Discover the unsolved customer pain to create a market niche, finding the blue ocean strategy.
I am currently working at a printing press manufacturer. The average price range of our printing press is in the millions(USD). At this price range, it is no small figure to our customers: the printers. Each machine investment is a huge cost to the printers. The printers need to be sure that they able to produce enough cash flow to cover the machine investment. However, most often future investment are done based on forecast, and as you know forecast are always bound to uncertainty and fluctuation.
In today's business environment, nothing is stable, change is everywhere, uncertainty is high. A new political power could change the game, a new technology could over turn the old operation, unexpected financial crisis could turn the market into depression. The market is everything but certain. As result, the printers are taking on a very high with each machine investment, especially for SMEs. A wrong move upon an incorrect forecast could send the company into bankruptcy.
We once had a customer in Nigeria, a flexible packaging provider for food products. The main material used for the packaging product was plastics. But due to the new regulation on plastics ban in the region. The company had only a few years to change its whole production line from plastics over to paper. This requires a whole new investment in the production line. Besides the investment on hardware, there needs to be an whole set of training on the press operators. Luckily the company scale was big enough to help them overcame this regional regulation. Some others were not that lucky.
With all being said, the pain point was very clear: large investment based on an uncertain sales projection. As a press manufacturer, if we could help the printers mitigate their risk in their investment, we may just find a way to create win-win opportunity.
One possible solution is to Lease the machine instead of sell the machine
We are in the age of the leasing economy. So why not lease the machine instead of selling it? What we could do is to lease the machine to the printers, the cost of leasing in the long term off course would come at a higher price. However, an option for purchasing the machine during the leasing period is always available. On a leasing term, fee is charged by the month and by the amount of materials printed. On top the printer would also need to pay the shipment cost and the installation/uninstallation cost for the machine up front. If some point in time during the lease the printer decides to purchase the machine, the the shipment back to the warehouse and the uninstallation cost would be refunded back to the printer.
The printers are now able to mitigate the risk of making a huge investment if the projected sales volume was much lower than expected. Therefore, printers could be more confident when making the lease instead of a purchase. The printers changed from being the machine owner to the machine usage right owner. For the printing press company, we should be ale to lease much more machines this way, and in turn we should also be able to sell much more machines as well.
Off course, as a printing press company, we are now taking part of the risk that was once carried on by the printers. A few major cost for the for the printing press company would include, the warehouse space for the returned and unrented machines. Cash flow speaking, on paper would look bad in the short term, as the cash flow as being spread out instead of being collected as a sum. However, I do believe that through right financial calculations, the company should be able work out a formula to takes into account all these risks into the business model and still be much more profitable at the end of the day.
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