Print works - Keynote, Sydney Australia

Global Developments in PrintTuesday September 21, 2010

Agenda• Most recent sales data• Key trends for the future• Example of value added solutions• Final thoughts on the evolution of the industry

2009, A most unpleasant year. • September 2009 US Shipments were down $907,000,000 compared to 2008. • In Australia: printing industry gross value added stood at $3,480 million which is 4.1 per cent lower that the previous financial years outcome, and 20.9 per cent lower than the reported outcome of two years ago.

Profit Picture Isn’t Pretty

On the Other Hand • 1st and 2nd quarters of 2010 showing slights improvements in both US and Australia. • US increase due to continued downsizing and the departure of weakest printers, not more demand or higher margins.

Key Trends • Migration of print communication to digital media • Explosion of color • Ink jet technologies will take volume from both toner based digital devices and offset presses. • Faster and faster turnarounds demanded • Workforce evolution • The revenue mix is changing to include more sales from non production services.

Migration to Digital • Slow economies fueled a faster migration to digital methods of messaging. • Digital advertising spend will surpass print in 2010. – Out of collective spend of $368 Billion, 32.5% will go to digital advertising with 30.3% going to print.

Non Local Production • 1980, 70% of all printed products were purchased from a company within 100 miles of the customer. • Today it’s 45% and dropping. Country Production US US, Canada, UK and the Far East Western Europe Estonia, Poland, and other Eastern European countries Asia-Pacific Asia Pacific

Asia Pacific • Asia-Pacific is fastest growing market • Publication and commercial printing growth fueled by developing economies in China and India. • High-end packaging applications increasing rapidly especially in Vietnam, Philippines, Thailand, and Malaysia.

Color Exploding • In 1970 most pages were black and white. • Full color will be 85% of all print volume by 2020. • Today, full color represents 59% of print volume.

New Technologies • Half of all printing will be done digitally by 2020. • Inkjet printing promises to take volume from both toner based engines and offset presses.

TurnaroundsType of Project % of All VolumeShort run, time sensitive 45%Short run, non time sensitive 9%Long run, time sensitive 24%Long run, non time sensitive 19%Not Classified 3%Total 100% Short Run classified as under 2,000. Time Sensitive is classified as less than 2 days.In U.S. 8% of work is required in less than 24 hours. That percentage isexpected to grow to 30% by 2020.

Current Revenue Mix$1.1 Trillion (US dollars) Industry Type of Service Percentage of Revenue Creative Services 7.6% Prepress, printing and finishing 70.2% Distribution and storage of print 16.7% products Print related paper and 2.9% consumables All other services 2.6%

Future Revenue Mix • As traditional print volumes decline, revenue will come from new services. – Strategic marketing and creative services – Programming – Database services – Email distribution – Tracking and analysis

Watch Out For • Buying equipment, software and people before there is business to justify the expense. – Develop partners who can supply critical services – Squeeze costs out of integration processes – Consider new business models for access to services and talent

It’s a One to One World • Run lengths continue to decrease. • Getting the right message to the right person at the right time via the right channel is the future of marketing. • Customized markets not mass markets. • Social media is providing a way for niche businesses of all kinds to reach interested constituents. – Presents opportunities for one to one marketing for these new businesses.

Direct Mail • Remains an effective marketing tool when used correctly. – Direct mail offset print volume has peaked and is dropping. – Growth is in personalized print and shorter run lengths.

Encouraging News • 18 – 34 year olds prefer to learn of marketing offers via direct mail rather than email. Market Segment % Preferring % Preferring Direct Mail Email Personal Care Products 62% 22% Food Products 66% 23% Over the Counter 53% 21% Medicines Insurance 43% 21% Financial Services 44% 19% Travel 42% 34%

Reflection of EmailProliferation and Spam• 25 percent of respondents perceive theyre getting more postal mail compared to a year ago• But…• Nearly three times that amount say theyre getting more e-mail.

Sainsbury –The UK Program objectives: • Engender loyalty among a key segment of customers using – personalized messaging and offers Significant results reported by user: • Increased redemption rate to more than 50% • Representing a 50% increase over non personalized tactics. Free gift varies according to Shopping behaviors

Solution Development • Agency for strategy and creative • Printer/Mailer • Digital Press • Variable data software • Direct Smile for icing fonts

Cross Channel Anatomy Trackable Capture Messaging Response/Purls Information /Channels Gurls/Curls Data Nurture Revenue Activities Best Practices

Girl Scouts – Arizona, USA• Business Need – Declining donations – Needed to engage alumni and cultivate new donors• Strategy – Personalized postcards sent to targeted alumni segmented by age group – Second channel used when email address was known – Recipients directed to Personalized URL and encouraged to join Facebook Cause page

Results – Girl Scouts Arizona• Results – 4.9% unique response rate – 31% of respondents donated – Increased average donation amount from $50 to $250 – Grew Facebook membership – Captured information on referrals

Solution Development • Franchise provided marketing understanding to develop a thorough multi- channel solution • Sales professional with ability to build a business case for a multi-channel solution • Variable data print, email and purl software • Digital print engine • Mailing capabilities

QR Codes

QR Codes• Merge print and digital communication to enhance the recipient experience and drive results.• Provides way to integrate video, audio, additional relevant content and e-commerce into print.

Augmented Reality

Augmented Reality • Offers tremendous potential to add value to educational, entertainment and marketing oriented print.

