Industry analyst Andy Paparozzi says the print industry should pay careful attention to 2008’s economic outlook.

The numbers matter. When the print industry wants to look at forecasts for the coming year, it needs look no further than the economy itself.

“The industry serves the entire economy,” says Andy Paparozzi. “You can’t name an industry that doesn’t buy printing in one form or another. Certainly, it’s hard to find a household that doesn’t subscribe to a magazine, newspaper or something that is printed, so it really is a case where the industry truly does serve the entire economy, from the largest corporation to the smallest household. As the economy rises and falls, expands and contracts, as profit margins that support advertising budgets rise and fall, the printer finds out about it pretty quickly.”

And what the industry, and print sales reps, will find in 2008, is a need to not just keep up with the economic trends, but stay ahead of them.

The numbers
Paparozzi is vice president and chief economist for the National Association for Print Leadership (NAPL). He directs the association’s Printing Economic Research Center, which monitors and reports on the graphic communications industry’s performances. The center also produces the NAPL’s “State of the Industry Report” and “Printing Business Conditions” both well read throughout the industry.

According to Paparozzi, the economy as a whole was robust and jogging along from 2004 to 2006, which meant increased sales opportunities for printing companies. In 2007, however, the motor slowed, especially in the first half, growing about half the rate it did in 2006. The industry should take note of this trend, he says.

“The reality is where the economy goes, print soon follows,” he says. “We’re expecting the industry to grow somewhere between 2 to 2.5 percent his year, down from 5.3 percent (in 2006), and somewhere between 1 to 2.5 percent in 2008. We don’t expect any significant increase in activity until late next year because that’s how long it will take to unwind the excesses that were created in the early part of this decade.”

Overdose
The housing market takes some of the responsibility for the excesses, as well as the subsequent slowdown. With home buyers overextending on finicky subprime loans and mortgage companies all to willing to reel them in, 2007 has been the year of foreclosures on a massive scale. Credit markets in general can play havoc with growth, and 2008’s success or failure will be tied to how the economy rebounds.

“In essence what’s happening is we’re unwinding excesses in credit markets that took a long time to build up,” Paparozzi says. “One way or another in market economies, the excesses, whether they’re in housing prices or in the assumption of risk, or in Internet stocks or capital investment, one way or another, excesses must be corrected.”

Paparozzi says the correction can come in one of two ways – in an orderly fashion, or a collapse. “So far the correction has been orderly, in the sense that it has been a slow down. A significant slow down, but a slow down, rather than a collapse.”

Two gaps
Even in economic upswings, the print industry has seen new trends develop in recent years. New technologies have led to new product offerings. They’ve also led to new competition. Many print companies are consolidating. However, the key issue has always been profitability. Printing companies increasing profits comes down to something Paparozzi has coined “A Tale of Two Gaps.”

“You’ve heard of ‘A Tale of Two Cities,’ well, the industry’s story is a ‘Tale of Two Gaps,’” says Paparozzi. “The [first] is the growing gap between the industry’s best performing companies and the industry at large. The leaders are pulling further and further ahead of the industry at large. They’ve been able to redefine themselves, and been able to, quite frankly, grow at the expense of others.”

“The other gap is what we call the ‘Top Line, Bottom Line Gap,’” he says. “We’re seeing top-line growth, but not enough of that growth is getting through to the bottom line.”

In the past, printing companies could expect that if the market grew that they would, but that top-line growth would equal bottom-line growth. That’s not the case anymore. Paparozzi says that the industry is getting more competitive, despite consolidation, and more complex. So there are more and more factors that chip away at top-line growth, and drain top-line growth before it gets to the bottom line, if the print industry lets it.

“The primary question everyone has got to ask is ‘What am I doing to fortify that bottom line?’ he notes. “There’s more pressure than ever because competition is more intense and diversified than ever despite consolidation. That seems something of a contradiction, significantly fewer printing companies, but significantly more competition, but that’s the reality.”

New competition
Competition has always been tough in the printing industry. What’s changed is the origin of that competition. Sales reps should no longer be looking across town for its competition. Even regionally, the game has changed. Paparozzi says that printers in Washington D.C., for example, who were used to competing with printers in Baltimore now have to broaden their base. They may get competition from as far as Richmond and Atlanta – or even farther, like China.

Paparozzi says everyone is facing new competition. He says one of the keys to beating the competition is by helping customers be more successful. Part of that approach involves perspective. For years, many in the print industry have considered themselves in simply the “ink-on-paper business,” Paparozzi says. That has to change.

“We’re in the communications business,” he says. “The beauty of it is, we have more ways than ever to help our clients communicate more effectively, whether it’s through lithography, digital printing, variable content, web-to-print, one-to-one marketing, mailing, database management; we can do more things than ever to help our clients communicate more effectively, get ourselves out of the commodity trap.”

The other element to success in the new marketplace is to find a way for the customer to recognize the services provided.

“All of the leaders get that, but what even the leaders are struggling with is the second part of it, making sure that the client recognizes your contribution,” he says. “Being able to document that for the client, and not being shy about it. What did you do for that client? Did you increase the return rate to their direct mail campaign, maybe by using variable data? Did you drive prospects to their Web site? Did you save them time and money somehow? Did you develop a database for them that they didn’t even know they had? What did you do to make that client more successful? Don’t assume that they recognize your contribution. Document it.”

Sales reps
Despite the new challenges, the role of the sales rep remains virtually unchanged, it’s just that the tools have improved. Effective prospecting that used to go through cold calls and hours at the library can now be trimmed through Google searches. All of those new technologies, if packaged correctly as programs and not jobs, can give sales reps an edge in gaining a new customer. Paparozzi says it comes down to researching the right clients and following through with a clear message.

“It’s a matter of identifying the right kind of clients, and picking an industry and being knowledgeable about it,” he says.