Note: The opinions expressed here are those of Bill McCurry and are not those of Hewlett Packard or the Photo Marketing Association International.
 

For the second year, HP retained Bill McCurry to present his ideas on the marketplace acceptance of the HP Photosmart Studio within The Complete Picture Inspiration Center at PMA. This year Bill went cross-country interviewing “Jennifers” about their experiences with Studio. What Bill found surprised him and may surprise you. HP’s Studio is opening doors for photo retailers way beyond the Jennifer target market. You can read Bill’s report and view portions of the interviews. As always, Bill welcomes your questions and comments. wmccurry@mccurryassoc.com or (877) McCurry [877-622-8779]. You can read last year’s report at www.photoimagenews.com/hpsweetideas/index.htm.

We’re Sucking the Passion Out of Our Industry

We’re an industry built on emotion. And we’re sucking the passion out of the business as fast as we can. What’s wrong with our industry “leaders”? They’re focused on production – on what they can make, not how the customer uses it.

PMA 2007 was, by most reports, the most successful PMA show in history. Hearty congratulations to the PMA team! Hisses and boos to the manufacturers who filled the halls with stories of “dual-sided copiers,” “pages per minute,” “dots per inch,” and things that have zero meaning to our customers. Our customers aren’t buying production technology, yet that’s what most PMA exhibitors sold. It’s also what many mis-guided retailers bought. Successful retailers don’t buy back room solutions. Instead, they will focus on only two pieces of equipment – (1) the kiosk where the customer interacts with the process and (2) the cash register.
Insights for Retailers from Customer Interviews
Bill McCurry spent two weeks traveling across the US videotaping customers’ reactions to the HP Studio. You can hear/see valuable customer insight videos using the links below. Listen closely to what these customers tell us is important to them. Listen carefully to their comments about price, about the complexity of building the product, about time to make the product, and about the overall experience. There is valuable market information here for you to act on.

Photobooks Are So 2006 . . .

Everyone said PMA 2007 was about photobooks. I say they are wrong. Photobooks are so 2006. Photoworks (used to be called Seattle Film Works) reported that in 2006 they did around $4 million in books — approximately 100,000 books — roughly 29% of their total volume. One published report stated Indigo press owners printed over seven million photobooks and calendars in 2006. This isn’t to be sneezed at. It’s a significant part of a lab’s future business. But to focus primarily on books is to badly miss the big picture survival and extreme profit potential.

The Extreme Profits Are Beyond Photobooks

“We bought the HP Studio as a coffee table book solution. The big surprise was how collage posters took off. And calendars,” says Michelle Bosgosian, co-owner of The Camera Shop (Bryn Mawr, PA). Michelle is a bright lady. She’s not telling her customers what to do. Instead, she exposes them to the options and then gets out of their way so they can do what they want, how they want, when they want. Michelle’s customers are making cards, calendars — and did we mention CDs? Another sleeper product is the HP CD, which includes an index print. Customer response to these was amazing. Check out the video where women who see the CD for the first time say it should sell for $10. One woman explained that she thought the CD could sell for $15. Watch the tape! Catch their excitement. Listen to what problem these women think HP’s CD process solves. Extreme profits can be made when you solve customer problems. Listen to these women carefully and profitably.

Retailers who grew up in the 4x6 world tend to be production oriented. Those who thrive in the post 4x6 world will be job shop oriented, able to help their customers make one-of-a-kind “mass-customized” products. Today we’re looking at mugs, calendars, mouse pads, greeting cards, collage posters, blankets, etc. Who knows what tomorrow will bring? The key is being flexible and showing your customer easy-to-use options. It is NOT about your ability to produce it in the back room. It IS about your customers’ ability to be engaged in the process — quickly, easily and with no unpleasant surprises.

The Power of Studio to Drive Additional Products/Sales

It was like a Hollywood script for a commercial, except it’s all true. We’re at Dan’s Camera City (Allentown, PA), shortly before closing, and in walks Tracey Stoffey with six memory cards. To be exact she had:

2–CF 128MB cards
1–SD 256MB card
1–SD 1GB
1–XD 16MB card
1–XD 1GB card

These six cards represented four years of images from the three different digital cameras she owned. Her goal was to stop her 12-year-old daughter from nagging her to get prints made.