TransPromo - Spain • TransPromo – Increases effectiveness of the information communicated – Provides a way to easily integrate billing and sales messages – Color and graphics improve response – Improves readability and reduces traffic to call centers

TransPromo: More Than a Pretty Redesign Automobile Finance Lease Statement ) BEFORE: Preprinted color (logos & tints) sent through laser printer AFTER: “Full color imaged on white paper. 100% variable data

Solution Development • Transactional print, data and forms design expertise • Sales professional who could build a business case for workflow process engineering and combining transactional and marketing documents • Print Service Provider specializing in transaction statements • High volume print engine, GMC software • Distribute and print capabilities

Re-engineering theworkflow/value chain – Books – Enrollment kits – Specialty photo products – Magazines – Web to Print • Print On Demand • Collateral management

Short Run Book Publishing • 20-40% of all books printed by traditional publishers are destroyed. • A re-engineered supply chain can reduce waste and associated warehousing, inventory, and shipping costs. • The result is more publishing of first run books by digital technology.

Short Run Book Printing• Advanced and Review Copies• Keeping books in print• Backlists• Short runs

The Blitzprint Approach

Threat of ElectronicSubstitution • Sales of wholesale e-books for February 2010 were $28,900,000, a 339.3% increase over February 2009 ($6,600,000). • Opportunities is in niche markets where hard copy is preferable.

Magazines –Hansaprint, FinlandBusiness Objectives – Test the concept of personalized magazines (Magazine 2.0) – Research the brand effects of personalized magazine ads – Compare personalized magazine ads to printed direct mail – Introduce Magazine 2.0 concept to potential customers

Hansaprint - ResultsPersonalized ads vs. static ads• 93% of all responses came those receiving personalized versions.Personalized direct mail vs. personalized ads• Direct mail drew higher response rates – 3% vs. 2%.• Personalized ads in magazines generated response over longer period of time.

Solution Development • Printing firm specializing in printing, logistics services and e-media solutions • Both magazine and digital printing capabilities • Variable data and Direct Smile software

MyPhotoFun - Netherlands Program Objectives – Offer amateur digital photographers a convenient method of making quality prints from digital images – Print images in book form – Offers faster and more convenient production compared to traditional methods Results Reported by User – Significant new revenue for TED Gigaprint – Print volume doubled during the first few months – Number of business partners grew – Business continues to grow 10% per month

Solution Development • Management team with foresight to develop a business model using other printers as channels and other consumer websites for advertising. • Application programming expertise for downloadable end user application. • Digital printing capabilities.

Enrollment Kits – New York, USA• Business Objectives – Streamline production of information kits and reports to individuals – Reduce production costs – Increase participation and investments in plans – Improve customer experience by making the document understandable

Prudential Retirement Plans • Plan sponsor name and logo, call out instructions, web links, step by step instructions, retirement income projections MichaelMaria

Results • The length of the average kit was reduced from 40 pages to 25 • Production costs were reduced by approximately 30%

Solution Development • Marketing agency specializing in highly personalized strategic documents. • Size and expertise to go after #66onFortune 500 list of Top American companies. • Sale professionals who could position the company as trusted advisor on “mission critical” communication. • Database and security expertise. • Variable data and design expertise. • Digital printing and mailing.

Collateral Management - UK• Business Need – Increase brand awareness for Diageo products – Increase sales of premium spirit brands• Strategy – Online portal where sales representatives create customized drink menus & posters for pubs throughout Ireland and England.• Fully automated workflow from order to delivery.

Diageo Personalized Menus• Results – Sales of Diageo spirits have risen by 10% – Competitive brands have been delisted by some Diageo clients.

Solution Development • Agency creative. • Print service provider designed workflow, web portal and providing programming. • Sale professional built business case for a transformed marketing process to improve customer loyalty and drive sales. • Variable data and web to print software. • Digital printing presses.

Opportunity Exists • Personalized and relevant multi channel campaigns. • Short run book publishing. • Photo imaging books and products. • Trans-promotional documents. • Collateral management.

As the Print Industry Evolves • Don’t confuse pent up demand with a return to pre downturn levels. • The industry has changed forever. • Focus on developing differentiation strategies so prospects have a clear understanding of what you do and why they should buy from you. • Make strategic decisions that will maintain your differentiation.

Differentiation Strategies • Niche manufacturer • Price Performer – Most efficient, low cost producer. • Supply chain management consultant – Providing customer with savings and control of one vendor doing it all. – Specific types of business with defined needs. – Can’t just execute, must integrate. • Marketing services provider – focused on delivering specific results to customers. – Does not require ability to produce all aspects of the solution. – May also focus on market segments.

Your Differentiation Strategy • May also mean changes in your distribution model – Internet sales replacing non value adding sales professionals. – Sales professionals who can elevate levels of contact, manage complex sales cycles and develop business cases for their solutions.

Workforce Evolution • Depending on the differentiation strategy • New Positions may include: – Project managers instead of Customer Service Representatives – Document engineers – Database managers – Direct marketing experts – Solution sales professionals – IT Specialists – Networking Specialists – Distribution Specialists

Conclusions • Future profitability may come from not being bigger but better. – Profitability from new services with high profit margins, not more production volume. • Higher profits come from taking greater responsibility in the business value chain. • New businesses targeting smaller niches provide opportunity. – Packaging and targeted multi channel marketing solutions. • Proliferation of digital content generates new opportunities in photo imaging, short run book publishing and more!

Sources • Caslon, the management company of PODi • Printing Industries of America and Australia • Frank Romano, WhatTheyThink.com • NAPL, Strategic Perspective 2010: New Rules of Recovery, Andy Paparozzi

Print works - Keynote, Sydney Australia

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