What to Consider When Exploring Market Expansion
Written September 20, 2021
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For print service providers willing to dedicate time to a thorough evaluation of the feasibility of market expansion within their business, there is an opportunity for significant growth.
When a business is considering changing its strategy or adding a new profit stream, the last thing it probably wants to hear are the reasons why it shouldn’t. But, when it comes to market expansion for print service providers (PSPs), Adam LeFebvre, president of Niles, Illinois-based Specialty Print Communications (SPC), suggests going a slightly unconventional route by asking other PSPs in the market the reasons not to expand.
“Have them tell you the top 20 reasons why you shouldn’t expand,” he says. “Once you know them, if you still want to do it, go for it.” Although not every printing company will test out this suggestion, there are several considerations that need to be made when beginning to evaluate market expansion, which is becoming more common as print journeys through a remarkable evolution.
As David Zwang, principal at Zwang & Company, explains the evolution, “the reality is, you can’t imagine continuing to do business the way you did 10 years ago, or even five years ago.” He continues by stressing that the question of whether to consider expanding into new markets results in a single answer: Absolutely.
The time will come for many printers when a customer asks if they offer a specific product that might not be in their current repertoire, which Marco Boer, VP at IT Strategies, explains is partly due to the growing use of Web-to-print services.
“As we go forward, the whole print business is getting, in some ways, to be a lot less about printing [and more about] being able to deliver printed goods that people want, in the format they want it, when they want it,” he says.
But is expanding into new markets the right business decision for every PSP, and what are some of the considerations that need to be made to do so?
Analyzing Adjacencies, Investigating Infrastructure
When researching new markets for expansion, Boer says the first thing to look at is adjacencies.
“If you’re in wide-format today, you definitely should be looking at soft signage as an extension of something that you’re already doing,” he says. “And in part, you do these extensions because you end up getting higher value.”
Being able to support new technology for market expansion requires a cohesive process and equipment plan. For example, Boer says, for a commercial printer considering moving into the folding carton market, the finishing and converting processes need to be investigated.
“[For a commercial printer], you can’t just get into the folding carton business using your existing process,” he explains. “You probably also have to invest in new finishing equipment [and] new machines that can diecut and score.”
Zwang, a former commercial printer, explains that the reality of transitioning into a new market is a multistep process, with some expansions inherently easier than others. Transitioning from transactional printing into direct mail might be easier, for example, but for a commercial printer to dive into packaging, there are more challenges to navigate.
“I sold my business to a company that was actually into packaging; they did gravure flexo, they did labels, they did folding cartons,” he says. “I learned that it isn’t as easy as you think to get into that and to convert to that kind of manufacturing. Ultimately, I did it. But it’s not as easy as just going out and buying a bigger press or a folder/gluer and some diecutting. … How do you integrate that into your existing business flow? What do you do with your people?”
Connecting with and considering the individuals who will be involved with the new processes before any decision is made is crucial.
Although technology might take the stage during the decision-making process, the human aspect needs to remain top of mind during the process. The learning curve is the real cost, Boer says.
“It’s not the cost of the capital equipment,” he says. “We all know what those things cost, right? … What you don’t really know is what it’s going to cost you to come up to that learning curve.”
Zwang echoes a similar sentiment.
“Technology is easy, people are hard,” Zwang says. “How do you engage and educate and convert your existing people in production processes to be able to take on these new tasks and new processes?… It is something that requires a very thoughtful and determined way of making the transitions.”
Technology might be “easy,” but Zwang says a printing plant’s infrastructure is a serious
“When I say infrastructure, I’m talking about everything,” he says. “The physical plant. If I am currently a sheetfed printer and now I’m moving into something that requires rolls, how do I manage that? If I have workflow systems, will they support this new technology?”
For SPC, expanding into new markets doesn’t necessarily make the most sense business-wise, but that doesn’t mean that the direct mail print provider hasn’t explored the options that exist. LeFebvre explains that the company at one point wanted to expand into the point-of-purchase space, and even opened a small entity to do so, but it’s not realistic for every PSP.
“It takes the infrastructure of a whole new business,” he says. “You need new product experts. You need someone to sell it. You need completely different supply chain and supply chain management.”
He continues by pointing out that while a PSP might be physically able to print something, it doesn’t mean they would be able to advise the customer adequately on how to package that item or ship it.
Is It a Growth Market?