Daughter Cassidy loves scrapbooking and was relentless in reminding Tracey that prints had been promised. This was Tracey’s first attempt to get digital prints. She was briefly shown the HP Kiosk, along with samples of what the machine could do. As a first time user she sat down and went to work. You can see the poster she made.

When she walked in she didn’t know a poster was possible.

When she walked out she had a poster and a pledge to return with Cassidy, as well as her nine-year-old daughter Makenna.

“This is so much fun the girls will love to come do this with me.”

We understand from Dan’s employees she returned the following week, kids in tow, and made over $100 of books and posters—and yes, she put all the images on CDs with index prints.

You Make Your Own Success

Let’s take a side trip from Pennsylvania to Corvallis, Oregon. Talk about breaking the mold. Paul Rentz of Rush Hour Photo is one of the smartest guys you can meet. He’s a very hard worker and always excited about his business. We met three customers at Paul’s store who had found totally new uses for what the HP Photosmart Studio does.

The first was Dave Shear who does aerial infrared photography. He takes pictures of crops, like vineyards. By printing 24”x36” posters on the HP Studio, he can look at the images of a specific grapevine through an 8x loupe and tell if that specific plant is getting too much or not enough water. Is this an application that anyone had ever thought of before? Dave says the quality of the image allows him to see the detail he needs. He sometimes orders up to 50 different posters at a time, depending on his flight paths. He knows he could buy a wide format printer and do them in house. He doesn’t. Instead, he trusts Rush Hour Photo and their HP Studio and finds the process easy, quick, reliable and very high quality.

Second was Christy Luehring, a real estate broker. Christy sells the houses of many older people. When she lists a house, she has to take pictures throughout for Multiple Listing Service (MLS). If she senses an emotional attachment between the sellers and the house, she will take additional photographs in the home, including furnishings, décor and heirlooms. Christy turns these into a hardbound photo book to give to the seller at time of closing. It’s a unique “marketing” technique that endears her to the seller and their extended family.

Third were Brad Teel and Terry Barker of Teel Travel Planners. They take “hosted” tours to various destinations. Everyone who goes on the tour is invited to a post-tour dinner. That night they are given a photo book of the tour with Teel’s name gold embossed on the front cover. Teel’s believes the book gets wide circulation among their customers and exposes the firm to new customers who are friends of those who went on the trip.

What do all three of these customers have in common? None of them came into Rush Hour Photo looking for an HP Photo Studio. All three of them, independently, said they started thinking about the potential of using Studio products in their business after Paul Rentz told them, “Hey, we got this new machine that makes all kinds of things — you should come down and see what it does.” Paul was out and involved in community events and functions when he met and invited the three of them to come to the store. Each of them says they have referred other customers to the store to see and use Studio for themselves. Presently very few customers know of all the things Studio can do for them. The successful retailers are spreading the word to their customers — who are also telling their friends and family about the potential of Studio.

What’s the Role of Mass Market and the HP Studio?

I got this email from a friend “Down Under.” “Looks like HP is making good progress in Oz with 10 studios+ in a good cross section of retailers. Will Bulk and Mass cut the price out of these products in the future?” (Oz is shorthand for Australia).

My answer: You better hope in the future Mass and Bulk Retailers embrace HP Studio and yes, they will cut the price, otherwise the products will be a failure. Remember the market life cycle? You make money while the product is growing in popularity, lose margin when the product is a commodity, and then make money during its declining years. Here are a couple of examples of that:

E-6 and black-and-white processing are both a small percentage of what they used to be. Fewer labs offer it. Those labs that are doing it are charging much more than they used to. We’re hearing of labs getting $15-$20 per roll of E-6. Sure, they are getting fewer rolls and way more margin dollars per roll.

