/P Corp. seeks three types of accounts. The lowest level is the usual commercial print job: bid, pick up artwork, print, and deliver. The second level involves multiple jobs, which have beginning and end dates and include a series of mailings for a specific project. The highest level accounts are programs, which provide a block of business such as customer retention management (CRM), which can continue for years and may include many different campaigns. These jobs require major planning, working closely with a client’s database, understanding their business, and contractual pricing. A key element in such projects involves working with clients on finding ways to maximize a client’s marketing budget.

Program sales are completely different than the response-to-bid business. They have a longer sales cycle and require team selling. The hardware and software vendors help train sales people and a technology team accompanies the salesperson to visit the client and develop a long-term relationship. Such relationships do not foster bidding for specific print jobs. Program sales also allow K/P to work horizontally within a company. If they produce good results for the marketing department, they can approach the HR department, or financials, as a client, or address project managers for other products in the same company.

Program sales and tracking response rates involve campaigns that require different tools—some that commercial printers don’t normally become involved with. Rather than outputting solely to print, K/P is now involved in multiple output. This necessitates using XML data files that allow templates and the merging of information for multiple output streams such as PDF formats, HTML formatting, printing, and even archiving. Working in multiple formats becomes essential and is more involved than simple printing. For example, while working with a credit card company, K/P learned that FDIC rules require that it must archive a low-resolution copy of each credit card solicitation. The credit card company sending a solicitation must be able to produce a copy of the original offer in case legal questions arise in the future. A typical mailing can include 200,000 solicitations. To cover the requirement, K/P can burn a CD, DVD, or send files to a FTP site for the client.

Thornton admits that he would like to see more volume in one-to-one variable printing, but cautions that K/P must leverage existing offset investments by printing shells that are then personalized on digital printers. A mailing may run to several hundred thousand, which isn’t yet economical for one-to-one variable data. These hybrid jobs also have the added advantage of being ganged on offset runs and commingled in a mail stream for postal zip-sort savings.

Over time, Thornton predicts that hybrid jobs will become less economical to produce, due to labor cost increases. When offset jobs are placed in inventory and reprinted digitally, handling costs increase each time quantities are pulled from inventory, plus there is a warehousing cost. Although the initial costs are higher when printing on digital presses, efficiencies in handling will make jobs cheaper at a certain point. Like most printers, K/P wants to fill capacity on the equipment it has and emphasize the lowest per-sheet cost for its customers. Looking at the overall cost allows the printers to see whether offset shells with VDP overprinting or digital printing will be the most economical.

“There is definitely an emerging business in variable-data printing,” says Thornton, “but you have to be successful at figuring out how components fit in with the rest of your business. You can’t just purchase a digital press and have a viable business. When marketers learn that this closed-loop system works, they will effectively drive demand for personalized print.”

Reorienting the Sales Approach
Asking a print buyer to buy some variable-data printing will elicit a blank stare. Much has been written about the new consultative sales approach that is necessary to make VDP a viable business. Choice Communications, a Richmond, Virginia-based printer with 42 employees and a variety of digital printing equipment, takes the message to heart. Choice Communications began selling VDP ten years ago and has steadily built a viable business. The company wins numerous awards for best practices from PODi, the digital print initiative, and finds that helping clients hone their messages and target their audiences with personalized messages gets results.

Everyone knows that selling VDP is not the same as selling ink on paper, yet most experienced print salespeople have a difficult time making the change. To emphasize the point, Kate Dunn, vice president of sales and marketing, compares print sales and VDP sales to dating. Dunn contends that VDP sales go wrong because most salespeople focus on appearances, such as the type of paper, the number of colors, whether there is a full-bleed, etc., when they should be focusing on personality. By focusing on deeper issues, akin to personality, salespeople can help a business solve its problems by using variable data. This requires that salespeople understand broader issues, such as their clients' businesses, their competitors, what they are trying to accomplish, and how their businesses will evolve, before they can successfully implement a VDP solution. For this reason, Dunn finds it difficult to convert traditional print salespeople to selling VDP. She finds her most successful VDP salespeople in other fields.

“We use a consultative sales approach,” says Dunn. “A salesperson has to be able to call on a bank and then a major retailer and ask good questions in both situations. You can teach basic sales skills, but you can’t teach salespeople to be interested in their clients' problems, and that’s what it’s all about. Good salespeople build a relationship to help their clients accomplish their goals.”

To illustrate her point, Dunn describes a customer who wanted a mailing to sell eyeglasses. The salesperson doesn’t need to understand technical aspects of a database, but does need to understand how data can be used in such a mailing. Although the customer said everyone was a potential customer, Dunn knew this couldn’t be true if an average pair of glasses costs $500. She asked him to describe his ideal customer and they developed a mailing list of potential customers based on people of a certain income. By using this knowledge, she helped the customer design a mailing database and narrowed down the prospects. In a similar fashion, she helped a daycare center develop a VDP mailing that broke prospects down by the ages of their children. A mother with a child between the ages of 3 to 5 wouldn’t respond to the same graphics and pitch as the mother of an infant, or a child age 6 to 11.

“If the childcare center had gone to a typical printer, it would have sold her one postcard to say the same thing to everyone, but the readers would not have responded because it wouldn’t have pertained to them,” says Dunn. “Each age group cares about different things, so we helped develop three versions of copy and three sets of graphics to target the audience. People face information overload and lack time. Variable-data printing allows you to reach them. It’s like a huge secret that no one knows about yet.”

Innovators Create a Market
Variable data is definitely a business and there are service bureaus, commercial printers, new hybrid service agencies, and others blazing the trail. They are making money, although VDP is not an easy sale, and building volume isn’t easy. Some who tackled the market didn’t have the staying power, but for others, the prospects are too promising to simply sit on the sidelines to see what happens. Besides, what is a printer to do? The commercial print market faces a glut of equipment, which is under utilized, especially during the current downturn that is stretching into its third year. Pricing is brutal, new equipment is expensive, print runs continue to shorten, and the number of shops closing their doors continues to grow. Others are scrambling to add services such as, mailing, fulfillment, design, and asset management to differentiate them from their competition. It’s no wonder that those in the print industry look at variable-data printing as a new opportunity.

Entering the variable-data printing market requires a different mindset from the typical ink-on-paper sell. It requires retraining current employees or hiring expertise in sales, database management, data mining, and information technology (IT). Innovators who put the elements in place are still waiting for volume to develop so they can sell more four-color one-to-one variable-data jobs. Gauging growth and making investments in the area will be touch-and-go until more marketing people catch on, but these innovators will be the ones who are in a position to take advantage of the market as it grows.