After thoroughly considering adjacencies and potential issues with an existing infrastructure, it’s important to analyze the growth rate of the new market. Boer suggests always looking at the growth rate of a given application. He points to marketing collateral as one example for a market that might be an easy transition for some printers but doesn’t necessarily support a growth rate worth investigating.
“It doesn’t mean that there’s not a wonderful opportunity, it just means you have to fight that much harder to buy your way in to get market share,” he explains.
However, if it’s feasible for a printer to expand into soft signage, for example, he explains they would be tapping into a market that is experiencing steady growth. He proposes searching specifically for the applications that have inherent growth, as opposed to an application that is shrinking.
Zwang suggests a similar process when factoring in the viability of a market and its growth rate, but adds that existing competition needs to be explored.
“Is there a lot of competition in the market?” he says. “Because if there is a lot of competition in the market, that means that you’re going to have margin pressure. And if you’re going to have margin pressure, that doesn’t give you a lot of float in terms of your ability to learn, grow, and make mistakes.”
Density of competition should be the next aspect. Boer describes this as paying attention to the current landscape, depending on a printer’s existing reach. For example, if a commercial printer has a regional customer base and wants to expand into T-shirt printing, but the market is saturated with many T-shirt printers within a 10-mile radius, it might not be the best option, he says.
Boer also suggests keeping a close eye on investment risk, “which is a little controversial,” he says. “You ought to go into a business where you don’t know any customers — if it’s a growth market,” he continues. “You’ve got to build it yourself. Now, that’s acceptable to do if your capital investment risk is below a certain number. Whatever that number is within your comfort zone.”
On a more practical level, he suggests “getting your feet wet” in the application first, by moving into the new market on a small scale to find any sticking points that wouldn’t be
obvious until taking on new jobs.
An Emphasis on Engagement
No matter how much time and effort are dedicated to analyzing and exploring new markets and the technology and infrastructure needed to adequately serve them, if a PSP doesn’t consider how to engage customers with these new applications, all the effort could go to waste.
“Just because you build it, doesn’t mean they’re going to come,” Zwang says.
He explains that this step in the process goes back to the focus on infrastructure. If a PSP decides to expand into a new market, an existing customer might not necessarily jump at the new service. Credibility still needs to be developed in that space. So, PSPs need to question if they have the correct equipment, skill set to produce the new applications, and finally how it’s going to be sold.
“Can I engage my existing salesforce? Do I bring in someone who knows what they’re doing to help engage the market?” he asks.
Although there are multiple solutions to these questions, Zwang says that, initially, many of these issues can be addressed with outsourcing.
“[It can] start that way, where you work in these symbiotic relationships until you get to a point where you can actually afford to, or decide that you want to, take it all in-house,” he says.
Circling back to the idea of building credibility, Zwang says that this and internal production process optimization could be two of the biggest challenges.
“Market credibility will get you the work,” he says, “[addressing] production challenges will allow you to do it at a price that will keep the work there and allow you to grow and make money.”
Straight from the Printer’s Mouth
For PSPs looking to expand into a new market, there are plenty of resources to assist with the considerations that need to be made and necessary steps to address equipment, infrastructure, and workforce issues.
For one, “keep your eyes open,” Boer says. “Before you jump into it, you’ve got to No. 1, read up. Read whatever trade magazines are out there and follow blogs and discussion boards, because that’s where you will find a lot of things you might not have learned about otherwise.”
Next, both Zwang and Boer suggest talking to local PSPs that have already moved into the application that you’re considering. It’s beneficial to speak directly with someone who will understand and be able to help guide you through the transition process, even if they might end up being the competition one day.
“Often, you may end up being competitive to them, but at the end of the day, we’re all in the same boat,” Boer says. “You’re probably also there to help each other out in the case of overflow, or something that you just don’t have the skill to do, some special finishing or something.”
Working directly with your peers is something LeFebvre also recommends, pointing to peer groups as a good resource.
“Some of the things [to think about] don’t appear in front of your face, you wouldn’t even know,” he says.
Once all considerations are made — equipment decisions, infrastructure analysis, workforce processes, density of competition, and how to engage customers in the new market — the opportunity for growth is there for the PSPs that do the homework on market expansion.
“I think there is plenty of opportunity,” Boer says. “You’ve just got to make sure you filter to get the most appropriate fit for your business and your level of comfort and interest.”
Ashley Roberts is the managing editor of the Printing and Packaging Group at NAPCO Media.