Remember when the Kodak Create-A-Print or Kodak Copy Print Stations were brand new? Those who jumped on board had a license to print money. Customers didn’t know about them, there wasn’t a huge demand, but the margins were excellent. Those retailers who bought the machines early and created demands among their customers reaped great rewards. Those who waited until every mass marketer had the machine got in a price war and eked out marginal results. The lesson — invest early in the products/services you think your customers will embrace. Then cut loose your team’s enthusiasm to launch the new product/services. Losers are saying, “I’m not going to invest in the new technology until it’s more widely adopted.” The downside of that is you’ll be installing the new technology just to stay in business and you’ll behind the curve. By then the margin will be — well, it will be marginal. You don’t want marginal margin. You want extreme margin. Successful specialty retailers know their place in the food chain — and their place is to pioneer new products/services at higher margins. Then, when the mass adopts them, the specialty store jumps onto something else new. Always has been that way — always will be.

Law of Imaging Investment Repealed

It must have been a law in our industry because we all did it. We bought a new piece of capital equipment, got it installed and then, when the first payment was due we started to think about how to market its output so we could make the payment. That makes zero financial sense and, in a market that’s moving as fast as digital, we’re wasting precious profit-building time.

We think Dan’s Camera City is one of the best-run camera stores in the world. One of the things they do is to have the sales team primed before the equipment arrives. In the case of the HP Studio, the Dan’s employees knew about its arrival before it got there and began thinking how they would sell their customers on the unique things Studio would do. As soon as the system arrived, every store employee who would interact with Studio customers was required to have a short sales pitch for each Studio service. They also made samples, using their own pictures, of each product Studio could produce. This not only gave them samples to show their customers, but because the samples were of the employee’s own pictures, their enthusiasm and emotion carried the conversation.

Some readers may say, “That works for Dan’s because they’re huge with 65 employees and a 15,000 square foot building.” We remind everyone that Dan’s didn’t start out that way. They’ve built the business because they do smart things — things you can copy. Dan’s DigiJulie (aka Julie Strauser) spoke at DIMA. When questioned about Dan’s success compared to other smaller stores, she offered this wisdom, “People need to realize that Dan's is big because of the ‘little’ things we do that have a large impact, really. A minimal amount of time is invested in rehearsing lines compared to the impact it can have in a sale. Anyone can pick up these techniques and implement them . . . they are just hard to keep up with because of the constant need for follow up, persistence, training, changes, staff involvement etc...” Yes, that’s called management.

Who’s Going to Market Studio Products?

Here’s the specialty store’s opportunity: If you listen to the successful owners of Studios, they all say, “word of mouth.” Here’s your challenge/opportunity. People don’t know what Studio can do for them. Again, listen/watch the customer interviews to determine how these customers found out what they could do. Somebody told them! You and your team need to be that somebody. If you jump on the opportunity NOW, you’ll capture their imagination before the technology is widespread. Mass retailers can’t spread word of mouth as effectively as independent local stores. You have a window of opportunity. Seize it!

We’re hearing interesting ideas to effectively market these new services. You’ve already read about Paul Rentz (Rush Hour Photo, Corvallis, OR) and his trips through the community telling everyone he knows about his Studio. Mike Worswick (Wolfe’s Camera, Topeka, KS) is planning on hosted home parties (think Tupperware®) where moms will share experiences, see samples, receive introductory gift certificates, and explore what Studio can do for them. Michelle Bogosian (The Camera Shop, Bryn Mawr, PA) is offering to have birthday parties in her store/studio at which each girl attending will decide to make either a book or a poster. Engage your employees and empower them to get the word out.

On-line? Is It Off Line?

Watch the videos and listen to how consumers describe the “on-line experience.” Shutterfly CEO Jeffrey Housenbold has said "There's just inherent limitations as to what you can do in retail. You don't have the creative choices, the high-quality user experience. And you don't have the time or the convenience when you're in retail.”  While we certainly respect Mr Housenbold and what his team has built at Shutterfly, the consumers in the video gave us a different story than what his statement describes. Studio is easier, quicker and less frustrating. When it’s put in a friendly kiosk/café/lounge environment, it creates a user experience that trumps the on-line solution. Don’t take our word for it. Listen to the customers!

The Quality Game . . . The Worm Turns and We Ignore It

Those of us who grew up in the silver halide world don’t like to believe that anything can be as good as the old fashioned way. Some critics say the HP prints aren’t as good as “real” silver halide. Again, listen to the customers. In all the interviews we did, not a single customer described the HP products as anything less than great quality. No single customer asked to have the same prints done on silver halide to compare them. Sure, some industry purists want to have a “shoot out” between the HP processes and traditional silver halide. That’s fine, you do that. But remember that your customer is looking at the quality through their eyes and the judging is over. HP has no quality problems except in the minds of a few industry old timers.

Alvin Toffler called it “Ignorage” – the ignorance, caused by the information age, that’s no longer accurate. We argue the archivability issue — until we find the latest Wilhelm Reports show some of the HP ink/paper combinations have a life of up to FIVE TIMES longer than Fuji Crystal Archive. Ouch! That hurts. The “longest lasting” photo paper now is no longer the champion for lasting characteristics. Worse, dye sublimation prints are the fastest to fade. Isn’t it ironic that those who are arguing the loudest against the “HP Quality” are those who are delivering short lift dye-sub prints to their customers? Excuse us for pointing out the inconsistencies in this illogic.

Some of us aren’t too sure the Wilhelm research should be the final answer to archivability. That’s a fair concern. Certainly, some materials will last longer/shorter depending on the heat/light they are subjected to. Based on the rebuttals we’ve seen however, changing the light/heat that the images are exposed to will change the rated life of the materials – but it generally doesn’t dramatically change the ranking. The leading HP ink/paper combination is still the leader, silver halide is not the leader and dye-sub still fades the fastest. We’re not an expert in this field and would be happy to share any other credible facts that someone sends us.

Bad News for the Fence Sitters

Many retailers tell us that HP devised a very attractive PMA promotion, (even more attractive, we hear, for members of PRO or IPI Buying Groups). It is alleged the genius of the HP-PMA promotion was hatched by Greg Kearnan and Dan Kinsley of HP, both of whom are from the NJ area and were operating under the Noo Joisey theory of “make dem an offer dey can’t refuse!”

We believe HP sold more machines at PMA than they anticipated. This is great news for them, but makes it difficult for those who haven’t placed their orders yet and think they can negotiate further. Being a public company, we’ll guess that the PMA deal will end just before March 31st so they can get the orders into this quarter. There seems limited incentive for them to continue with the super-cheap-give-away-free-financing pricing. Let’s face it; with the reception they got from those who placed orders, they don’t need to subsidize machine placements as heavily as they did for the PMA rollout. Would you give away money you didn’t have to just because some retailers were slow to catch on? (We remind you this is Bill McCurry’s opinion – not the opinion of HP or PMA. It’s just his “educated guess” after looking at the landscape.)

One well-meaning but misguided retailer told an HP sales rep he would probably place an order when the rep came up and saw him. Guess what? This is 2007 and the rep isn’t coming. We need to get used to the new economics. If a machine is selling for less than $50K or $100K, it’s not economically feasible for a rep to make too many field calls for a single machine order. That’s why there are trade shows and buying groups. If you’re waiting for a rep to personally call on you, you may have a long wait. Do the math — it’s not practical. Additionally, we’d bet that those who can’t make a decision at PMA are the same ones who will sit out this opportunity, even if a rep does come to see them. Either you seize the opportunity to be a market leader or you sit and do nothing. Either you keep “special” in your “specialty store” description or you lose the customers to those who do special things. Either you get the concept, or you don’t.

Those who wildly embrace what Studio can do for them and their customers will buy (or have already bought!) the machines and are crazily telling everyone they know what the machine does for them. Those who don’t get it are pondering the production specifications of various printers, trying to determine the lowest cost per page. Sure, cost per page deserves a little consideration, very little. If you’re only making 10 pages a day — instead of 200 — you need to keep the costs low. With Studio, it’s not the cost per page; it’s the total number of pages you’ll be printing. Don’t take my word for it. Listen to the customers!

Who’s right? Shutterfly or consumers? Who will respond in time to capture the money? Shutterfly? Aggressive Mass Retailers? Or the smart Specialty Retailer? It’s up to you.

Go to the videos

Bill McCurry publishes a weekly on-line marketing exchange for people in the photo/imaging industry. It's free, but for the obligation to share your own ideas.

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